PARIS/BRUSSELS: Finance chiefs of the euro zone's four biggest economies will hold last-minute talks in Paris on Tuesday evening to try to narrow differences on the currency area's future after Cyprus became the fifth member to request a bailout. Ministers from Germany, France, Italy and Spain will discuss how to manage the crisis in the short term and proposals for closer long-term fiscal and banking integration to prepare for a European Union summit starting on Thursday. Financial markets are on edge and international pressure for decisive action is rising but the summit, the 20th since the bloc's debt woes began in early 2010, is not expected to produce a lasting solution to the crisis. "Tomorrow there is a meeting, which will be very important, between (French President) Francois Hollande and (German Chancellor) Angela Merkel, and this evening I will receive the finance ministers... along with the European Commissioner," French Economy Minister Pierre Moscovici said. A report prepared by the EU's top four officials suggests the euro zone could create a treasury for the single currency and issue euro bonds in the medium term as the final stage of a fiscal union. However Merkel, who leads Europe's biggest economy and the main contributor to its bailout funds, again ruled out on Monday any sharing of debt or bank liabilities as "economically wrong and counter-productive". The finance ministers' session was called at such short notice - in an apparent rush to repair damage from a public rift between Merkel and leaders of the other three states when they met in Rome last Friday - that one finance minister's press staff only learned of the invitation on Tuesday morning. Little Cyprus, the 17-nation currency area's third smallest economy with just 1 million residents, added drama to a fraught week by applying for rescue loans on Monday. HALF ITS ECONOMY Two euro zone sources said the East Mediterranean island, with an outsize financial sector heavily exposed to neighbouring Greece, may need up to 10 billion euros in emergency financing, more than half its 17.3 billion euro annual output. While the sum is easily within the range of the European Financial Stability Facility (EFSF) bailout fund, it sets an awkward precedent and may lead to demands for collateral or for private bondholders to take a write-down as they did in Greece. Cyprus needs to plug a 1.8 billion euro regulatory capital shortfall in its second largest lender by June 30. Potential aid could be more comprehensive to cover fiscal requirements, Finance Minister Vassos Shiarly told Reuters. Nicosia is believed to have applied to the EU for aid after exhausting attempts to secure loans from either China or Russia, a close ally, in an apparent effort to avoid the tough conditions and intrusive monitoring of an EU/IMF programme. "The exact number has not been decided yet. It was to be 6 billion for the state financing and 2 billion for the banks but that is optimistic - it is more likely to be seven and three - up to 10 billion euros in total," one euro zone official said. On Monday, Spain formally requested up to 100 billion euros in rescue loans to recapitalise banks weighed down by bad loans from a burst real estate bubble. It is seeking to avoid the political humiliation and partial loss of sovereignty involved in a full state bailout programme of the kind granted to Greece, Ireland and Portugal.

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