Crucial week for EU

Europe's sovereign-debt crisis, which has dragged on for more than two years, has entered a pivotal week, as leaders across the continent converge to prevent a collapse of the euro and a financial panic from spreading.

Expectations are rising that Friday's summit of 27 European Union (EU) leaders will yield a breakthrough.

An agreement on tighter integration of the 17 countries that use the single currency - especially on budget matters - would be seen as a crucial first step.

Further emergency

That could trigger further emergency aid from the European Central Bank, the International Monetary Fund or some combination, analysts say.

The coming days "will decide if the euro will survive or not," Emma Marcegaglia, the head of Italy's industrial lobby, Confindustria, said yesterday.

French President Nicolas Sarkozy, German Chancellor Angela Merkel, European Central Bank Chief Draghi, and even US Treasury Secretary Timothy Geithner will star in a five-day financial drama leading up to the summit.

If the summit is a failure, Sarkozy warned last week, "the world will not wait for Europe."

Sarkozy and Merkel meet in Paris today to unveil a proposal for closer political and economic ties between eurozone countries. While the leaders differ on some of the details, their cooperation has been so tight they have come to be known by a single name - 'Merkozy.'

The two agree overall on the need for tougher rules that would prevent governments from spending or borrowing too much - and on certain penalties for persistent violators.