German Chancellor Angela Merkel speaks at the Bundestag, the lower house of parliament, in Berlin on Wednesday. Photo by Odd Andersen/AFP/Getty Images.
12:30 p.m. ET | Germany’s parliament has passed Merkel’s measure, boosting a bailout fund for the eurozone as leaders arrive in Brussels for the start of the summit.
Original post: | European Union leaders are meeting in Brussels Wednesday in an attempt to reach a deal to expand aid for debt-laden countries in the eurozone amid fears that Greece’s debt woes will spread.
A Greek default could have spillover consequences in other European countries and the global economy, a risk U.S. Treasury Secretary Timothy Geithner has characterized as “catastrophic.”
German Chancellor Angela Merkel is pushing a measure in the legislature that would bolster the fund, a move she said is critical to maintaining Germany’s own economic growth.
“The world is watching Europe and Germany; it is watching whether we are ready and able, in the hour of Europe’s most serious crisis since the end of World War II, to take responsibility,” Merkel said to parliament.
Proposals being considered include adding to the EU bailout fund, preparing banks to compensate for losses and trying to stave off growing debt or default within troubled nations.
(The Wall Street Journal has a live blog with up-to-the-minute developments from the euro zone meeting.)
Italian Prime Minister Silvio Berlusconi is also expected to provide an economic plan that would address his country’s mounting debt.
The meeting is overshadowed by concerns that European leaders may not be able to reach a substantive agreement in time to avoid a default. The New York Times recaps:
“On several previous occasions, European leaders have promised systemic changes to resolve the euro’s troubles, only to come up with a patchwork that fails to mollify the markets and just delays the day of reckoning. From all appearances this week, this could be another disappointment, an agreement on a general plan but without many specifics, and probably without the massive ‘wall of money’ to protect vulnerable Italy and Spain that the markets have demanded.”
After providing bailouts for Portugal, Ireland and Greece, there is concern about having the resources to put together bailouts for larger economies like Italy and Spain.