Resolution hopes dwindle as leaders arrive for EU summit

Hopes are fading that a plan to fix the eurozone debt crisis will emerge from today's emergency EU summit.

Europe's 27 leaders are meeting in Brussels this evening - for the second time in days - as efforts continue to reach an agreement.

German Chancellor Angela Merkel is warning that there are still many problems to settle and negotiations to carry out.

The Chancellor says weaknesses in the euro must be addressed "now or never", and referred to the Eurozone challenge as the worst crisis for Europe since the end of World War II.

However draft conclusions leaked ahead of the talks show no deal on a figure for bank recapitalisation and diplomats are now warning that further meetings may be necessary later in the week.

Luxembourg premier Jean Claude Juncker is also downplaying the chances of any detailed rescue plan being finalised today.

Taoiseach Enda Kenny, who is attending the summit, said he wants major decisions made today but he warned that any such decisions should not mean changes to the Lisbon Treaty.

"I continue to believe that there is very considerable scope within the existing legal framework - however I'd be a fool... if I didn't say that there are others who take a different view" he said.

"(They) are strongly of the view that some change, however limited, is required.

"The case for this will have to be examined strongly over the coming months" he added.

British Prime Minister David Cameron - speaking on his arrival at the summit - said he wants to see a comprehensive solution.

"It is in British interests that we actually solve this crisis," Mr Cameron said.

"We need to have the greatest possible support for the most comprehensive solution possible."

But the real focus was on the powerhouse couple of Chancellor Merkel and French President Sarkozy, leading efforts to resolve their deep personal differences and steer the 17 eurozone members towards a deal which contains big enough figures to impress jittery markets that the EU is getting to grips with the problem of containing the Greek debt crisis and putting in place enough safeguards to cope with any future economic shocks.

Today was described last weekend as the day for final decisions – but even before the latest negotiating got under way officials in Brussels were dampening down expectations, insisting the talks were part of an ongoing process to resolve the crisis with a lasting set of measures.

Downing Street talking of a G20 summit in Cannes in early November as the real deadline, with more EU-level ministerial meetings on the cards in the next few days.

Ahead of the eurozone summit, the German parliament voted in favour of strengthening the EU’s bailout fund – a boost for Mrs Merkel and a lift for talks which seem to remain divided on crucial details of a three-point plan to crack the crisis.

A provisional agreement is already in place on the recapitalisation of Europe’s most exposed banks to the tune of about €100bn. Many financial experts say at least half as much again will be needed to convince markets that they are well insulated against further economic shocks.

On the second plank, disputes over efforts to leverage an existing €440bn) bailout fund to boost its lending capacity above €1tn may have receded thanks to the German parliament vote, although a figure has not been finalised. If it is agreed it should demonstrate determination to respond to any more Greek-style meltdowns.

And a decision is still awaited on a demand that private investors – mainly banks – absorb at least a 50% write-off of their loans to Greece. A consortium of global banks has so far suggested 40%, but that has been rejected.

Meanwhile, the spectre of a debt-laden Italy was hanging over the talks, with Prime Minister Silvio Berlusconi facing demands to act on austerity measures in return for financial aid.

The fear is that a Greek-style crisis in Italy will be totally unaffordable for Europe, and make the scale of financial support for Athens look like pocket money.