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As Tempers Flare at EU Summit, Progress on Bank Recapitalization

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Heated exchanges marked a summit meeting of European Union (EU) leaders over the weekend as tempers ran high. Despite efforts by member countries to come to agreement on parts of a unified strategy to tackle the eurozone crisis, no final consensus was reached, and another meeting was scheduled for Wednesday. Despite that, however, leaders said that progress was made on a strategy to recapitalize banks.

Reuters reported that wrangling over how to increase the size of the European Financial Stability Facility (EFSF) resulted in French President Nicolas Sarkozy giving ground to German Chancellor Angela Merkel (left), who had steadfastly opposed the notion, along with the European Central Bank (ECB) itself, that unlimited ECB funds should be used to attack the crisis. Their disagreement had threatened to derail talks, as previously reported by AdvisorOne. The issue still must be resolved, and is one of the aspects of the plan to be discussed at Wednesday’s meeting.

The New York Times reported that leaders had come to an overall agreement on bank recapitalization, and set the amount required at 100 billion euros ($138.583 billion). According to the agreement, banks must raise what cash they can on their own, with their own governments chipping in if they cannot raise adequate funds. Should those governments be mired in their own financial difficulties, the ECB will at that point step in “as a last resort,” according to Merkel.

Still at issue is the enlargement of the EFSF. Currently under discussion is the possibility of turning to a combination of BRIC nations (Brazil, China and India) and non-euro countries to raise funds.

The pressure to find a definitive solution to the eurozone’s debt problems contributed to short tempers and acrimonious discussions during the meetings, which included one made up of leaders of all the EC countries and one consisting of eurozone leaders alone. Sarkozy and Merkel confronted Italy’s Prime Minister Silvio Berlusconi, pressing him to cut the country’s debt.

One particularly heated exchange was between Sarkozy and British Prime Minister David Cameron. Cameron has criticized eurozone leaders’ work on the debt crisis. Sarkozy was quoted in the report saying, “You say you hate the euro, and now you want to interfere in our meetings,” and was reported to have told Cameron in essence that if Britain wanted to criticize the eurozone, it should join it.