Brussels- The EU agreement on banking union is "no triumph". The evidence sits hidden in plain sight in the difference between the summit text before and after yesterday's negotiations...

The summit deal on banking supervision was no triumph. It was another EU exercise in decision dodging and fudge as German procrastination won the day.

Angela Merkel wanted to postpone a new European Central Bank banking supervisor because that in turn delays decision on using the euro’s bail-out fund to recapitalise banks until after German elections.

To see the tricksy, evasive, responsibility-doging fudge – a tortuous linguistic exercise that went into the early hours of today – it is necessary to contrast before and after.

Here is the original draft that the leaders began discussing yesterday: “We need to move towards an integrated financial framework, open to the extent possible to all Member States wishing to participate. In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of completing it by the end of the year:”

Here is the agreed summit text: "We need to move towards an integrated financial framework… In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of agreeing on the legislative framework by 1 January 2013. Work on the operational implementation will take place in the course of 2013.”

This is no triumph. The EU has gone from a deadline to “complete” from one to “agree” with the schedule slipping from December 2012 to anytime next year. This will mean that Chancellor has deferred the issue of using the ESM to directly recapitalise banks until after elections in September 2013, significantly reversing a June summit decision.

At least the Greeks, the Spanish and the Portugese are starting to fight against the rape of their countries by the EU and the IMF.
Unlike the spineless Brits who just bend over and take it, from Cameron and his Atlantic Bridge coterie.
The fire-sale is under way, and the taxpayer will be paying for the largesse enjoyed by the shareholders and parasites of the multinationals.

It isn't going to be a two-speed Europe; it is going to be Greater Germany and the rest. And sooner or later, if Angie is still in office, she is going to be kowtowing to a (German) president of Europe. Only vassal states need apply. And they have. It's just that one or two are choking on the small print....Anthee Carassava is on the ground in Athens and she writes:

Thursday's protests are part of a 24-hour nationwide strike the country's two biggest labour unions have organised as European leaders meet in Brussels to decide the fate of the single currency. It is the second job walk out millions of Greeks have taken to in three weeks; the 20th since the financial crisis here erupted nearly three years ago.

“Just once,” said Yannis Panagopoulos, head of the GSEE private sector union, “the government should reject [international] lenders’ absurd demands. “Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will be indefinite.”

From taxi drivers to doctors and diplomats, the strike is expected to paralyze an already suffocating economy. Ships remained docked, hospitals were operating on skeleton staff, and dozens of domestic and international flights face cancellations leaving travelers stranded as air traffic controllers joined the protest, keeping aircraft grounded and the country isolated from the rest of the world for three hours.

At least 4000 police have been deployed in the city centre alone. At least 12 buses of riot police and three water canons were propped outside parliament, shielding the building -- a favourite target of protests -- from militant demonstrators.

'If Germany goes under then the Titanic really hits the iceberg'

The Chinese are worried that Europe is going to collapse. The Europeans are worried that China is going to Collapse. Actually both are headed for Collapse. European demand comes from the north europeans lending to south europeans to consume in the hope that because they are in Eurozone, they will get repaid. Not going to happen, all that is lent will be written off one way or another.

Chinese demand is based on construction of empty cities, empty skyscrapers, trains on which nobody rides, highways and bridges to nowhere, municipal offices that look like palaces and factories to produce this malinvestment.

There is a saying in Chinese, A day comes when the yellow river clears. Well, the Chinese have run out of money, construction has halted across china, steel is piling up, iron ore is piling up. Dealers are choking on unsold cars. Nobody is taking delivery of ships the shipbuilders are building. Don't expect the chinese to keep buying German cars, French wine , Italian leather or Swiss watches. The south europeans have run out of money, don't expect them to buy chinese toys or electronics....Money supply numbers may be just based on channel stuffing. Don't expect it to put food on your table. Inventory liquidation will start soon, then we will find out who has been swimming without clothes

Isay : Merkel desperately sucking up to the Chinese, hoping that they can take up the slack for the increasing effect of falling demand in the Eurozone, to paraphrase a pundit on RT today, 'If Germany goes under then the Titanic really hits the iceberg'

