When you are negotiating as a team it’s imperative to have a united team. If you don’t then the other side will make the most of your disunity. This is one of the many enduring problems in negotiations concerning the Euro. Ranged on the institutional side of the negotiation are the Eurozone Governments – in particular France and Germany, the European Central Bank, and the IMF. On the other side are the financial markets.

The Eurozone institutions are grappling in a disunited way with two major headaches – the inability of Greece to repay its debts on schedule, and how to set up safety mechanisms to offset the impact of a Greek default on other vulnerable countries such as Portugal, Italy and Spain.

In relation to the Greek issue a schism has emerged between the IMF and the ECB, with the IMF arguing that the bailout needs are that a further “haircut” is needed from private owners of debt in Greece as the economy has deteriorated so badly that global lenders would otherwise need to find €252 billion in bail-out loans through to the end of the decade. This is more than twice the €109 billion agreed by the EU and the IMF only 3 months ago. Accordingly the IMF is suggesting a “voluntary” 60% reduction in debt for bondholders as opposed to the 21% previously agreed. The ECB on the other hand fears that this would cause market panic. This very difference of opinion itself promotes anxieties in the financial markets.

The second issue is that of increasing the firepower of the European Financial Stability Fund which would address any need to buy or guarantee bonds of Governments under pressure because of their exposure to sovereign debt fears. At its present level of €440 billion the EFS Fund doesn’t have nearly enough funds to deal with the threatened default of a large country such as Spain or Italy. France is against any measures to increase its firepower which would leave France exposed to a risk of a downgrade of its own triple-A rating. Moody’s rating agency has already said it is reviewing France’s debt rating, in view of the potential impact on France’s already highly leveraged position of any loss guarantee scheme. France would like the ESF to be able to borrow money from the ECB to increase its firepower. Germany is reluctant to support this – it may be illegal under EU laws and would effectively position Germany as Europe’s banker. Germany has turned its attention to attempts to involve the IMF in increasing the level of funds available to the ESF. Germany’s position is complicated by the recently introduced need to obtain approval from its Parliament for any deal of this kind.

The same problems bedevil attempts to recapitalise European banks so that they can withstand the risks of a default. How can this be done without exposing France (whose Banks are among the most vulnerable) to further risk of financial contagion?

Against this kind of backdrop it is hardly surprising that the summit meeting this Sunday failed to provide any concrete response with a further “conclusive” meeting planned for Wednesday.

This kind of disunity over how to handle complex and unprecedented financial issues is not surprising, but the disunity smacks of weakness and the financial markets will continue to make their own negative judgements about the debt crisis until the Eurozone Institutions at least speak with one voice.