BRUSSELS, Oct 20 (Reuters) – A split between the International Monetary Fund and the European Union is threatening to delay Greece’s next aid payment in another blow to European efforts to stem the debt crisis.

An admission by French President Nicolas Sarkozy on Wednesday that Berlin and Paris were divided over how to make the euro zone bailout fund more effective had already dented hopes that Sunday’s EU summit would bring substantial progress.

News the IMF rated EU projections for Greece’s debt too optimistic and wanted to delay approval of the next aid tranche further complicated the picture. The fund wants to wait until after this weekend’s summit to see if discussions produce a clearer picture, EU officials said.

Without an eight billion euros loan payment from the EU and IMF next month Greece faces default, possibly dragging the larger economies of Spain and Italy into the mire and sending shockwaves through the banking system.

Seeking a comprehensive plan, euro zone leaders are racing to agree new steps to reduce Greece’s debt, strengthen the capital of banks with exposure to troubled euro zone sovereigns and leverage the euro zone’s rescue fund to stem contagion to bigger economies.

But progress appears to be glacial.

Sarkozy flew to Frankfurt on Wednesday evening for emergency talks with German Chancellor Angela Merkel, the head of the IMF and other key euro zone officials. French media reported he missed the birth of his daughter in the process.

PARIS/BRUSSELS, Oct 19 (Reuters) – Efforts to secure a deal to tackle the euro zone debt crisis are stalled over methods to increase the firepower of the region’s bailout fund, French President Nicolas Sarkozy said on Wednesday.

Sarkozy told French parliamentarians the dispute was holding up negotiations and he was prepared to fly to Frankfurt later on Wednesday to talk with German Chancellor Angela Merkel and try to break the deadlock ahead of a make-or-break European leaders’ summit on Sunday.

French sources later confirmed Sarkozy would travel to Germany, where he is also expected to meet outgoing European Central Bank President Jean-Claude Trichet.

While France has argued the most effective way of leveraging the firepower of the European Financial Stability Facility is to turn it into a bank which could then access funding from the ECB, both the central bank and the German government have opposed this.

“In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince,” Sarkozy told the parliamentarians, according to Charles de Courson, one of the legislators present.

His comments fuelled doubts about whether euro zone leaders will be able to agree a clear and convincing plan when they meet on Sunday.

Failure to do so would further undermine financial markets’ already shattered confidence in the currency bloc and its ability to get on top of a two-year-long debt crisis, which threatens the long-term viability of the single currency.

BRUSSELS/MADRID (Reuters) – A double-notch downgrade of Spain’s credit rating has piled pressure on European leaders to make decisive progress on solving the region’s debt crisis at an October 23 summit.

The blow from Moody’s Investors Service came just a day after the agency warned France its triple-A rating could be at risk and as Greeks began their biggest strike in years in protest at a painful austerity drive designed to avert default.

Markets are counting down to a summit of EU leaders on Sunday which Paris has said will deliver a decisive outcome while Berlin has been more cautious.

The Spanish rating cut, which highlighted the threat of contagion from debt-stricken Greece, tempered a sharp rally in shares on Wall Street late on Tuesday.

German Chancellor Angela Merkel warned that leaders would not solve the debt crisis at a single meeting.

“These sovereign debts have been built up over decades and therefore one cannot resolve them with one summit but it will take difficult, long-term work. Nonetheless, I do think we will also be able to take relevant, important decisions,” she said.

The hope is that Sunday’s summit will agree new steps to reduce Greece’s debt, strengthen the capital of banks with exposure to troubled euro zone sovereigns and leverage the euro zone’s rescue fund to prevent contagion to bigger economies.

BRUSSELS (Reuters) – Euro zone leaders are likely to agree to leverage their bailout fund at a summit on Sunday by allowing it to guarantee a portion of newly issued euro zone debt, euro zone officials and the expert who first developed the plan said on Tuesday.

