European Commission president Jose Manuel Barroso said that it was time for Eurozone leaders to “make good” on their promise to save the single currency.
“Most of the decisions to be taken… belong to the competence of the member states,” he said. “They have reserved the instruments to themselves. And they have said they will do what it takes to ensure the stability of the euro area. Well, now is the time to make good on that promise.”
Greece urgently requires a new rescue to avoid a disorderly default next year, with markets sensitive to any suggestion that a deal might again be put off.
German chancellor Angela Merkel has tried to dampen hopes of a deal, despite the Eurozone’s final deadline for agreeing a bailout package having passed last week: “Further steps will be necessary and not just one spectacular event which solves everything,” she said, suggesting that constructing a bailout will be an ongoing process.
Capital Economics’ Jonathan Loynes said: “Today’s summit could provide the last chance for Euro-zone policymakers to get a grip on the region’s debt crisis. Anything other than a very decisive response could see the situation become irretrievable.”
Following a panicked crash at the start of the week, markets rose on the hope of a grand announcement yesterday, with the euro gaining 0.5 per cent against the dollar. The FTSE 100 closed up 1.1 per cent and the Eurostoxx 50 gained 1.8 per cent.
Yields on Eurozone government debt also dipped after successive rises over recent days. Italy’s two-year yields dropped from 4.3 to four per cent and its ten-year yields fell from 5.7 to 5.6 per cent.
But if the day passes without a substantial agreement, vulnerable Eurozone economies could again find themselves subject to the whims of nervous investors.