Crisis talks falter againDavid Gow, BrusselsOctober 22, 2011...

Crisis talks falter again
David Gow, Brussels
October 22, 2011

Deep differences: German Chancellor Angela Merkel and French President Nicolas Sarkozy. Photo: Reuters
EUROPE has been thrown into fresh chaos as the failure to resolve deep differences between France and Germany forced the postponement of a new plan to save the single currency.

A joint statement from French President Nicolas Sarkozy and German Chancellor Angela Merkel admitted that a deal this weekend was now unachievable and talks in Brussels tomorrow would be followed by a second summit next Wednesday.

Financial markets have rallied strongly in recent weeks amid hopes of a breakthrough agreement this weekend.

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This would have recapitalisd Europe's weak banks, written off part of Greece's debts and, crucially, increased the firepower of the euro zone's bailout fund to protect Italy and Spain from speculative attack.

It emerged yesterday that Berlin and Paris still differ over the size of the European Financial Stability Facility, with Germany resisting French calls for it to resemble a bank capable of issuing €2 trillion ($A2.7 trillion) in loans.

Dr Merkel is also opposed to Mr Sarkozy's plan to put the European Central Bank at the heart of the plan.