A grand plan to resolve Europe's escalating debt crisis is once again in doubt after officials decided Tuesday that key parts of the package will not be ready in time for a leaders' summit on Wednesday.
A meeting of European Unions finance ministers, which was to be held just before the summit, was called off. A summit of EU and eurozone leaders planned for Wednesday evening will still be held, but its conclusions on the grand plan may remain vague without the technical work concluded.
The euro and stocks on both sides of the Atlantic took a dive on the news amid fears that Europe would prove unable, after two years, to get a grip on its debt crisis.
The 17 eurozone countries have not reached final agreement on the details of two key elements of the plan — reducing Greece's massive debts and boosting the firepower of the bailout fund, two European officials said. They spoke on condition of anonymity because the talks were confidential.
Because of that, the 10 EU countries that do not use they euro won't sign off on a plan to force banks across the continent to raise billion of euros in capital and insisted the meeting of finance ministers be called off, the officials said.
One of the officials said that the eurozone was also still waiting for Italy to take concrete action to control its debts and kick start growth.
"It's a real mess once again," one of the officials said
The eurozone is locked into negotiations with banks and other private investors to take losses of as much as 60 percent on their Greek bond holdings, but negotiations for the banks have indicated that they will not be willing to accept those losses voluntarily. Forcing losses onto banks could trigger big payouts of credit insurance and cause huge turbulence in global markets.
At the same time, two schemes to give the 440 billion euros ($612 billion) European Financial Stability Facility more firepower — by using it to guarantee bond issues from shaky countries like Italy and Spain — also still lack detail.
Some officials doubt how effective the changes to the bailout fund will be at containing the crisis. Others are reluctant to commit their money to insuring the debt of Italy as long as that country does not do its part to reduce its debt.
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