9 Oct 2011

Leaders meet to discuss European debt crisis

6:55 am on 9 October 2011

International Monetary Fund chief Christine Lagarde has held talks in France with President Nicolas Sarkozy on the euro zone debt crisis.

The meeting was to discuss how to help banks over-exposed to sovereign debt, but no comment was made after the talks, the BBC reports.

The French leader was then to visit Berlin for talks with German Chancellor Angela Merkel.

The European Commission has urged member states to draft a bailout plan to restore confidence in banking but the euro zone's dominant economic powers, Germany and France, have yet to agree on the way to proceed.

On Friday, international ratings agency Fitch downgraded the sovereign credit ratings of Italy and Spain and another agency, Moody's, downgraded 12 banks in the UK and nine in Portugal.

Plans to expand the euro zone's bailout fund, and give it greater powers, were agreed in July but are now seen as inadequate.

Further action is now being discussed and leaders have said they hope to announce new measures at a G20 meeting in Cannes at the beginning of November.