Minimalist EU summit hopes to calm markets

Diplomats have stripped down the agenda to this small treaty change and the bare outline of what the new permanent fund would look like, aiming to allow for maximum focus on the issue at hand and convince markets that they have dealt with the issue.

Ahead of the meeting, they were saying that it is crucial that leaders not get sidetracked by other issues or by tinkering too much with the wording of the treaty change.

If they exit the summit without the appearance of unity, the markets will pounce once again, though they appear to have calmed their ferocity when it comes to the debt situation of Portugal, Spain and Belgium in recent days after a maelstrom of attacks by the so-called bond vigilantes in November.

"We are hoping the prime ministers will not add any ‘decoration'," to the wording negotiated by diplomats, one EU source said. "There must be no surprises."

"There is just one objective: calm down the markets."

On Tuesday, Belgium had its sovereign debt outlook lowered by rating agency Standard & Poor's and Spain was warned on Wednesday by Moody' that its debt may be downgraded.

Unknowns ahead of the meeting include whether the leaders will back a boost to the size of the current temporary bail-out fund. Capped at 750 billion, some fear that it is not big enough to cover a rescue for Spain and have called for the sum to be increased.

Heading into the summit, the rotating presidency of the EU, currently held by Belgium, backed this idea, with Belgian finance minister Didier Reynders calling for a doubling of the fund.

Certain to come up but also certain to be slapped down by Germany and France will be Luxembourg's call for the EU to begin issuing bonds at the European level.

This week, Luxembourgish Prime Minister and chief of the eurozone group of states Jean-Claude Juncker and Italian finance minister Tremonti issued a call for such a move, only for the idea be brusquely dismissed by the bloc's two biggest powers.

Germany is worried that such a move would mingle its credit risk with that of weaker, peripheral European powers and increase the "moral hazard", allowing countries to get away with high public debts without paying the consequences.

However, Mr Juncker has said he intends to raise the issue nonetheless.

In an indication of the bitter wrangling behind the scenes, Mr Juncker this week also attacked Germany as "un-European" for opposing the idea of eurobonds.

Discussions on whether the new bail-out mechanism will involve simply loan guarantees or direct cash payments is off the table and will be discussed over the following three months.

Two other minor issues are also on the table: a progress report from the a Commission on the bloc'cs ‘2020 strategy', a plan to return the continent to growth; and Montenegro is expected to be offered the status of EU candidate country.