'Summit to save Europe' still vague on details

The core of the ‘letter of intent’ drafted by the Italian leader and the junior coalition partners of the hard-right Northern League saw the party relent to some degree in its opposition to hiking the retirement age - a key demand coming from Brussels, Frankfurt, Paris and Berlin.

For months, the head of the League, Umberto Bossi, has refused to countenance such an increase in the pension age, sensitive to his blue-collar base.

However, at the last minute, Bossi appeared to have yielded to some degree, conceding to the move so long as those who have being working and paying into the pension system for 40 years will still be able to retire.

Other details of the outline of structural changes and cuts are yet to be made public, but deregulation, privatisation and liberalisation of sectors of the economy, similar to changes ordered to the Greek economy, are expected to be contained in the letter delivered to EU leaders on Wednesday.

The European Central Bank in August began mass purchase of Italian and Spanish bonds, a move made in return for commitments by Madrid and Rome to fresh stringent austerity and structural adjustment.

While Berlusconi has delivered swingeing cuts to public spending, the structural changes have foundered on the rocks of a troubled coalition while the prime minister has appeared to be more focussed on tackling personal corruption charges and sex scandal allegations.

Italy is only one source of uncertainty heading into Wednesday’s EU and eurozone summits, widely trailed as the day to save Europe, as negotiations over a "comprehensive solution" to dealing with the eurozone crisis have barely advanced since last weekend’s marathon series of summits and meetings of ministers.

A planned meeting of EU finance ministers scheduled for Wednesday in the daytime was abruptly cancelled by the Polish EU presidency, a move that left some diplomats "fuming" over what was described as bad Polish management of the crisis talks.

Other EU officials said the cancellation was a sensible avoidance of duplication. Meanwhile, others conceded that finance chiefs would be unable to give the green light to a key plank of the comprehensive solution that has all but been wrapped up - a bank recapitalisation amounting to €108 billion - so long as the banks themselves remained intransigent over the scale of a haircut on their holdings of Greek debt.

It is understood that financial institutions are attempting to hold the line at 40 percent write-down while EU powers are looking to achieve at least 50 percent.

The scale of a boost to the eurozone’s firepower, intended to ring-fence Italy and Spain from market attacks, also remains left to agree.

With so many aspects of the deal still far from being brought together, any grand bargain reached between the bloc’s premiers and presidents on Wednesday will likely be only the broad outline of a plan, leaving the fine print to be tackled by finance ministers in the coming days.

Meanwhile in Germany, Chancellor Angela Merkel on the eve of the summit has ruled out any plan that would include encouraging the ECB to purchase still more Italian and Spanish debt.

The German parliament is set to meet in Berlin on Wednesday ahead of the summit exploring a negotiating mandate that can be given to Merkel. The discussions there will focus on the two main options under consideration for a scaling up of the eurozone rescue fund.