EU under intense pressure to save the eurozone

Eurozone finance ministers meet on Tuesday under intense pressure to stop the debt crisis from shattering the monetary union. The United States, IMF and Organisation for Economic Cooperation and Development each issued urgent warnings in the hours leading up to the meeting that decisive action is essential to prevent global economic meltdown. The possible fragmentation of the eurozone is now an explicit concern at the highest levels, and there are signs that the consequent lack of confidence is crimping lending by banks with balance sheets burdened by sovereign debt. The ministers must show that they can turbo-charge a 440-billion-euro ($586 billion) rescue fund that has helped Ireland and Portugal but is deemed too small to save Italy and Spain if the crisis brings these countries, with the third and fourth eurozone economies, to their knees. New Italian Prime Minister Mario Monti, who holds the finance portfolio, will join the talks to outline radical cuts, tax rises and reforms aimed at keeping his highly-indebted nation at bay from the wrath of markets. The eurozone partners are also expected to release billions of euros in long-blocked loans for Greece after politicians in Athens belatedly sent written pledges vowing to implement harsh austerity measures demanded by foreign lenders. Against a background of rumours, immediately denied, of contingency bailout planning for Italy by the International Monetary Fund, and talk of Germany and France jettisoning their weakest currency partners in a new pact, the ministers have plenty of contentious issues to address. Berlin and Paris are at odds over unleashing the full power of the European Central Bank. France wants the ECB act as a lender of last resort like the US Federal Reserve, but Germany fears that printing money would fuel inflation and in any case insists that the first line of fire fighting depends on countries disciplining their budgets and reforming their economies. With ratings giant Moody's warning on Monday that all EU government credit ratings could be hit, and an OECD report saying that the eurozone faces a "deep depression," the clock is ticking for the 17-nation bloc. Emphasising that the two-year-old crisis is hitting a pivotal phase, a growth report from the Organisation for Economic Co-operation and Development (OECD) said even Germany might see its borrowing costs rise. In Washington, US President Barack Obama told visiting EU officials that "this is of huge importance," to the US economy as well. Obama called for "bolder, quicker, more decisive action by European leaders," said William Kennard, US ambassador to the European Union. With another major EU summit looming on December 8-9, EU president Herman Van Rompuy maintained after White House talks that a "difficult period" had nonetheless spawned "unthinkable" responses to try to restore growth. With Italy's near two-trillion-euro public debt scaring everyone, Polish Foreign Minister Radek Sikorski said a eurozone collapse would trigger an "apocalyptic" crisis. German Finance Minister Wolfgang Schaeuble said "no European country would retain its triple-A rating" if the European Central Bank (ECB) were to become lender of last resort or if joint eurozone bonds were to be introduced. Meanwhile, the European Parliament told Germany and France, who want to change the EU's treaty to try and ensure the crisis is never repeated, but who face the threat of Britain and others repatriating key EU powers, that lawmakers will demand a "six-month" no-holds-barred public consultation. "If the European Parliament is kept aside, it is likely to come up with its own agenda -- in which case it would be very difficult to limit the scope of treaty change," said parliament business chief Klaus Welle. Former EU commissioner Monti is expected to unveil plans for accelerated reform at the meeting, with Rome needing to refinance a staggering 400 billion euros in debt next year. Out probably the most tangible outcome would be a green light for an 8.0-billion-euro instalment of loans to Athens -- repeatedly delayed since August. Ministers will also try to make progress towards ramping up the firepower of the 440-billion-euro European Financial Stability Facility (EFSF). Leveraging its reach some "three-to-four times" more than the 275 billion euros of available guarantees could see it reach the magic trillion demanded by eurozone leaders.