The eurozone is confronted with the prospect of "financial disintegration"

José Manuel Barroso began his press conference to outline today's report on the European economy (see 12.03pm onwards) by expressing sympathy to the victims of yesterday's earthquake in Italy. Moving to economic issues, Barroso argued that Europe is moving in the right direction on public finances, and also moving towards "greater integration in the euro area". Barroso stuck to broad-brush issues (I think Olli Rehn will do the detail shortly), insisting that the euro had delivered benefits, and wasn't the cause of this crisis – on the grounds that countries who aren't in the euro have also been caught up in the financial turmoil. The key message within the 1,000 pages of reports issued by the European Commission is that the eurozone risks imploding unless it uses the tools at its disposal to calm the crisis.

From Brussels, reports: The eurozone is confronted with the prospect of "financial disintegration" and should use its new bailout fund to overcapitalize distressed banks directly while embarking on a transnational banking union, the European commission said today. Delivering more than 1,000 pages of diagnosis and policy prescriptions on the dire condition of the European economy and how to try to end almost three years of euro crisis, the commission also talked up the merits of eurobonds or pooling of eurozone debt, a proposal gaining in traction but strongly resisted for now by the biggest economy, Germany.

The European Union has abrogated the Rule of Law

Poor Angela - Her early years as an organizer in the East German socialist party must have left her deeply disappointed with the end of the Soviet Union and reunification. Now, her dream of creating an EUSSR seems doomed to end in failure too !!!!..... "The new EU bank plan states clearly and without remorse that the decisions for any bank insolvency will be made by Regulators. This would be people appointed by European politicians, this would be bureaucrats, this would be employees of the State as Europe returns to the governance of the old Soviet Union where the Rule of Law was subordinated to the designs of the nation.....The only question is "do we have to go down with RMS Titanic, or are there enough lifeboats available?" To mangle the metaphor, just as the last thing the Titanic needed was more ice, the last thing the economies need is more debt.

"The European Union has abrogated the Rule of Law for the good of the State. This is the second such abrogation with the first being the exemption of certain European institutions and the IMF from the Private Sector Involvement of Greece. Greece may be a one-off exemption as they claim but we now have a second instance where jurisprudence has been overturned for the good of the nations of Europe. This is not Socialism or Capitalism but rather some sort of Fascist governance which I publicly decry as the echo of the jackboots sounds across the Continent once again."...As this eurozone meltdown deepens, a chronic lack of "periphery" bank capital raises the risk of acute liquidity crises. Spain's fourth largest bank has just asked for a €19bn bail-out. Catalonia, the country's wealthiest region, says it is bust and central government must pay its bills. According to some people in Spain this is Anglo Saxon propaganda, here is a piece from El Pais, the DT is top billing. On its website, Britain’s Daily Telegraph interpreted Mas’ comments as a call for a bailout, prompting the Catalan government, known as the Generalitat, to issue a statement complaining that the some media has misinterpreted the premier’s remarks and had taken them out of context....Shocking stuff - is this for real? I suspect it is.

Spain reintroduced checks at the border with France ahead of the meeting, temporarily suspending the Schengen agreement. So far reports say 17 arrests have been made at the border and 43 people denied entrance because of previous police records involving "violent protest". Authorities want to avoid clashes staged by "anticapitalist" protestors who may travel from abroad for the event. However, students from Barcelona University are staging a "strike" today and have taken to the streets to protest education cuts announced by Mariano Rajoy's conservative government last month. Streets have been blocked by the demo in the centre of the city. Some 8,000 police are on the streets of Barcelona during the ECB meeting to prevent trouble. Snipers visible on rooftops, armoured vehicles and riot police at the ready and helicopters flying overhead. The sunny city is on lockdown with some twitter uses dubbing the Catalan capital "carcelona" - carcel means prison in Spanish. No signs of any trouble as yet.... Mr Draghi's predecessor, Jean-Claude Trichet (below) has told German TV that Europe is "only halfway" through the crisis. In an interview with he said: Hard work has been done, but we are only halfway, and a lot still has to be done [...] As the leader of the Governing Council which has taken all those difficult decisions, yes they are doing a very good job... Mario Draghi will tonight hold a private meeting with Prime Minister Mariano Rajoy in which the Spanish leader is expected to ask for affirmation that the ECB can be relied on to provide liquidity boosts for Spain’s ailing banks. Mr Draghi’s had some positive things to say about Spain. In the press conference he recognised that Spain had “carried out significant reforms in a short time” though insisted that “perseverance was needed to push through more structural reforms” especially in the banking sector. ... The online edition of Spain’s financial newspaper Expansion chose to highlight his comments on further reforms. “Draghi calls for more forceful measures: ‘If you have a problem with the banks, confront it’” said the headline. Overall the paper said there were no surprises in decisions taken during by the ECB governing council.

