German Chancellor Angela Merkel and French President Nicolas Sarkozy continue to report that European leaders are making progress toward finalizing a plan to address Europe’s debt crisis. “A broad agreement is taking shape,” Sarkozy said, while adding that the goal is to reach a consensus by Wednesday’s EU summit, according to MarketWatch.
Merkel told reporters that progress was being made, particularly regarding the issue of recapitalizing Europe’s banks, but that they still needed to decide how the EU would address Greece’s debt crisis and how to leverage the 440 billion-euro European Financial Stability Facility. Economists view the EFSF issue to be the most difficult to hammer out. France pushed to borrow from the European Central Bank, but Germany and the bank are both against it. Sarkozy stated that currently two possible ideas for leveraging the EFSF were discussed, neither of which involved the ECB.
There is also still work to be done to address Greece. European leaders are trying to come to an agreement with European banks as well as with private bond holders to share the burden of a second Greek bailout. There was agreement around requiring banks to raise $150 billion in new funding in order to reach a new capital ratio. Pressure was also put on Italy to take action against its growing debt level and prevent the European debt crisis from becoming more widespread.