The European Debt Clock

With time fast running out, German chancellor Angela Merkel and French president Nicolas Sarkozy again held emergency talks overnight in an attempt to settle their differences before Sunday’s crucial summit of European political chiefs. 

The stakes are extremely high. Financial markets took Merkel and Sarkozy at their word almost a fortnight ago when the two pledged they would come up with a comprehensive plan for stemming Europe’s worsening bank and debt crisis by the end of the month. At this point, both Merkel and Sarkozy have relinquished all hope of coming up with a grand plan for solving the crisis. They’re just hoping they can do enough to avoid a major financial market meltdown. 

But the two sides remain deeply divided over the size of the Greek debt restructuring, and the firepower that the eurozone’s €440 billion ($US605.3 billion) bailout fund. Berlin opposes increasing the level of guarantees that France and Germany provide for the fund, arguing that this could see France lose its precious triple-A rating. Not surprisingly, Paris agrees with this, but wants to transform the institution into a bank, which will be able to raise funding from the European Central Bank.)