... in the end the Euro breaks up.

I think we will find that this €200billion back door funding through the IMF will not happen - the IMF have said that money given cannot be prioritised to a specific area. Mario Draghi has also pointed out that it would contravene EU treaty law (not that means much these days) but this fund was part of the deal that Merkozy tried to foist on the UK and the other non-euro countries along with the FTT. The UK or rather Cameron did not agree to be part of it, therefore I don't think he will. Also both Cameron and Osborne have pointed out previously that the IMF cannot be used to support a currency. Can you imagine the fall out if every penny of the government's limited spending cuts and savings were suddenly being seen to being sent to bailout the Euro. There would quite rightly be a run on the pound, our interest rates would have to go up, more QE, more inflation. However, when is a veto not a veto? When it is exercised by the UK. Honestly, listening to the ghastly Ollie Rhen, Van Rumpoy and Barroso makes you realise that Cameron did absolutely the right thing. Can you imagine having to be in the same room as all that eurotrash for endless hours. Think of the smell. What happened to us in the UK when we tried several times to defend a Sterling exchange rate by selling reserves? It got us absolutely no-where because trying to defend the exchange rate is just a big bluff if everyone knows the exchange rate is basically wrong. And even if the ECB claims they are not going to defend one particular exchange rate, they are still going to put the reserves behind a Euro currency *structure* that is as wrong as $2.80 was for Sterling way back when. The Euro is defective and the market is on to it. Deploying national reserves will just lead to a series of "step" adjustments, consisting of nations exiting the Euro, but in the process, reserves will be spent and they should not be spent. In fact, the traders take the long view, which is that - in the end the Euro breaks up.

Most notably, the Dow Jones Industrial Average jumped 700 points in the last three days of November to give the index an overall gain of 0.8 percent for the month. Much of the market's returns are determined by surprises, not simply by good or bad news. A company can experience its greatest quarter ever and still see its stock price hammered simply because the outstanding news still wasn't as good as the market expected. The same is true of bad news: A stock can soar if its company reports overall poor results that were much better than expected. The market as a whole responds similarly. In this case, we see the IMF action to provide liquidity to banks on a major scale, addressing the liquidity problem threatening the markets. Also, many economic indicators -- such as consumer confidence numbers, employment numbers and retail sales figures from the past weekend -- were all positive surprises. The market reacted accordingly.

Therefore : always keep in mind these two issues. Your plan should realize that surprises will occur and that just because things are bad (or good, for that matter) doesn't mean it will continue that way.

One of Angela Merkel's key allies has dampened hopes that Berlin may cave in – insisting that Germany is not about to unleash the Big Bazooka that other European leaders (notably David Cameron) have called for. Michael Meister, finance spokesman for Merkel's Christian Democratic party, said this morning that Germany is sticking to its current plan for the eurozone crisis. Meister told reporters that: We don't have any new bazooka to pull out of the bag. That means Germany is sticking to its position that austerity and budget cutbacks are the short-term solution to the crisis (along with bank overcapitalization and a haircut on Greek debt). In the long-term, it wants changes to the EU Treaty to bind eurozone members closer together. The Big Bazooka (das große Geschütz?) option would be for the European Central Bank to launch a quantitative easing programme to mop up large quantities of sovereign debt, followed by eurobonds – allowing weaker nations to borrow with the security of Germany's credit rating behind them. Both options, though, remain deeply unpopular in the eurozone's largest economy.

