BRUSSELS (Reuters) – Trust in the European Union’s ability to tackle the debt crisis is so low that its leaders are now relying on the IMF and European Central Bank to convince financial markets the rapidly deteriorating problems can be fixed.

But even when possible solutions involving the ECB and International Monetary Fund have been put on the table, internal EU disputes, often sourced to German intransigence, have scuppered the proposals — further compounding a crisis that threatens not just the euro but the whole European project.

Markets have long questioned the EU’s capacity to resolve the crisis, recognising that structural and political constraints make quick or firm EU decision-making all but impossible.

Last week’s G20 summit in Cannes did nothing but reinforce that assessment and the fact policymakers are now openly questioning their own abilities underlines just how dire the situation has become.

“Europe is running dry on credibility,” Swedish Finance Minister Anders Borg, one of the most straight-talking of his colleagues, said as he arrived for another crisis-fighting meeting of finance ministers in Brussels on Tuesday.

“There is a credibility problem … the solutions that are going to be discussed here today, like the Financial Transactions Tax, are a non-starter.”

For more than a year, German Chancellor Angela Merkel, French President Nicolas Sarkozy and the top EU officials, Herman Van Rompuy and Jose Manuel Barroso, have repeated the mantra that Europe “will do everything necessary” to defend the euro single currency and the region’s stability.

BRUSSELS (Reuters) – Trust in the European Union’s ability to tackle the debt crisis is so low that its leaders are now relying on the IMF and European Central Bank to convince financial markets the rapidly deteriorating problems can be fixed.

But even when possible solutions involving the ECB and International Monetary Fund have been put on the table, internal EU disputes, often sourced to German intransigence, have scuppered the proposals — further compounding a crisis that threatens not just the euro but the whole European project.

Markets have long questioned the EU’s capacity to resolve the crisis, recognizing that structural and political constraints make quick or firm EU decision-making all but impossible.

Last week’s G20 summit in Cannes did nothing but reinforce that assessment and the fact policymakers are now openly questioning their own abilities underlines just how dire the situation has become.

“Europe is running dry on credibility,” Swedish Finance Minister Anders Borg, one of the most straight-talking of his colleagues, said as he arrived for another crisis-fighting meeting of finance ministers in Brussels on Tuesday.

“There is a credibility problem … the solutions that are going to be discussed here today, like the Financial Transactions Tax, are a non-starter.”

For more than a year, German Chancellor Angela Merkel, French President Nicolas Sarkozy and the top EU officials, Herman Van Rompuy and Jose Manuel Barroso, have repeated the mantra that Europe “will do everything necessary” to defend the euro single currency and the region’s stability.

CANNES, France (Reuters) – The euro zone won verbal support but no new money at a G20 summit on Friday for its tortured efforts to overcome a sovereign debt crisis, while Italy was effectively placed under IMF supervision.

Leaders of the world’s major economies, meeting on the French Riviera, told Europe to sort out its own problems and deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.

“There are hardly any countries here which said they were ready to go along with the EFSF (euro zone rescue fund),” German Chancellor Angela Merkel told a news conference.

Potential sovereign investors such as China and Brazil wanted to see more detail before they made any firm commitment to put money into the bailout fund.

Global stocks and the euro fell as doubts resurfaced about Europe’s financial rescue package.

U.S. President Barack Obama joked he had learned a lot in two days about the complexity of the EU’s “laborious” decision-making process but said he was confident Europe had the capacity and the right plan to meet the challenge. The key was now rapid implementation.

“They’re going to have a strong partner in us, but European leaders understand that what is ultimately important is to have a strong signal from Europe that they are standing behind the euro,” he told a news conference.

CANNES, France (Reuters) – On the surface it was the same old Silvio Berlusconi who arrived at the G20 summit in Cannes — beaming for the cameras as he stepped from his limousine, an overcoat hanging theatrically from his shoulders, a confident hand raised.

Photographers captured the 75-year-old billionaire, whose private life makes headlines, appraising Argentine President Cristina Fernandez de Kirchner from behind with a smile.

But underneath, the ground was shifting dramatically for the prime minister as his European allies pressed him to accept much tighter oversight of his planned economic reforms, not just from the European Commission, but the IMF too.

It wasn’t quite a case of the euro zone’s third largest economy being pushed into IMF protection, but it came close, with the leaders of France, Germany and European institutions telling Berlusconi that if he wanted to restore credibility and win back market confidence, the IMF had to be involved.

The alternative might be Italy, with debts of 1.9 trillion euros, or 120 percent of GDP, following Greece down the path toward a financial bailout, perpetuating a debt crisis that threatens to tear the European single currency apart.

“In the general climate, with the lack of credibility the Italian government has, every mistake is punished on the spot,” said a diplomat who participated in late-night talks with Berlusconi on Thursday, a meeting also attended by U.S. President Barack Obama and the IMF’s Christine Lagarde.

“That’s why very close monitoring is absolutely key, absolutely key… It took some discussion because some of the participants wanted to go even further than that, but the Italians, they can live with IMF surveillance.”

CANNES, France, Nov 4 (Reuters) – On the surface it was the same old Silvio Berlusconi who arrived at the G20 summit in Cannes — beaming for the cameras as he stepped from his limousine, an overcoat hanging theatrically from his shoulders, a confident hand raised.

Photographers captured the 75-year-old billionaire, whose private life makes headlines, appraising Argentine President Cristina Fernandez de Kirchner from behind with a smile.

But underneath, the ground was shifting dramatically for the prime minister as his European allies pressed him to accept much tighter oversight of his planned economic reforms, not just from the European Commission, but the IMF too.

