Leaders start crucial euro summit as China, Russia offer to help

Europe's leaders have gathered in Brussels for a make-or-break summit during which they hope to agree a masterplan to fix the eurozone debt crisis, amid increasing worries that a deal will fall below expectations.

As China and Russia waded in with offers to help Europe and safeguard the global economy, German Chancellor Angela Merkel, buoyed by backing from a strong majority in the German parliament,  warned that "the work is not yet over" while Polish premier Donald Tusk said he was "sceptical" details would emerge.

"There are still many problems to settle and negotiations to carry out, so the work is not yet over," Merkel told reporters on arriving for the summit.

"Everyone is impatiently awaiting the details, but it's not the devil that's in the details, it's all of hell," said Tusk.

"Will we know the details tonight? I'm prudent, not to say sceptical."

The summit is the second in days as markets and world leaders urge a watertight deal to defuse fears the crisis will trigger global recession.

Europe's leaders have been scrambling to produce a battle-plan to shield the euro after two years of turmoil embroiling Greece, Ireland and Portugal and now threatening the eurozone's third and fourth economies, Italy and Spain.

The talks come amid increasing euroscepticism across the bloc and tension between countries "in" the euro, and "outs" such as Britain and Poland, who fear decisions over the crisis may lead to a two-speed Europe of first and second-class nations, or even ultimately to the EU's collapse.

"Our challenge today is not simply to save the euro, it is to safeguard the ideals we cherish so much in Europe," Greek Prime Minister George Papandreou said.

Embattled Italian premier Silvio Berlusconi is in the spotlight after being ordered by his peers at a weekend summit to return armed with tangible proof of planned reforms to reassure markets on the health of the Italian economy.

Tighter eurozone fiscal discipline is one element in a package that includes beefing up the EFSF rescue fund to guard against further contagion, agreeing a massive write-off for banks on Greek government debt, and recapitalising Europe's banks so they can absorb the hit.

Draft conclusions leaked ahead of the talks showed no figure for recapitalisation although finance ministers have given broad agreement to a €108 billion deal.

Diplomats warned too that negotiations with banks on a write-down of Greek debt were proceeding with difficulty. Officials want the banks to accept losses of 50 to 60 percent while lenders are offering a 40 percent "haircut."

"It looks as if we may have quite a weak statement, at the lower end of expectations," said an EU diplomat speaking on condition of anonymity.

"We do not even expect a headline figure on the rescue fund."

With the world on tenterhooks over any such prospect, emerging powers China and Russia earlier today offered to help.

Hopes the EFSF could be swollen from €440 million to more than a trillion rose when diplomats told AFP that China has agreed to invest.

Russia then too offered to help boost the size of the bailout fund by acting with other countries, but through the auspices of the International Monetary Fund.

"We will be insisting on this particular mechanism," President Dmitry Medvedev's economic advisor, Arkady Dvorkovich, told the Voice of Russia radio station.

Europe's leaders are examining two options to boost the EFSF without increasing guarantees from members states as taxpayers in countries such as Germany are fed up with pouring money down a bottomless hole.

One option is to use the EFSF to insure investors against potential losses on bonds of troubled countries, a bid to tempt nervous traders into buying the debt of shaky economies.

The other option is to create a second fund, possibly linked to the EFSF or to the IMF, to entice the likes of China, as well as private investors the world over, to buy this debt.

Malta is represented at the summit by Prime Minister Lawrence Gonzi.