The head of the group of euro zone finance ministers has said deep divisions among EU leaders about the area's debt crisis are sending out "disastrous" signals.
Jean-Claude Juncker, Luxembourg's prime minister, was speaking as he arrived for a meeting of euro zone finance ministers in Brussels. "We are not really showing a properly functioning leadership," he said.
The meeting in Brussels is the of a series which could determine the fate of the single currency. The talks will culminate in back-to-back summits of EU leaders on Sunday and Wednesday.
On his arrival, Finance Minister Michael Noonan said he was not too surprised that a second summit of EU leaders would have to take place next week, given the parliamentary restrictions which are placed on the leaders of Germany and the Netherlands.
Asked if Irish banks would be required to recapitalise, Mr Noonan said he believed Irish banks will have "the headroom" without the need further bank recapitalisation.
Earlier, French Prime Minister Francois Fillon said Europe was moving towards an economic government for the euro zone. He was speaking to South Korean business chiefs in Seoul ahead of what he called a "decisive" summit on the bloc's debt crisis.
Sunday's EU summit would be a "decisive meeting", he said, although another summit is already planned for Wednesday as the euro zone battles to prevent Greece's problems from spilling over more widely.
Fillon said the crisis had exposed the "oversights" in the continent's monetary union, and the world economy and governance was approaching a "moment of truth".
"Today Europe is faced with a new challenge. As she has always done in the past, she will overcome the tests and emerge strengthened," he said.
Banks want EFSF to insure countries' debt
Leading European banks and insurers are reported to have called on the EU's bail-out fund to insure sovereign debt.
According to the AFP news agency, the group sent a letter to the head of the European Financial Stability Facility, Klaus Regling.
The companies - including insurers Allianz, Axa and Generali, and banks Deutsche Bank, Commerzbank and UniCredit - argued that the EFSF could make make best use of the €440 billion available to it by insuring sovereign bonds.
Europe is currently deeply divided over how to maximise the EFSF's firepower to prevent the euro zone debt crisis from spreading without increasing the financial burden on states.
France argues the fund can be leveraged by awarding it a banking licence, thereby giving it access to the funds of the European Central Bank. But Germany is vehemently opposed to any such option.
Another way of beefing up the fund would be to use its pool of funds to insure part - say 20-30% - of a country's sovereign debt so as to encourage investors to buy its bonds, allowing it to secure fresh funding.