Under the scheme, the European Financial Stability Facility (EFSF) would promise investors who buy Spanish, Italian or other higher-risk euro zone debt at auction that it would cover a portion of any losses they made if the country were to default.

“This idea is the main contender,” one euro zone official said, but added there were other projects under consideration for how best to increase the EFSF’s firepower, with markets unconvinced it is big enough to handle the widening crisis.

By guaranteeing the first 20-30 percent of any losses, for example, the EFSF could stretch three to five times further.

With about 300 billion euros of its 440 billion-euro capacity still deployable, the fund could be expanded to more than 1 trillion euros, enough to support the refinancing needs of Spain and Italy for at least the next year or longer.

However, rather than leaders fixing the degree of leverage as many in financial markets expect, the EFSF is more likely to be given flexibility to decide how much it is leveraged on a case-by-case basis — depending on which country’s debt is being guaranteed and the prevailing market conditions.

“It is at the point of the transaction that the EFSF would provide the figure,” said Sony Kapoor, the managing director of Re-Define, an economic think-tank which first set out the idea to use the EFSF and its permanent successor, the European Stabilization Mechanism, as bond insurers.

BRUSSELS (Reuters) – Greek Finance Minister Evangelos Venizelos came into office offering a fresh start in his nation’s financial crisis. But he began with more of the same.

When the 54-year-old politician made his debut at an emergency meeting of euro zone finance ministers on June 19, his country was teetering on the brink of bankruptcy and desperate for more aid to avoid default. The burly constitutional lawyer began his presentation by seeking to renegotiate an austerity program his predecessor had only recently concluded with European Union and International Monetary Fund inspectors. Greece needed easier terms, he said.

“Venizelos started with excuses as to why they have to change some parts of the program to buy parliamentary support,” said one participant in the confidential Sunday-night meeting in Luxembourg.

The euro zone’s point man in the talks, a normally mild-mannered Finn named Olli Rehn, exploded. The EU’s executive arm would refuse to sign off on Greece’s compliance with its bailout program, the 49-year-old economic and monetary affairs commissioner told Venizelos. Athens would get no further emergency loans, Rehn said, according to the participant. “I will not put my signature to the compliance report on behalf of the Commission,” Rehn said.

That moment of tension was one of many as European officials grappled to find a fix for Greece in the first weeks of summer — a fix that several months on has failed to ease fears in a painfully protracted drama. Today, Greece has once again fallen behind on its fiscal targets. Its economy is heading for a fourth straight year of recession in 2012. Public anger over austerity, pay cuts and rising unemployment is boiling in the streets. And growing expectations of a Greek sovereign default threaten to unleash a banking crisis in Europe and aggravate a global economic slowdown. “The negative feedback loop between sovereigns and banks is materializing,” said a senior EU official in the thick of the fire-fighting.

As the strains mount, the battles over politics and policy are sometimes turning personal. In months of round-the-clock crisis management, ministers and senior officials have grown physically exhausted and at times short-tempered with each other.

Many euro zone officials blame Greece’s lack of engagement for the crisis. Others point to alleged intransigence on the part of Europe’s most important political leader, German Chancellor Angela Merkel.

BRUSSELS (Reuters) – Greek Finance Minister Evangelos Venizelos came into office offering a fresh start in his nation’s financial crisis. But he began with more of the same.

When the 54-year-old politician made his debut at an emergency meeting of euro zone finance ministers on June 19, his country was teetering on the brink of bankruptcy and desperate for more aid to avoid default. The burly constitutional lawyer began his presentation by seeking to renegotiate an austerity programme his predecessor had only recently concluded with European Union and International Monetary Fund inspectors. Greece needed easier terms, he said.

“Venizelos started with excuses as to why they have to change some parts of the programme to buy parliamentary support,” said one participant in the confidential Sunday-night meeting in Luxembourg.

