I'm here at the big EU summit in Brussels, the D-day event that is being billed as the last chance to save the Euro and prevent a collapse of the European economy. Even if the leaders emerge from those fortified doors having done everything the markets are asking, there will still be a long road ahead in this crisis. But this could be the moment they were finally able to turn the tide and appear in control.
Or it could be remembered as the moment where the entire European project collapsed. The tension in the press room is palpable. It's hard to say if it's coming from the stressed-out journalists or seeping in from the inner chambers where the European leaders are meeting. Either way, I would venture to say the Justus Lipsius building (or 'Just Lips' as I like to call it) is one of the most tense places on earth at the moment.
The markets need the leaders to come out of those doors and tell the press room two things: First, that they have amassed a trillion euro war chest to protect all of the Southern European economies, including Italy and Spain, from collapse. Second, that Italy has agreed to put in place a drastic austerity plan in line with what is being imposed on Greece.
Italian prime minister Silvio Berlusconi has come to Brussels tonight with an letter for the other EU leaders that has been agonisingly crafted over the past two days. According to reports, the letter agrees to implement the drastic measures including – and this was the key sticking point – hiking the Italian retirement age. Berlusconi's coalition partners the Northern League had refused to acquiesce to this demand, threatening to topple the Italian government. But in the end it appears they've relented, as long as those near retirement will still be able to retire early.
The leaders will also need to emerge with some kind of bank recapitalisation plan in order to sooth the markets. European banks will likely be asked to increase their core capital, and those that are unable to do so will have to seek support from their governments. If the governments can't provide it (which is likely the case for the indebted Southern European states) then the European Financial Stability Facility (the €1 trillion fund) could provide it.
The leaders are also expected to ask for larger private sector involvement in the recovery effort, with banks being asked to take a 'haircut' on their Greek bonds. They've already agreed to take a 21% haircut, but it is expected that they will now be asked to take a 50% reduction.
Finally, the leaders are going to have to indicate that they have some kind of plan for bringing in closer Eurozone economic and fiscal integration. This of course will be a process that will take a few years and may require treaty change, but tonight they need to at least indicate that they are taking the first steps. To put it crudely (and this is admittedly over-simplified), the current crisis is the result of the fact that the euro created a monetary union without a fiscal union. Individual member states could set their own budgets and these were not independently verified, while at the same time they were sharing a common currency. Experts say this is no longer tenable, and either fiscal policy for the Eurozone needs to be dictated/coordinated or the euro needs to be abandoned.