The leaders of the 17 euro zone countries will hold a special summit next week in an attempt to forge a deal on a second bailout for Greece, the European Union president announced Friday night.
President Herman Van Rompuy called the meeting after disagreement over the contribution of banks and other private investors to a second rescue package rocked markets for much of the week.
Fears that Greece's private creditors may have to take losses as part of the deal dragged the big economies of Spain and Italy into the debt crisis, which has so far been confined to small states like Greece, Ireland and Portugal.
Leaders of the struggling countries have pushed their euro zone counterparts to come up with a solution quickly, while Germany, the biggest European contributor to the rescue packages, dragged its feet.
Germany argued that Greece is financed until the end of September and that there was no need to rush into a deal.
Greece needs a $161 billion Cdn. to keep it afloat until mid-2014, according to the European Commission — on top of a $154 billion bailout it was granted last May.
Private creditors pushed to contribute
About $42 billion of that is supposed to come from assets sales by the Greek government and the euro zone is pushing for Greece's private creditors, which have so far been spared, to come up with about the same amount.
The final rescue bill for the euro zone and the International Monetary Fund may, however, be higher than the remaining $77 billion, because the currency union is also working on an overhaul of its main bailout fund that could prove costly.
On the table are additional loans to Greece to buy back its bonds, which are currently trading far below market value.
Such a buyback could help cut Greece's overall debt, some 160 per cent of economic output.
Banks and investment funds may also be encouraged to give Greece more time to repay its debt, an initiative that may be sweetened by collateral deals that ensure repayment even if Greece defaults.
Leaders are also expected cut the interest rates and extend loan maturities on existing bailout loans, which could help make the debt of struggling countries more sustainable.