As the European summit on 23 October approaches, rumors about possible European agreements to defuse the debt crisis are multiplying. The protagonists naturally remain the German chancellor Angela Merkel and the French president Nicolas Sarkozy. According to the British newspaper "The Guardian", the two leaders would have found an agreement to dramatically increase the firepower of the European State Rescue Fund (EFSF).
Through leverage, the Fund would see multiply by almost five times its intervention capacity, going from a budget of 440 billion euros to over 2 billion. Also according to the Guardian, Paris and Berlin have also agreed to recapitalize European banks to raise their prudential capital ratios to 9%.
On the other hand, different versions are circulating in other newspapers about the agreement and the same figures at stake, while rifts seem to have opened between Germany and France in recent days. After partial retreat by the chancellor Merkel, who wanted to reduce market expectations on the outcome of the next summit, a vaguely apocalyptic warning came from the Elysée Palace: if the EU summit ends with nothing done - Sarkozy ruled - the euro could collapse . And if the euro fails, goodbye European Union.
Another version of the new agreement is provided by another authoritative source, the Financial Times Germany. According to the German edition of the famous British newspaper, Wolfgang Schaeuble, German finance minister, would agree on the use of financial leverage for the EFSF, but only to boost it up to one billion euros. An opening which in any case, if confirmed, would mark a clear change of line by Schaeuble.