This sentence was a gift for euroskeptics in Britain. "Suddenly Europe is speaking German," said Volker Kauder, floor leader for German Chancellor Angela Merkel's conservative Christian Democratic Union, at the CDU party congress in Leipzig. The British press eagerly jumped on the soundbite on Wednesday, seeing it as confirmation of the old prejudices about Germany's supposed thirst for power. "Europe speaks German now!" was the headline in the tabloid newspaper Daily Mail, complete with fat exclamation points. "Controversial claim from Merkel ally that EU countries all follow Berlin's lead -- and Britain should fall into line," the paper continued in outrage. But the consensus of the conservative British press was that such a thing would, of course, never happen. Instead, so the euroskeptics argued, British should take advantage of the euro crisis to "free" itself from the EU. The Kauder controversy is the latest indication of a growing rift between Berlin and London. On the British side, Business Secretary Vince Cable added fuel to the fire on Wednesday in connection to a proposed European Union tax on financial transactions. Cable described the so-called Tobin tax, which Germany has been campaigning for, as "completely unjustified." Kauder, meanwhile, had earlier criticized British opposition to the tax as irresponsible. Merkel's and Sarkozy's reactions to the criticism coming out of London have been increasing thin-skinned. At the most recent EU summit, Sarkozy's comment about Cameron -- that he was "sick of him telling us what to do" and that Cameron had "lost a good opportunity to shut up" -- came from the heart, but Chancellor Merkel will probably be a bit more diplomatic on Friday. She knows she'll need Cameron on her side if she is going to be able to push through an amendment to the Lisbon Treaty, given that changes must be unanimously approved by all 27 EU member states. On Thursday, she appeared to strike a conciliatory note. "We want a Europe with Great Britain," she said at a conference in Berlin. One would have to handle the process of further European integration with great political sensibility, she added.

Hot news and ...comentary - Hang on....

Just in -- the eagerly awaited Italian debt auction has finished (earlier than we'd indicated). The good news is that the auction was a success, with Italy finding buyers for the full €3bn of debt. The less-good news is that the yield jumped to 6.29%, from 5.3% at a similar auction last month. That means that investors demanded a much higher interest rate in return for buying the debt. The bid-to-cover ratio came in at 1.469%, up from 1.34% in October. So, more demand, but only at a much higher interest rate.

Hang on...there is an alternative to this crisis of moribund STATE MONOPOLY CAPITALISM - A SOCIALIST UNITED STATES OF EUROPE! Capitalism is doomed by it's inherent contradictions of class struggle over the division of surplus value and the antagonisms of nation states through economic competition. You know as well as I do that the class nature of the system makes genuine, lasting international economic co-operation impossible. Capital, in the hands of a few private owners, in the current crisis, is being used in more and more dangerous ways which is destroying whole economies; the ultimate being WORLD WAR. (militarized economics). All in vain attempts to recuperate ever increasing losses. It's akin to watching Rome burn slowly as mindless idiots pore more fuel on the fire! Our lords and masters won't accept that their economic mode is finished for obvious reasons. They are the modern dinosaurs. They sincerely believe that wealth can be created by throwing a few chips on the table! Capital is a social product which belongs to everyone. It should be used in a balanced, constructive manner across the globe. This requires an end to the blind anarchy of markets which serve the interests of the few. Then there will be no need for different currencies or destructive speculation. We've all been brainwashed into believing that Socialism will always turn into a Stalinist nightmare. What about another Fascist nightmare which I have hinted at in my recent postings?... In October EFSF came up with a plan to Guarantees the new European bonds by 20%However 2 weeks later this plan has been a failure. The reasons are: Unlike the Brady Bonds ( South American debt restructuring by consolidating the old debt and making the banks take haircuts plus Guarantees from the US Treasury) The EFSF plan would not restructure existing debt hence carrying the problem forward ; the Guarantee's are too small- 20%. even 30% is doubtful as enough : the fact the debt is being guaranteed by countries in a basket of defaults does not give lenders any confidence ; 800 Billion Euros of guarantees is available but the debt to be refinanced is 2000 Billion. A shortfall of 1200 Billion...So now France and Germany want to get out of this plan as they will not allow the ECB to buy the debt.

