BRUSSELS, Belgium - European leaders have agreed to order banks to raise around $140 billion in new capital and ask Greek bondholders to accept losses of as much as 60 percent as work continued on a plan to resolve a lingering financial crisis.
After three days of meetings, however, debate continued Sunday on perhaps the most contentious issue: how to increase the power for a bailout fund whose $600 billion size is widely considered inadequate to convince world markets that it can backstop nations the size of Spain and Italy.
The option favored by many euro-region countries and pushed by the United States is to have the European Central Bank act as the financier of the new European Financial Stability Facility. That would let the ECB loan virtually unlimited sums to the bailout program.
But Germany and the ECB have ruled that out. They fear it would undermine the bank's main mandate of fighting inflation and possibly violate the basic treaties that created the euro.
Other options, including insurance schemes that would allow the bailout fund to support perhaps a trillion dollars or more in bond sales by European governments, are among the alternatives the leaders of the 17 euro nations were debating Sunday night.
They have promised a decision by Wednesday. If the plans to "leverage" the bailout fund are too small, markets will dismiss them as inadequate; if they are too ambitious, they may face opposition from German lawmakers who have demanded that Chancellor Angela Merkel brief them this week before a follow-up summit Wednesday.
by Howard Schneider Washington Post Oct. 24, 2011 12:00 AM
Debt crisis plan is not yet ready
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