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EU leaders gather in Brussels for crucial summit

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EU leaders gather in Brussels for crucial summit
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Europe’s leaders arrived at the European Council for the crucial two-leg summit to tackle the deepening sovereign debt crisis.

German Chancellor, Angela Merkel had already held a private meeting with French President Nicolas Sarkozy and Italian Prime Minister, Silvio Berlusconi ahead of the morning session worried about Italy’s huge debt ratio which is second only to Greece’s.

European Council President Herman Van Rompuy outlined two of the main challenges to the bloc’s leaders in his opening remarks as, “ the pressure on the banks and risks on the sovereign bonds”.

And one analyst stressed those problems are not just related to Greece.

“The criteria for determining where banks need capital is less related to Greece. It has more to do with the fact that banks hold a lot of the bonds of the countries that they are in. Spanish banks hold a lot of Spanish government bonds, Italian banks hold Italian government bonds. And what is going on now is that the bonds of all countries that are in trouble, Greece, Ireland, Spain and Italy are trading at very low market prices.”

Our correspondent at the summit says, “German Chancellor, Angela Merkel played down expectations of a breakthrough saying decisions would not be taken before Wednesday. That may not be what the markets want to hear.”