Fears that Europe's sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets. Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy would be too big to rescue. Despite Silvio Berlusconi's announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in the eurozone's third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland. Italian bond yields surged through the critical 7% mark, at one point hitting 7.5%, amid concern that the deteriorating situation had moved the crisis into a dangerous new phase. In Athens talks to appoint a prime minister to succeed George Papandreou were in deadlock, and will resume on Thursday morning. The Italian president, Giorgio Napolitano, sought to reassure the markets by promising that Berlusconi would be leaving office soon. Angela Merkel, the German chancellor, said the situation had become "unpleasant", and called for eurozone members to accelerate plans for closer political integration. "It is time for a breakthrough to a new Europe," she said. "Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe."

Right now the death howls for the EU are underway; what matters is how the people will handle the challenges to come, and prepare for the resetting of their nations economies...deal with some pain now and make the needed changes, or face catastrophic care later with the implementation of draconian measures ...these are the choices. Yesterday, Angela Merkel, the German chancellor, said the market turmoil could last for a decade and there was still “a chunk of work” to do. “The Germans want more fiscal unity and much tougher central observation – with the idea of a finance ministry.” Titles , titles, lot's of hot air :

1) The euro is the EU.
2) France is Club Med and will not desert PIIGS.
3) This is why Greece cannot be allowed to exit. It will pull all Club Med with it.
4) The EU/euro is a Project which cannot be tinkered with. It will either survive or collapse whole. There will be no derivative.
5) If the Project collapses, Europe is in free fall. There are no contingency plans.
6) The Project is not even stressed yet. When matters get real desperate, Brussels will go nuclear with the ECB. As a major reserve currency, the euro will join the dollar in a race for the bottom, but buy enough time for the EU to emerge intact. Schroeder bragged about making an honest currency out of the EU, Schauble will do better by making a dishonest bank out of the ECB.

BEIJING - Chinese and European officials sought to play down expectations about when and how China may deploy its vast financial resources to help bail out indebted countries in Europe. A Chinese Vice Finance Minister said China must first see the details of a new European bailout fund before making any commitments. "We of course must wait until its structure is extremely clear," Zhu Guangyao told a press briefing. "And moreover, this investment must be decided on after serious, technical discussions."

Klaus Regling, the chief executive of the European Financial Stability Facility, flew into Beijing on Friday on the first stop of his trip. Klaus Regling is the
German Governor of the new Europe" de facto !

THE RIBBENTROP - MOLOTOV PACT - IMPLEMENTED - the second pillar.

THE RIBBENTROP-MOLOTOV PACT - IMPLEMENTED - the second pillar. Germany takes over the administration of Europe. In Berlin, the new epicentre of political as well as economic Europe, the German chancellor, Angela Merkel, was putting the finishing touches to her government statement to the Bundestag on the broad shape of the new "bazooka" – the enhanced bailout fund, or EFSF, that would save Europe from any reprise of the sovereign debt crisis that has overtaxed the powers of EU leaders to assert the primacy of politics over the naked short-sellers of financial markets. The letter – which Berlusconi hopes will give him a respite from humiliating criticisms of his country's €1.9tn debt and stagnant economy – was in Rome, being touched up by his advisers, but it was one of three key elements to a day destined to determine Europe's future. Down the road in Brussels from the marble-clad Justus Lipsius building, the current home of the council of ministers, EU officials – marshalled fittingly enough by an Italian treasury official, Vittorio Grilli – began a new session of their tortuous, often aggressive talks with leading bankers over how to reduce Greece's debt burden and allow a second bailout package to go ahead. Later the negotiations over the "haircuts" for holders of Greek debt moved from the Lex building to Justus Lipsius so they could be closer to Europe's political leaders. The overnight news from Rome was that Berlusconi had cut a deal on pensions reform with the Northern League, but that did not pacify the Italian press corps, the biggest national contingent in Brussels and the best-paid. At the midday news conference in the Berlaymont, the European commission's headquarters, that letter was the sole topic. "Can't we interest you in anything else?" Olivier Bailly, the spokesman, asked plaintively. He could not.

