Conclusive deal on euro zone crisis looks elusive

EU officials and European diplomats are lowering expectations of a breakthrough when the 17 euro zone leaders meet, despite Franco-German assurances only weeks ago that a “comprehensive solution” to more than two years of debt and economic turmoil would be found by the end of the month.

While there appears to be broad consensus on the need for around 110bn euros (£95.6bn) to be injected into the European banking system to help it withstand a potential Greek debt default and wider financial contagion, there is little clarity on either of the other two critical parts of the plan.

One element involves scaling up the region’s 440bn euro (£382.5bn) bailout fund, known as the European Financial Stability Facility, and the other is focussed on reducing Greece’s debt burden by deepening the losses private investors - major banks and insurance companies - must take on their Greek bonds.

EU leaders will consider two methods for scaling up the EFSF, one by using it to offer guarantees to purchasers of new euro zone debt, and the other using part of its capacity to set up a special purpose investment vehicle that would attract money from sovereign wealth funds and other investors to buy debt. They might also agree to combine both options.