European leaders convene over mounting debt crisis

German Chancellor Angela Merkel and French President Nicolas Sarkozy during a press conference at the E.U. headquarters in Brussels on Oct. 23, 2011.

Jeremy Hobson: We'll start in Brussels, Belgium, where European leaders are meeting today and could finally produce a grand solution to the debt crisis. They're trying to reach an agreement on how to increase the size of Europe's bailout fund, and how to handle a Greek debt default without bringing down Europe's banking system.

The BBC's Andrew Walker, economics correspondent, is with us live from Brussels with the latest. Good morning.

Andrew Walker: Good morning.

Hobson: Well Andrew, there's been some effort to play down the significance of today's meeting leading up to it. How significant is it?

Walker: Well the European leaders would really like to come up with a comprehensive package to draw a line under this financial crisis once and for all. It's something that's holding back economic recovery across the eurozone; they really could do with putting it behind them.

They want to be able to put the Greek government debt on a sustainable footing. And perhaps most importantly, they want to create a kind of firewall that ensures that the two really big ones they're worried about -- Spain and especially Italy -- don't get sucked into the crisis anymore than they already have done.

Hobson: Does it look like they're going to reach a deal by the end of today?

Walker: I'm sure there'll be some kind of political declaration that will cover all the main points the financial markets want to see addressed. But I don't think it's going to have all the detail that they would like; it's not going to have some of the hard numbers that they would like to see. And some of the mechanics of how some of the money's going to be raised -- again, I don't think that's going to be nailed down fully.

Hobson: And of course, this is turning into a political story in each of the countries in the eurozone. Italy is one that you just mentioned. It's got big trouble with its finances. They're trying to push through austerity measures like raising the retirement age. And now there are reports coming in that Prime Minister Silvio Berlusconi's leadership could be at risk -- what's that all about?

Walker: There certainly is a big political challenge facing Mr. Berlusconi. We are hearing reports that there is a kind of deal done with his coalition partner that will get some measures through. But ultimately, what he's under pressure to do from Europe is to make his contribution by having reforms that will encourage the Italian economy to grow more rapidly, and getting better control of the government's debt situation.

But you know, more generally, it's a huge political issue across the eurozone. It's perhaps surprising that there haven't been many political collapses. We have seen the Slovak government going down as a consequence of this crisis, and there's a lot of pressure on others. And I wouldn't be surprised if we see some more political heads rolling at some stage in the coming months.

Hobson: The BBC's economics correspondent Andrew Walker in Brussels, thanks Andrew.

Walker: Thank you, Jeremy.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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