Europe’s leaders have delayed a vital summit meeting scheduled for next Monday by almost a week as they struggle to reach agreement on both Greece and the growing concerns over the region’s banks.
On a day of announcements of deadlines in the Eurozone, European Council president Herman Van Rompuy said the EU’s summit meeting would be pushed back to October 23.
The move frees up German chancellor Angela Merkel and French president Nicolas Sarkozy to come up with a strategy to stabilise the Eurozone by the end of the month.
“Further elements are needed to address the situation in Greece, the bank recapitalisation and the enhanced efficiency of stabilisation tools (EFSF),” Van Rompuy said in a statement.
“These elements are closely related to the outcome of the troika mission to Greece on the state of implementation of the programme and to the Commission's plans for a framework for the bank recapitalisations, taking into account the work of the European Banking Authority.”
The news came as Slovakia's parliament failed to reach a decision on whether to extend the powers of the European Financial Stability Facility, the Eurozone's bailout fund. The parliament will reconvene to continue discussions tomorrow
Merkel has backed a recapitalisation of the banking sector by its governments, as Germany could easily bankroll its weak lenders and wants countries to stand by their own banks.
But France, whose banks are heavily exposed to Greek debt and grappling with an interbank lending freeze, fears it could lose its high credit rating by bailing them out.
Van Rompuy is trying to broker a compromise on that and other issues, as well as getting other countries in Europe, including Spain and Italy, on board.
But many experts are sceptical that he will win backing for what they see as a badly needed increase in the size of the EFSF.
"If they still have only €440bn (£380bn), you are quickly going to burn through that by recapitalising banks, with not enough left for sovereigns," said one banker.