German Chancellor Angela Merkel has said that the euro zone summit on a second Greek rescue scheduled for Thursday will not produce a 'spectacular' knock-out blow to the bloc's sovereign debt crisis.
'After more than a year of discussing Greece there is currently a great yearning for one finalising, single big step, something ideally that is spectacular,' Merkel said after talks with Russian president Dmitry Medvedev.
'The words being used are clear - a large debt restructuring, euro bonds, a transfer union, and lots more.
'This creates the impression that everything is going to be okay afterwards, that the issue of Greece and the issue of the euro can be put to one side.'
This way of thinking, she said, was 'negligent' or reflected a 'lack of patience, or both,' Merkel said.
'If you are going to be politically responsible, and this is what the (German) government wants and takes seriously, you know that such a spectacular, single step cannot responsibly be made, including on Thursday.
'Instead, we need a controlled and manageable process of successive steps and measures, a process that has one single purpose, one paramount aim, namely finally getting to the root of this problem.
'This means reducing debt and improving competitiveness.
'Thursday will help in this, but further steps will be needed, not one spectacular event solving all problems.'
The Taoiseach told the Dáil today he wants to see a 'conclusion to the anxiety over the future of the euro zone'.
Answering questions about Thursday's summit, Mr Kenny pointed out that the agenda has not yet been finalised, with officials continuing to work on it.
He said the discussions are about a European solution to a European problem - which the Government has been pointing out the need for over the past four or five months.
IMF tells Europe to act on debt crisis
The International Monetary Fund has told Europe to take action now to contain the euro zone crisis and prevent a meltdown in the weakest economies from damaging the entire region and the global economy.
The IMF warned that the results of any policy paths would be unpredictable, and also said the euro zone needed more private money involved to support its most fragile members and its still-frail banks.
'We should not delay any longer clarifying some of the uncertainties that are hanging over the solutions of the sovereign crisis in the periphery,' said Luc Everaert of the IMF's European Department, detailing a new report on the economic situation of the 17-country euro area.
'The crisis in the periphery is not fully addressed yet... Directors think this should be done very urgently,' he said.
The IMF urged Europe's leaders to expand the size and operational scope of the European Financial Stability Facility to intervene more effectively, suggesting this would go a long way to helping stabilize the region.
A parallel, detailed report on 'spillover' risks warned that even Europe's strong economies, like Germany and France, were at danger from contagion from a meltdown in the struggling countries of Greece, Ireland, Portugal, Italy and Spain.
'Spillovers could be large if stress in euro-area crisis countries spreads to other members... Delays in resolving the crisis could be costly for the euro area and the global economy,' the IMF said.
Meanwhile, Austria's central bank governor has said that a solution to Greece's debt crisis could involve a 'selective default' without major consequences, the first sign of a crack in the European Central Bank's hard line on the issue.
The ECB has proved a major stumbling block to agreeing a second rescue plan for Greece as it has threatened to refuse to accept restructured Greek bonds as collateral in its lending operations in the event of a default or a selective default.
Ewald Nowotny, head of Austria's national central bank, said a full default would have 'grave consequences' for Greece and the ECB's ability to accept its debt as collateral. But he indicated that selective default might work.
'There is a full range of options and definitions - from a clear-cut default to selective default, to a credit event and so on,' he told CNBC in an interview broadcast today.
'This indeed has to be studied in a very serious way. There are some proposals that deal with a very short-lived selective default situation that would not really have major negative consequences,' he added.
Nowotny's remarks differ starkly from the stance taken by ECB President Jean-Claude Trichet, who told a news conference after the ECB's monetary policy meeting earlier this month: 'We say no to selective default, no to a credit event.'
Trichet repeated that view in a separate newspaper interview published today.
European leaders hold a summit on the euro zone crisis on Thursday, and any sign the ECB could be open to a compromise on the collateral it accepts at its funding operations would increase the chances of a deal for Greece.
The ECB demands that banks put up adequate collateral to receive funds at its regular refinancing operations.
The ECB's insistence that it would not accept collateral that is in default is aimed at making sure euro zone governments - with or without the private sector - assume the cost of dealing with the crisis, rather than pushing it over to the ECB, which fears its independence being compromised.
Ratings agencies have said that proposals to roll over Greek bonds into longer maturities would be a default and banking and government officials have struggled to find an alternative.
Nowotny stressed it was ultimately up to the ECB - not ratings agencies - to decide what it could accept as collateral.
'At the end of the day, it has to be the decision of the ECB,' he said. 'The ECB should not be totally dependent on rating agencies. It is at the end of the day our own responsibility, our own decision,' he stated.
Meanwhile, Greece has raised €1.625 billion in three-month debt at an easier yield rate of 4.58% compared to the 4.62% rate offered on the same amount in June, Greece's debt management agency has said.
Bids at the three-month treasury bill auction totalled three times the offer, with a total demand of €3.845 billion for an initial offer of €1.25 billion, the agency said, giving the final amount raised of €1.625 billion.