It wasn’t quite a case of the euro zone’s third largest economy being pushed into IMF protection, but it came close, with the leaders of France, Germany and European institutions telling Berlusconi that if he wanted to restore credibility and win back market confidence, the IMF had to be involved.

The alternative might be Italy, with debts of 1.9 trillion euros, or 120 percent of GDP, following Greece down the path towards a financial bailout, perpetuating a debt crisis that threatens to tear the European single currency apart.

“In the general climate, with the lack of credibility the Italian government has, every mistake is punished on the spot,” said a diplomat who participated in late-night talks with Berlusconi on Thursday, a meeting also attended by U.S. President Barack Obama and the IMF’s Christine Lagarde.

“That’s why very close monitoring is absolutely key, absolutely key… It took some discussion because some of the participants wanted to go even further than that, but the Italians, they can live with IMF surveillance.”

CANNES, France (Reuters) – Italy, under fierce pressure from financial markets and European peers, has agreed to have the IMF and the EU monitor its progress with long delayed reforms of pensions, labor markets and privatization, senior EU sources said on Friday.

Prime Minister Silvio Berlusconi, his government close to collapse after more loyalists defected on Thursday, agreed to the step in late-night talks with euro zone leaders and U.S. President Barack Obama on the sidelines of a G20 summit in Cannes, France.

The Italian move came after Greece stepped back from a proposed referendum that could have triggered its exit from the euro area and agreed to seek national consensus in support of a 130 billion euro ($178 billion) new bailout program.

“We need to make sure there is credibility with Italy’s targets — that it is going to meet them. We decided to have the IMF involved on the monitoring, using their own methodology, and the Italians say they can live with that,” one EU source said.

“Italy has no problem with surveillance at all, even with the IMF being involved,” he said, adding that the European Commission and the International Monetary Fund would each report separately on how Italy was meeting its targets.

The leaders of France, Germany, Italy, Spain, the European Central Bank, the IMF and European Union institutions also discussed with Obama ways of ramping up the IMF’s warchest to help prevent contagion from the euro zone’s debt crisis plunging the world economy back into recession.

A G20 source said no figures were agreed but the boost to IMF resources, mostly from large emerging countries such as China, could be in the range of $300-350 billion.

CANNES, France, Nov 4 (Reuters) – G20 leaders meeting in southern France will try to look beyond a Greek drama that has shaken their annual gathering and agree on measures that will convince markets the risk of further euro zone contagion can be stemmed.

Delegates gathered in the Riviera resort of Cannes for two-day talks that were meant to send a calming message to markets instead found themselves watching the euro zone battle to snuff out its biggest fire yet as Greece threw a rescue deal into question and seemed on the brink of quitting the euro.

On Friday, heads of state from the 20 major economies will focus on ways to ramp up the IMF’s resources and build a financial firewall to protect vulnerable euro zone peripherals like Italy and Spain from a possible Greek default.

“I don’t think the market has confidence in EFSF leveraging, so I said the euro zone needs to set up a firewall and enhance concrete measures,” Japanese Finance Minister Jun Azumi said after a working dinner with his counterparts.

A Spanish official told Reuters the focus of euro zone talks on Thursday had been on speeding up and strengthening firewall measures, including bigger credit lines for peripheral states.

Other G20 sources said IMF resource talks were looking at a rollback of the fund’s New Agreements to Borrow (NABS), due to expire next year, and the injection of billions of dollars into the global economy through a special allocation of its Special Drawing Rights. Some sources said the euro zone countries were discussing pooling their new allocations to boost resources.

“It all depends on Sarkozy, how hard he pushes,” one said.

* Euro, stocks rally after euro summit deal

* Euro zone, banks agree to 50 pct private sector losses on Greek bonds

* Details of deal to be finalised by the end of the year – EU

* Euro zone says to scale up EFSF bailout fund to 1.0 trln euro

By Luke Baker and Julien Toyer

BRUSSELS, Oct 27(Reuters) – Euro zone leaders struck a last-minute deal to limit the damage from the currency bloc’s debt crisis early on Thursday but are still far from finalising plans to slash Greece’s debt burden and strengthen their rescue fund.

After a summit in Brussels, governments announced an agreement under which private banks and insurers would accept 50 percent losses on their Greek debt holdings in the latest bid to reduce Athens’ massive debt load to sustainable levels.

* Euro zone, banks agree to 50 pct private sector losses on Greek bonds

* Details of deal to be finalised by the end of the year – EU

* Aim is to cut Greece’s debt to GDP ratio to 120 pct by 2020

* Euro zone says to scale up EFSF bailout fund to 1.0 trln euros

* European banks to be recapitalised; Italy promises pension reform

By Luke Baker and Julien Toyer

BRUSSELS, Oct 27(Reuters) – Euro zone leaders struck a deal with private banks and insurers on Thursday for them to accept a 50 percent loss on their Greek government bonds under a plan to lower Greece’s debt burden and try to contain the two-year-old euro zone crisis.

* Euro zone, banks agree to 50 pct private sector losses on Greek bonds

* Details of deal to be finalised by the end of the year – EU

* Aim is to cut Greece’s debt to GDP ratio to 120 pct by 2020

* Euro zone says to scale up EFSF bailout fund to 1.0 trln euros

* European banks to be recapitalised; Italy promises pension reform

By Luke Baker and Julien Toyer

BRUSSELS, Oct 27(Reuters) – Euro zone leaders struck a deal with private banks and insurers on Thursday for them to accept a 50 percent loss on holdings of Greek government bonds as part of a plan to lower Greece’s debt burden and try to contain the two-year-old euro zone crisis.