France-Germany fail to agree on bail out plan

According to analysts, deep divisions between France and Germany mean there will not be much progress on strengthening the euro zone bailout fund at a summit on Sunday, a sign that Europe's leaders are yet to get a grip on the bloc's debt crisis.

The two countries said in a joint statement yesterday that European leaders would discuss a global solution to the crisis on Sunday but no decisions would be taken before a second meeting, which would be held by Wednesday at the latest.

The problem concerns expanding the European Financial Stability Facility (EFSF), a €440 billion fund, used that was used for bailing out Portugal and Ireland.

France and Germany have failed to agree on the best way to bolster the facility, with Paris concerned over its triple-A credit rating which would be jeopardised in case of a misstep.

Failure to reach an agreement on leveraging the EFSF would further erode confidence in the euro zone's ability to tackle its debt crisis especially as it has been two years since the problem started with Greece and now Italy, Spain and even France being drawn in the danger zone.

The euro zone crisis and its dark implications for the broader global economy, were underlined when US president Barack Obama held a video conference with German chancellor Angela Merkel and French president Nicolas Sarkozy, when he reiterated that he hoped a solution would be found in time for a summit of G20 leaders in France on 3-4 November.