Bruussels - AFP
Eurozone leaders head into fresh talks Monday to craft a new rescue package for Greece hoping to bridge widening splits over private sector involvement as Europe\'s debt crisis threatens to spiral. After a tumultuous week that saw debt contagion hit Italian banks and Spanish bonds, and borrowing costs peak for eurozone struggler Ireland, finance ministers from the 17-nation area meet from 1300 GMT. Their counterparts from the full EU 27 will join them on Tuesday. Gathered just a week after plucking Athens from default this summer clearing a 12-billion-euro ($17 billion) slice due from its first 2010 bailout eurozone leaders have delayed a final decision on a second rescue until September. Observers are not expecting a quick fix at this week\'s talks. Instead, it will focus on how to get banks to bear a fair share of involvement in a second Greek bailout -- and in such as a way as to avoid it being interpreted as a credit default that would ripple across the single currency zone. The prickly issue in the last days has exposed sharp splits in the euro-front, and comes days ahead of much-awaited July 15 data on European bank stress-tests. Differences that flew into the open after a market-rattling decision last week by Standard & Poor\'s ratings agency need to be addressed swiftly, EU sources said. \"We will have to weed out the different ideas,\" one source said. \"We cannot delay, we need to be on the right track to be ready for September.\" European leaders have been working for weeks on drawing private bondholders into a second rescue of Greece tipped almost as big as last year\'s 110-billion-euro bailout, either by voluntarily buying new Greek bonds when current bonds come due, or swapping them for new, longer-maturing bonds. Touching off a powder-keg response, S&P poured cold water Monday on a proposal from France, for private creditors to opt to replace Greek debt about to mature with new 30-year bonds. French banks hold a sizeable proportion of Greek debt. Such a debt rollover \"could result in a selective default for Greece,\" said S&P, meaning Greece would be technically in default, even if the rescheduling was voluntary. The hotly contested view undermined weeks of efforts while raising fresh calls from some governments to force the private sector to join taxpayers in rescuing Greece -- whether or not this came down to a default. \"I think we have to accept that a voluntary contribution is not realistic,\" said Dutch Finance Minister Jan Kees de Jager. \"If a compulsory contribution gives rise to a short and isolated rating event, then it\'s not so bad,\" he said, using a term which refers to a default rating. In signs that sentiment may be shifting, German Finance Minister Wolfgang Schauble too came out in favour of a debt swap that would be tantamount to a debt default, or restructuring. The plan to involve the private sector has won backing from key global finance group, the Institute of International Finance (IIF), which represents banks, insurers and investment funds, and which has held talks in Europe this week. But European Central Bank chief Jean-Claude Trichet is sticking to his guns. \"Credit events, or selective default, or default, we say no, full stop.\" Finland meanwhile wants guarantees from Greece over and beyond a four-year austerity plan and ambitious privatisation scheme, that would see its national heritage held as collateral. With pressure building on Italy as markets closed Friday, eurozone leaders are aware that time is of the essence to prevent contagion from Europe\'s sovereign debt crisis. Banks will come under further scrutiny too from the ministers ahead of the publication Friday of the results of stress tests on 91 banks representing 65 percent of Europe\'s banking sector. The tests were designed to combat criticism over last year\'s banking sector review which found that just seven out of the 91 European banks inspected were vulnerable to economic stress. Those cleared included Irish banks that subsequently needed billions more in bailout funds.