The euro zone’s point man in the talks, a normally mild-mannered Finn named Olli Rehn, exploded. The EU’s executive arm would refuse to sign off on Greece’s compliance with its bailout programme, the 49-year-old economic and monetary affairs commissioner told Venizelos. Athens would get no further emergency loans, Rehn said, according to the participant. “I will not put my signature to the compliance report on behalf of the Commission,” Rehn said.

That moment of tension was one of many as European officials grappled to find a fix for Greece in the first weeks of summer — a fix that several months on has failed to ease fears in a painfully protracted drama. Today, Greece has once again fallen behind on its fiscal targets. Its economy is heading for a fourth straight year of recession in 2012. Public anger over austerity, pay cuts and rising unemployment is boiling in the streets. And growing expectations of a Greek sovereign default threaten to unleash a banking crisis in Europe and aggravate a global economic slowdown. “The negative feedback loop between sovereigns and banks is materialising,” said a senior EU official in the thick of the fire-fighting.

As the strains mount, the battles over politics and policy are sometimes turning personal. In months of round-the-clock crisis management, ministers and senior officials have grown physically exhausted and at times short-tempered with each other.

Many euro zone officials blame Greece’s lack of engagement for the crisis. Others point to alleged intransigence on the part of Europe’s most important political leader, German Chancellor Angela Merkel.

BRUSSELS, Oct 5 (Reuters) – Greek Finance Minister Evangelos Venizelos came into office offering a fresh start in his nation’s financial crisis. But he began with more of the same.

When the 54-year-old politician made his debut at an emergency meeting of euro zone finance ministers on June 19, his country was teetering on the brink of bankruptcy and desperate for more aid to avoid default. The burly constitutional lawyer began his presentation by seeking to renegotiate an austerity programme his predecessor had only recently concluded with European Union and International Monetary Fund inspectors. Greece needed easier terms, he said.

“Venizelos started with excuses as to why they have to change some parts of the programme to buy parliamentary support,” said one participant in the confidential Sunday-night meeting in Luxembourg.

The euro zone’s point man in the talks, a normally mild-mannered Finn named Olli Rehn, exploded. The EU’s executive arm would refuse to sign off on Greece’s compliance with its bailout programme, the 49-year-old economic and monetary affairs commissioner told Venizelos. Athens would get no further emergency loans, Rehn said, according to the participant. “I will not put my signature to the compliance report on behalf of the Commission,” Rehn said.

That moment of tension was one of many as European officials grappled to find a fix for Greece in the first weeks of summer – a fix that several months on has failed to ease fears in a painfully protracted drama. Today, Greece has once again fallen behind on its fiscal targets. Its economy is heading for a fourth straight year of recession in 2012. Public anger over austerity, pay cuts and rising unemployment is boiling in the streets. And growing expectations of a Greek sovereign default threaten to unleash a banking crisis in Europe and aggravate a global economic slowdown. “The negative feedback loop between sovereigns and banks is materialising,” said a senior EU official in the thick of the fire-fighting.

As the strains mount, the battles over politics and policy are sometimes turning personal. In months of round-the-clock crisis management, ministers and senior officials have grown physically exhausted and at times short-tempered with each other.

Many euro zone officials blame Greece’s lack of engagement for the crisis. Others point to alleged intransigence on the part of Europe’s most important political leader, German Chancellor Angela Merkel.

LUXEMBOURG (Reuters) – For two years the euro zone has fought desperately to get on top of its debt crisis, throwing hundreds of billions of euros and countless hours of talking at the problem, largely without success. The coming weeks may prove pivotal.

Between now and mid-December, the sheer onslaught of high-level gatherings — whether euro zone finance officials, EU leaders or the G20 — is likely to force a resolution of the most pressing issues confronting policymakers as they battle to get to grips with Greece, Spain and Italy.

On Monday and Tuesday, euro zone finance ministers meeting in Luxembourg will discuss how they can increase the firepower of the European Financial Stability Facility, the bailout fund set up last year and so far used to help Ireland and Portugal.