As Donald Tusk, the Polish premier whose country holds the rotating presidency, set out the achievements so far, a leak of the draft eurozone summit communique began doing the rounds. It again contained no figures, preferring instead to talk of boosting the bailout fund's firepower "severalfold" and strengthening the role of the European commission as Greece's debt and budget inspector. No word of those "haircuts" for the banks. Merkel and her team had spent all day lowering expectations of breakthroughs, big bangs, full-range bazookas; as dinner for the eurozone 17 loomed it looked pretty clear they were right.

Resque - Europe's leaders are claiming a victory in the eurozone crisis after agreeing new deals that halve Greek debt and increase the firepower of the main bailout fund to around €1trn. Athens will be handed a new €100bn bailout early in the new year. The accord was reached in the early hours of Thursday after hours of fractious debate. At one stage talks broke down with holders of Greek debt but they ended up accepting a loss or "haircut" of 50% in converting their existing bonds into new loans. Investors are likely to welcome the breakthrough. Sharp gains are predicted for European markets on opening, with the FTSE 100 being called up 75 points and similar rises expected on the German and French stock markets. Angela Merkel, the German chancellor, helped broker the deal in talks with the bankers that also included the French president, Nicolas Sarkozy, and the IMF managing director, Christine Lagarde. Merkel said the swap would take place in January. Sarkozy said private sector investors would refinance Greek's remaining debt at preferential rates while governments would find €30bn to go alongside €100bn from the private sectors. The French president and German chancellor both insisted that the €440bn bailout fund, the European Financial Stability Facility (EFSF), could find its firepower increased by four to five times. Since the fund has about €250bn left this could amount to €1trn – or US$1.4trn in Sarkozy's words. "We have reached an agreement which I believe lets us give a credible and ambitious and overall response to the Greek crisis," Sarkozy told reporters as the meeting broke on Thursday morning. "Because of the complexity of the issues at stake it took us a full night. But the results will be a source of huge relief worldwide."

EUROPE - The Polish finance minister appears to have dashed hopes that a big package will be decided tomorrow. Jacek Rostowski gave this indication in a letter to Eurogroup President Jean-Claude Juncker last night, according to the FT Brussels by Peter Spiegel. Since Poland holds the rotating presidency of the EU, Rostowski is charged with calling meetings of the Ecofin, comprised of finance ministers from the 17 countries that use the euro. Here's what he said: As things stand at present, I understand that the full package may not be ready by Wednesday, 26 October. Were this the case, the presidency would need to postpone the Ecofin council meeting by a day or two. Therefore I would like to ask you to keep me informed on when the remaining elements of the package will be completed by the Eurogroup so that I can convene the Ecofin meeting as promptly as possible. Stock markets have turned negative after comments from German chancellor Angela Merkel and rumours that tomorrow's meeting of eurozone finance ministers has been cancelled. The FTSE has tumbled more than 30 points to 5515, a 0.6% fall. Spain's Ibex is down 1.1%, Portugal's PSI 1.4% and Italy's FTSE MIB 1.2%. Merkel said Germany was opposed to a phrase in the draft EU summit document that calls for support for the continued use of 'non-standard measures' by the European Central Bank. EU sources told Reuters said the phrase referred to the ECB's purchase of bonds from countries like Italy and Spain. Greek prime minister George Papandreou hopes Wednesday's EU summit will draw a line under Greece's economic crisis. He appealed for unity in his Socialist party to approve the latest round of austerity measures. He said the deal, which could include a reduction of up to 60% in the face value of Greece's debt of more than €200bn, would help reduce the burden on ordinary Greeks. Papandreou told Greek president Karolos Papoulis in a televised discussion before leaving for the summit: Tomorrow we want to be able to turn the page, so that we, as Europe and as a country, can move forward. We have been fighting a great battle... for these burdens and responsibilities to be shared, so that the Greek people can breathe and move forward with the country's rebirth. It takes a sense of calmness and unity from all parties.

