Europe Faces Financial Reckoning In Brussels

European leaders are gathering in Brussels Thursday for a two-day summit that could determine the fate of the euro.

Some officials have described the European summit as a moment of reckoning for the common currency, under siege by the continent’s ballooning debt crisis. But before the meeting opened, there remained a divergence of opinion on exactly how to resolve the two-year debt contagion that threatens the stability of the world economy.

The economy in the 17-nation bloc that uses the euro has all but stalled, with some analysts saying it has already dipped into a recession. The European Central Bank took a modest step ahead of the summit to boost lending, trimming its prime interest rate a quarter percentage point to one percent, the second cut in two months.

German Chancellor Angela Merkel and French President Nicolas Sarkozy are calling for the eurozone nations to curb excessive spending and impose strict penalties on violators. Their plan would also create a unified corporate tax rate and a new financial transaction tax.

Mr. Sarkozy said an agreement is essential.

before a deal is reached. Another senior official was quoted as saying that some countries “have not understood the seriousness of the situation.

European Commission chief Jose Manuel Barroso said decisive action is needed to end the debt crisis. He said, “The entire world is watching. We must do everything” to insure the survival of the euro.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of eurozone ministers, told French radio Thursday the goal is to get all 27 European Union members to agree. He said if that was not possible, officials would pursue a new treaty for the eurozone nations.

Fears that Europe’s debt crisis could spark additional problems have sent jitters through the global financial markets and have prompted warnings from several top credit rating agencies.

Standard & Poor’s Wednesday put the the EU’s long-term rating on a credit watch, suggesting a downgrade could be imminent.

U.S. President Barack Obama has repeatedly urged European leaders to do what is necessary to fix the crisis as soon as possible and spoke with Ms. Merkel by telephone late Wednesday.

The White House said President Obama and the German chancellor agreed on the need to find a lasting and credible solution for the eurozone crisis.

But Britain, which has its own currency , has indicated that it may not be willing to sign on to new EU treaty provisions. Prime Minister David Cameron said earlier this week that he will defend Britain’s financial interests at the summit.