Europe scrambles to finalise debt crisis solution

BRUSSELS, Oct 24 (AFP): Europe laboured to put the finishing touches on a lasting defence against the debt crisis by tomorrow (Wednesday) as leaders homed in on a deal and Italy pledged reforms to prevent a devastating contagion. European Union leaders and IMF chief Christine Lagarde hailed "good progress" after a first summit on Sunday aimed at overcoming a crisis that has threatened to pitch the world into a fresh recession. However, presidents and prime ministers left Brussels with few concrete details, vowing to reveal all at a second gathering tomorrow (Wednesday) despite mounting international and market pressure. French President Nicolas Sarkozy and German Chancellor Angela Merkel seemed to have resolved their differences, telling reporters at a packed joint news conference there was "a quite broad agreement" on the main sticking point, boosting the EU bailout fund. Leaders are concerned the 440-billion-euro ($605-billion) war chest will be insufficient if it has to bail out a big country like Italy, so are examining ways to beef up its firepower without actually putting in more money. "Work is in progress and progressing well," said a bullish president of the European Commission, Jose Manuel Barroso. "We expect those decisions to be taken in 72 hours and I am confident those decisions will be taken." EU president Herman Van Rompuy said there were two models still on the table. One is a scheme whereby the fund would insure investors against potential losses on their bond holdings, a bid to tempt nervous traders back into buying the debt of shaky economies. The other option would create a second fund to attract contributions from non-European nations such as China, although this has prompted splits within the EU. By using such financial inventiveness, leaders hope to "leverage" the fund up to as much as a trillion euros, which they hope will be enough of what has become known as a "bazooka" to reassure volatile financial markets. Van Rompuy told reporters: "It could even be that we combine the two models and have a cumulative effect." European leaders also achieved breakthroughs on two related and complex issues, managing a huge write-down on the debt of stricken Greece and making sure banks had enough resources to withstand these losses.