Crunch time for euro as Merkel and Sarkozy lock horns

Angela Merkel and Nicholas Sarkozy are set to meet today as political commentators warn Europe is entering the end game for the crisis, which must be resolved this week to save the euro.

The leaders are prepared for five days of talks ahead of a crucial EU summit on Friday.

They are aiming to reach agreement on whether to move to stricter fiscal union in the EU, centralised in Brussels, as Germany advocates, or whether to allow countries to retain individual control over their own budgets.

Diplomats say Germany and France remain divided, the FT reports, so no announcements are expected from today’s meeting. Meanwhile Ireland and Italy are preparing to introduce more austerity measures to support their fragile economies.

In Italy, Prime Minister Mario Monti is due to seek parliamentary approval to increase taxes on the wealthy, increase the pension age, and clamp down on tax evasion.

Welfare Minister Elsa Fornero broke down in tears on Sunday during a press conference outlining the €24bn (£21bn) of tax increases and spending cuts in Italy’s emergency budget.

Ireland is also preparing to cut public spending by €2.2bn (£1.9bn) and raise taxes by €1.5bn, as well as hiking VAT to 23%.