Merkel's spokesman Steffan Seibert told journalists that further changes to Europe's bailout fund would require the agreement of the Bundestag, the German parliament. The eurozone's efforts to solve its escalating debt crisis plunged into disarray Thursday, when Germany and France called a second emergency summit after it became clear that they would not be able to bridge their difference in time for a first crisis meeting Sunday. Merkel's address to parliament scheduled for Friday was cancelled, and Seibert said it would take place next week. Sunday's summit was supposed to deliver a comprehensive plan to finally get a grip on the currency union's debt troubles by detailing new financing for debt-ridden Greece, a plan to make Europe's banks fit to sustain worsening market turbulence and a scheme to make the eurozone bailout fund more powerful. The announcement came from the offices of French President Nicolas Sarkozy and German Chancellor Angela Merkel after it became clear that the currecy union's two biggest countries could not agree on the main points of the plan. Both governments said that all elements of the eurozone's crisis strategy would be discussed on Sunday "so it can be definitively adopted by the Heads of State and Government at a second meeting Wednesday at the latest." It also said that the two leaders would meet Saturday afternoon ahead of the summit in Brussels in the hope of making progress.

The European Union's executive may ask for powers to censor credit ratings for countries in crisis, its financial reform chief said on Thursday, describing a ban as one way of stopping fallout from "ill-thought-out" ratings. The proposal, which officials cautioned may be impossible to police, would be the most stringent curb yet on rating agencies and highlights frustration in France, which was this week warned by Moody's that its top rating was under threat, and Germany. "These rating agencies should probably be considered one of the causes of this crisis," said Michel Barnier, the former French foreign minister who is now the EU commissioner in charge of regulating finance.

Whatever the outcome of this weekend's on - off, on again summit, it seems unlikely the 17 euro countries will get what's needed, given Germany's entrenched reluctance. As we predicted after the July 21 summit, Europe's leaders continue to fall behind the problem they're trying to solve. That's a constantly evolving debt crisis that gets bigger by the day. It doesn't stop and wait, its morbid momentum reflected in markets since early summer. What we'll see revealed in Brussels this weekend is that the euro zone is not just a flawed currency system, but it is also a flawed political system incapable of being led and incapable of making the difficult, often painful decisions required. Could it, for instance, ever impose the sort of fiscal discipline being attempted in the UK or the bank overcapitalization already complete here? I doubt it. That's not to be complacent about our own parlous position. We may be implementing fiscal and monetary policy decisions, but are they working? This crisis, whether elsewhere or in the euro zone, is like a virus mutating against a vaccine. Europe isn't using enough medicine while rest may have already administered what they can without any meaningful effect. The patient remains ill and the drugs aren't working.Markets slide on reports of deadlock between France and Germany in talks over how to expand the eurozone bailout fund, making a resolution by this weekend's crucial summit increasingly unlikely. Silvio Berlusconi has named Ignazio Visco as the new head of the Bank of Italy. He wasn't one of the favourites in the running for the job, which won't be an easy one at the moment. He's the existing deputy director general of the bank. Visco will take over from Mario Draghi, who is taking over from Jean-Claude Trichet as head of the European Central Bank.

France wants the euro region's European Central Bank (ECB) to be a backstop for an expanded EFSF, currently guaranteed by eurozone governments. Germany, the eurozone's economic powerhouse, and the central bank itself are unwilling, seeing such as move as outside its role. "We think that clearly the best solution is that the fund has a banking licence with the central bank," Francois Baroin, the French finance minister, said on Wednesday. "Everyone knows about the reticence of the central bank. Everyone also knows about the Germans' reticence." Throughout the two-year debt crisis, Berlin has argued for solutions in which the private sector debt holders are more exposed to losses. "In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince," Mr Sarkozy was reported to have told colleagues on Wednesday. A senior EU source said the negotiations were proving "very difficult", with the size of the haircut to be given on Greek debt held by private investors also an issue. The depth of the tension emerged even as markets were boosted by a report on Tuesday night that France and Germany had agreed, through an alternative plan, to expand the rescue fund's firepower to €2 trillion. Under this proposal, the rescue fund would guarantee the first 20pc or so of any losses of distressed governments' debt, meaning its stretch would be up to five times greater. Investors shrugged off the news that Spain's credit rating had once again been downgraded, with Moody's, one of the triumvirate of top rating agencies, cutting it by two notches to A1. The FTSE 100 closed up 40.14 points of 0.7pc at 5,450.49.