EU outlines bank plan, rescue fund

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European leaders reached the halfway mark of their marathon to end the debt crisis, outlining plans to aid banks and ruling out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund.

Stocks advanced and the euro rose after Europe’s 13th crisis-management summit in 21 months, which also explored how to strengthen the International Monetary Fund’s role. The leaders excluded a forced restructuring of Greek debt, sticking with the tactic of enticing bondholders to accept losses to help restore the country’s finances. China said today that it had “faith” in the European Union’s ability to tackle the crisis.

“It seems that progress has been made over the weekend to get to a ‘comprehensive package,’ but it is unlikely to be a bold one,” said Juergen Michels at Citigroup Inc. in London. “There remain many open questions.”

Greece’s deteriorating finances have narrowed Europe’s room for maneuver in battling the contagion, which threatens to pitch the country into default, rattle the banking system, infect Spain and Italy and tip the world economy into recession.

The complete blueprint won’t come together until a summit in two days, giving German Chancellor Angela Merkel time to go back to Berlin to brief her lawmakers and seek their approval for the next steps. Like yesterday, it will start with all 27 EU leaders before the 17 heads of euro economies gather on their own.

‘Options are Converging’

“Work is going well on the banks, and on the fund and the possibilities of using the fund, the options are converging,” French President Nicolas Sarkozy told reporters at the Brussels summit yesterday. “On the question of Greece, things are moving along. We’re not there yet.”

The euro rose as much as 0.4 percent to $1.3951, trading at $1.3897 at 9:49 a.m. in Berlin. The benchmark Stoxx Europe 600 Index advanced 0.5 percent to 240.12, its second day of gains.

The mayhem began in Greece in October 2009, when an unexpected cash shortfall left the new government unable to pay for its election promises. Since then, 256 billion euros of bailouts have failed to stem the tide, which rattled France this month, prompting Standard & Poor’s to warn the country may lose its top sovereign credit rating.

Expressing concern over the potential impact on their nations, world leaders including President Barack Obama and Chinese Premier Wen Jiabao have stepped up calls for Europe to defuse the risk to the global economy.

European leaders reached the halfway mark of their marathon to end the debt crisis, outlining plans to aid banks and ruling out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund.

Stocks advanced and the euro rose after Europe’s 13th crisis-management summit in 21 months, which also explored how to strengthen the International Monetary Fund’s role. The leaders excluded a forced restructuring of Greek debt, sticking with the tactic of enticing bondholders to accept losses to help restore the country’s finances. China said today that it had “faith” in the European Union’s ability to tackle the crisis.

“It seems that progress has been made over the weekend to get to a ‘comprehensive package,’ but it is unlikely to be a bold one,” said Juergen Michels at Citigroup Inc. in London. “There remain many open questions.”

Greece’s deteriorating finances have narrowed Europe’s room for maneuver in battling the contagion, which threatens to pitch the country into default, rattle the banking system, infect Spain and Italy and tip the world economy into recession.

The complete blueprint won’t come together until a summit in two days, giving German Chancellor Angela Merkel time to go back to Berlin to brief her lawmakers and seek their approval for the next steps. Like yesterday, it will start with all 27 EU leaders before the 17 heads of euro economies gather on their own.

‘Options are Converging’

“Work is going well on the banks, and on the fund and the possibilities of using the fund, the options are converging,” French President Nicolas Sarkozy told reporters at the Brussels summit yesterday. “On the question of Greece, things are moving along. We’re not there yet.”

The euro rose as much as 0.4 percent to $1.3951, trading at $1.3897 at 9:49 a.m. in Berlin. The benchmark Stoxx Europe 600 Index advanced 0.5 percent to 240.12, its second day of gains.

The mayhem began in Greece in October 2009, when an unexpected cash shortfall left the new government unable to pay for its election promises. Since then, 256 billion euros of bailouts have failed to stem the tide, which rattled France this month, prompting Standard & Poor’s to warn the country may lose its top sovereign credit rating.

Expressing concern over the potential impact on their nations, world leaders including President Barack Obama and Chinese Premier Wen Jiabao have stepped up calls for Europe to defuse the risk to the global economy.