UK Chancellor George Osborne has said the eurozone debt crisis is a "real danger" to all of Europe as a summit in Brussels continued.
However, he said “real progress” had been made in the battle to beat the economic crisis and restore confidence in the stability of the single currency.
He emerged after 10 hours of talks with fellow EU finance ministers in Brussels to announce “important decisions” to strengthen the Continent’s banks.
A recommendation that the banks should raise more than €100 billion (about £87bn) in new capital – to offset larger losses that the eurozone will force Greek debtholders to absorb – will be put to today’s summit of EU government heads for ratification.
However, the eurozone is divided over a lasting solution.
Prime Minister David Cameron will attend an EU leaders’ summit today to add more safeguards to the EU’s economic armoury to counter a crisis which has threatened to get out of control. On the table is a massive increase in an existing €440bn bailout fund – possibly four-fold to about €2 trillion.
But more progress depends on resolving major disputes over details between German Chancellor Angela Merkel and French President Nicolas Sarkozy.
They were meeting over dinner in Brussels to thrash out concerns over how big the bailout fund should be and how far to go to give Greece a huge “discount” on its mounting debts.
It was supposed to be a make-up dinner for two, but they were being joined by International Monetary Fund chief Christine Lagarde, outgoing European Central Bank boss Jean-Claude Trichet, European Commission President Jose Manuel Barroso and EU Council President Herman Van Rompuy.
Earlier, Osborne had emphasised the need for a long-term solution to the economic crisis and an end to “short-term” measures.
He insisted that a comprehensive deal would be the biggest boost for the British economy this autumn and repeated the Government’s case that a secure and stable euro is as important for the UK as it is for the single currency member states.
He said: ”We’ve had enough of short-term measures, sticking plaster that just gets us through the next few weeks.
“The crisis of the eurozone is a real danger to all of Europe’s economies, including Britain’s.
“We need to address the root causes of the problem with a lasting solution that will help all of Europe’s economies.”
Today’s summit has already been overshadowed by a second summit – so far involving only eurozone leaders – in Brussels on Wednesday, by which time Berlin and Paris hope to have resolved their differences.
They are in the driving seat, but have clashed in the last few days over exactly how to shore up the euro and persuade jittery financial markets that the single currency is solid.
The hectic diplomatic activity comes amid growing concern that the Greek crisis is even worse than feared.
Despite Wednesday’s make-or-break summit, some ministers, including Osborne, have set the ultimate deadline as a G20 summit in Cannes in less than a fortnight, when world leaders gather to discuss the global financial crisis.
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