PROSPECTS for a comprehensive deal to resolve the euro zone debt crisis at a summit yesterday look dim, with deep disagreement remaining on critical aspects of the potential agreement, including how to give the region’s bailout fund greater firepower.

    EU officials and European diplomats are lowering expectations of a breakthrough when the 17 euro zone leaders meet, despite Franco-German assurances only weeks ago that a “comprehensive solution” to more than two years of debt and economic turmoil would be found by the end of the month.

    While there appears to be broad consensus on the need for around 110 billion euros (US$153.21 billion) to be injected into the European banking system to help it withstand a potential Greek debt default and wider financial contagion, there is little clarity on either of the other two critical parts of the plan.

    One element involves scaling up the region’s 440-billion-euro bailout fund, known as the European Financial Stability Facility (EFSF), and the other is focused on reducing Greece’s debt burden by deepening the losses private investors, including major banks and insurance companies, must take on their Greek bonds.

    EU leaders will consider two methods for scaling up the EFSF, one by using it to offer guarantees to purchasers of new euro zone debt, and the other using part of its capacity to set up a special purpose investment vehicle that would attract money from sovereign wealth funds and other investors to buy debt. They might also agree to combine both options.

    “The numbers are not yet finalized — you have to have all parameters in place and see what is needed and what the leverage factor would be. It needs a lot of technical work to come up with a number,” one EU official said.

    Instead, it looks likely that it will not be until Nov. 7 to 8, when EU and euro zone finance ministers are next scheduled to meet, that the details of whatever euro zone leaders agreed on during yesterday’s summit will be completely finalized.

    Financial markets are likely to find that extremely disappointing, having been told on multiple occasions by EU leaders that a resolution to the crisis was near, only to find the EU and its institutions unable to deliver.

    That has in turn morphed a banking and debt crisis into a wider economic and political crisis that threatens to undermine the euro single currency and the EU project.

    Italy’s inability to deliver a substantive plan for reforming its pensions system has raised doubts about Prime Minister Silvio Berlusconi’s seriousness in tackling a crisis that threatens the euro zone’s third largest economy.

    Italy has the euro zone’s largest sovereign bond market, with a public debt of 1.8 trillion euros, 120 percent of its GDP. EU leaders fear that failure to make its debts more sustainable will mean it goes the same way as Greece, Ireland and Portugal, which have had to accept EU or International Monetary Fund’s financial aid programs. But the problem is there is not enough money to bail out Italy. (SD-Agencies)

    There is also a standoff over how much the European Central Bank (ECB), the ultimate defender of the euro, should be involved in trying to resolve the crisis, with France wanting deep and direct ECB involvement and Germany staunchly against it.

    German Chancellor Angela Merkel, fighting to secure parliamentary backing for the euro zone rescue measures, particularly the scaling up of the EFSF, said Germany opposed a phrase in the summit’s draft conclusions urging the ECB to go on buying troubled states’ bonds, a key backstop against deeper turmoil.

    Many analysts believe the ECB is the only authority at this stage that can deliver the financial firepower that convinces nervous and skeptical markets that the crisis can be contained. Locking the ECB out could prove another negative therefore.