Fears of no eurozone debt-crisis breakthrough deal deepened Wednesday morning as Europe's leaders were to meet while still at loggerheads over what to do.
A European Union finance ministers meeting, set for Wednesday before an evening Brussels summit meeting of EU leaders, was abruptly canceled Tuesday amid disagreements over writing down Greece's debt, bolstering the firepower of Europe's bailout fund and pumping up to $150 billion into Europe's weakest banks.
Banks holding Greek debt rebuffed government pressure for "voluntary" write-downs of 50 percent to 60 percent on their Greek bonds, banking and government officials said.
Without an agreement on how to restructure Greece's debt, European leaders don't know how big to make the bailout fund, known as the European Financial Stability Facility, whose current size is $600 billion, diplomats said.
The fund is considered less than half as big as it needs to be to help Italy alone cover its $2.8 trillion in debt, which amounts to about 120 percent of Italy's gross domestic product, among the highest in the developed world.
At least $200 billion of the EFSF is already committed to Greece, Ireland and Portugal, and European leaders have not yet agreed on at least two options they are considering for enlarging the fund, officials said.
Those options include using money from the International Monetary Fund and from non-European countries, including Asia and the Persian Gulf, Britain's Guardian reported.
Due to uncertainty on so many matters, EU leaders may decide not to announce the European banks recapitalization amount, a person involved in the talks told The Wall Street Journal.
"Everybody realizes that we are on the brink of such a total catastrophe that anything that prevents it and a huge recession must be grasped," one EU diplomat told The Guardian. "The markets will kill us if they haven't laughed themselves to death."
A German Parliament vote Wednesday would support increasing the bailout fund to more than $1.4 trillion, but it would also call on the European Central Bank to stop buying weak-government bonds once the EFSF is able to do so, a draft resolution indicated.
The resolution would also call for a financial-transaction tax -- a proposal lofted in the United States by the grassroots Light Party, which claims a 50-cent stock-trade surcharge would generate $350 billion a year.
The German resolution would be non-binding, but would highlight Germany's unease about the ECB's bond-buying, The Wall Street Journal reported. Germany is Europe's biggest economy.
Other European governments, led by France, Europe's No. 2 economy, want to press the ECB to continue buying bonds.
Adding to the complexity, Greece says it needs more money.
Eurozone governments agreed in July to lend Greece $152 billion, in the second bailout deal for the country in a year. Germany insists new loans for Greece total "not much more than" the size of the last loan, a senior Berlin official told the Journal.
Italy -- which many economists fear could be next to collapse in debt if it fails to make major budget cuts swiftly -- was reported to have reached an 11th-hour accord Tuesday night to implement austerity measures.
Details were not immediately released, but Italian media said part of the deal included raising the retirement age for most people to 67 -- a compromise Italy said would satisfy an EU demand for supporting Italy's bonds -- along with privatizations and simplifying bureaucratic red tape
Some critics dismissed the proposals as window dressing.
If the EU leaders reach an agreement in principle Wednesday night, the finance ministers will have to sort out the complex technical issues later this week and into the weekend, officials said.