The aim is to give the EFSF far greater clout than its 440 billion euro capacity, either by leveraging its capital in some way or by using it to guarantee only a portion of at-risk euro zone sovereign debt, allowing its funds to stretch further.

While no decisions are expected in Luxembourg, it will prove critical preparatory work for when all 17 euro zone countries have ratified changes to the EFSF agreed in July, changes that will allow the facility to lend to governments preemptively and help recapitalise banks, among other steps.

Those ratifications should be completed in time for a euro zone leaders’ summit in Brussels on October 18, the next make-or-break moment on which Greece’s future is likely to hinge.

“It is important that the ratification of the current reform of the EFSF is moving forward,” Olli Rehn, the EU’s monetary affairs commissioner told reporters as he arrived in Luxembourg, looking to focus minds on the next task in hand.

LUXEMBOURG (Reuters) – For two years the euro zone has fought desperately to get on top of its debt crisis, throwing hundreds of billions of euros and countless hours of talking at the problem, largely without success. The coming weeks may prove pivotal.

Between now and mid-December, the sheer onslaught of high-level gatherings — whether euro zone finance officials, EU leaders or the G20 — is likely to force a resolution of the most pressing issues confronting policymakers as they battle to get to grips with Greece, Spain and Italy.

On Monday and Tuesday, euro zone finance ministers meeting in Luxembourg will discuss how they can increase the firepower of the European Financial Stability Facility, the bailout fund set up last year and so far used to help Ireland and Portugal.

The aim is to give the EFSF far greater clout than its 440 billion euro capacity, either by leveraging its capital in some way or by using it to guarantee only a portion of at-risk euro zone sovereign debt, allowing its funds to stretch further.

While no decisions are expected in Luxembourg, it will prove critical preparatory work for when all 17 euro zone countries have ratified changes to the EFSF agreed in July, changes that will allow the facility to lend to governments preemptively and help recapitalise banks, among other steps.

Those ratifications should be completed in time for a euro zone leaders’ summit in Brussels on October 18, the next make-or-break moment on which Greece’s future is likely to hinge.

“It is important that the ratification of the current reform of the EFSF is moving forward,” Olli Rehn, the EU’s monetary affairs commissioner told reporters as he arrived in Luxembourg, looking to focus minds on the next task in hand.

NEW YORK/BRUSSELS (Reuters) – Euro-zone officials are working to magnify the firepower of the region’s rescue fund, European Central Bank policymakers said on Monday, while President Barack Obama piled on pressure for Europe to staunch a sovereign debt crisis that threatens the world economy.

Obama, saying the crisis “is scaring the world,” urged leaders of the 17-nation euro zone to act quickly to help a region where banks have not fully recovered from the 2008 financial crisis and which is now suffering from the Greek government’s debt crisis.

“They are trying to take responsible actions but those actions haven’t been quite as quick as they need to be,” Obama told a citizens’ meeting in Mountain View, California.

After meeting at the IMF/World Bank and G20 meetings in Washington D.C. last week, European policymakers said on Monday they are working on ways to shore up the euro zone financial system and prevent the region’s government debt crisis from spreading, but their mixed messages on the size of a rescue fund and the role of the ECB underscored the difficulties for 17 euro-zone nations in reaching consensus.

ECB Executive Board member Lorenzo Bini Smaghi, speaking in New York, said that the 440 billion euros in the bailout fund, known as the European Financial Stability Facility (ESFS), could be used as collateral to borrow from the European Central Bank making more money available for crisis fighting, but it was up to European Union governments to decide how to do this.

“I know that people are thinking about these things. They may not be willing to admit it in the public, but they are thinking about these things,” he said, citing the example of two U.S. programs used to recapitalize banks in the 2008-09 financial crisis.

Officials are examining “how to leverage the money out of the EFSF in a more innovative and efficient way,” he told a conference organized by Medley Advisors.