A key survey of European economic strength suggested Monday that the region may already be in recession, even as leaders searched for agreement on a solution to its debt crisis.

Momentum in both manufacturing and services continued to weaken in October, as the purchasing managers index fell to 47.3 and 47.2 respectively in October. A figure below 50 denotes contraction.

Vatican urges reform

The Vatican has called for a radical reform of the world's financial system, including the creation of a global political authority to manage the economy.

The aim is for a new world economic order based on ethics and the search for the common good.

The proposal by the Vatican's Pontifical Council for Justice and Peace, released Monday, follows up on Pope Benedict XVI's 2009 economic encyclical that denounced a profit-at-all-cost mentality as responsible for the global financial meltdown.

The new document stresses "the economy needs ethics."

It suggested that the reform process begin with the United Nations as its point of reference.

— The Associated Press

European leaders met in Brussels on the weekend, but once again did not announce a comprehensive plan to prop up struggling banks, erase part of Greece's debt to prevent a messy default and prevent the credit panic from spreading to other nations.

They promised to unveil one by Wednesday.

"Markets will remain nervous ahead of Wednesday's EU summit, hoping that officials can settle their differences and emerge with a concrete solution. In this respect, the risk of disappointment is high," the analysts at Crédit Agricole CIB told clients in a research note on Monday.

The only solid detail to emerge Sunday from three days of intense talks was that banks will have to raise their capital buffers much faster than they had planned — by the end of 2012, instead of 2019.

Bailout fund could hit €1T 

In Berlin, German opposition leaders said after a briefing with Chancellor Angela Merkel that the eurozone fund for shoring up financial institutions and the larger debt-burdened economies such as Italy and Spain is to be increased to more than €1 trillion ($1.4 trillion).

Frank-Walter Steinmeier, parliamentary leader of the opposition Social Democrats, said the increase would be achieved through a combination of measures.

It would insure investors against a percentage of possible losses on eurozone government bonds and also involve the participation of outside organizations such as the International Monetary Fund.

Although it isn’t a legal requirement, members of Merkel's party proposed that the change receive full parliamentary approval on Wednesday, because of the significant amount of money required.

In Rome, Italian Prime Minister Silvio Berlusconi lashed out at German and French leaders who criticized his government over the weekend for not doing enough to cut its public debt.

Italian banks strong, Berlusconi says

Berlusconi chided Merkel and French President Nicolas Sarkozy for trying to "give lessons" to Rome and insisted the Italian banking system was strong.

Berlusconi bristled at the criticism, saying Italy was already taking measures to cut its debt and balance its budget by 2013.

"No one in the EU can nominate themselves commissioner and speak in the name of elected governments," he said. "No one can give lessons to EU partners."

Berlusconi's comment came as he summoned his cabinet for an emergency meeting to discuss growth measures the European Union has demanded so that Italy doesn't get further dragged into Europe's debt crisis.

Italy's bickering political parties have suffered a near-paralysis when it comes to making substantive structural reforms.

He said Italy's banking system was stronger than that of France and Germany, and urged Italy's political factions to work together for the benefit of the country.

Also on Monday, shares in Greek banks plunged amid expectations they will have to accept higher than agreed losses on the country's government bonds as part of a new debt deal.

Greek banks hold billions in the country's government debt.

The Agricultural Bank of Greece shares closed on the Athens Exchange down 5.5 per cent at 24 cents and the Hellenic Postbank was off 25 per cent at 33 cents a share.

The Canadian Press and The Associated Press