EU's crisis summit in crisis

Markets had been rallying in recent days on anticipation of an announcement from EU leaders on Sunday that is expected to entail a three-pronged approach to address the crisis, including scaling up the firepower of the euro zone’s bailout fund — the European Financial Stability Fund (EFSF), recapitalising the region’s struggling banks and working out a way to force private investors to take a haircut on their holdings of Greek debt. But these expectations have been confounded by the continued inability of France and Germany — the two main architects of the rescue plan — to agree on how to beef up the Euro 440-billion EFSF.

Germany is apparently in favour of forcing a haircut of up to 50 per cent, up from the voluntary 21 per cent loss that had already been agreed to in July.