As investors anxiously await the European Central Bank (ECB) policy meeting this Thursday, Eurozone politicians continue their 'diplomacy rounds' as they hold talks on the current crisis and attempt to move forward on solutions.

While European Council president Herman Van Rompuy begins making the rounds to hammer out a plan for the European Unit summit in October, perhaps the most relevant meeting of the week will coincide with the ECB's decision on Thursday. Specifically, German Chancellor Angela Merkel will hold bilateral talks in Madrid with Spanish Prime Minister Mariano Rajoy just prior to a conference with over 100 businessmen from both countries that is aimed at driving economic cooperation.

Yet the market's attention will be focused on the results from the meeting between the two leaders and their positions on ECB bond buying or Spain's bailout request. Even as some investors expect the ECB to make some comment on plans to purchase sovereign debt to help lower borrowing costs for peripheral Eurozone countries such as Spain or Italy, various German officials have maintained staunch opposition to the proposal. In this context, Rajoy would be expected to try to convince Merkel to support the initiative and would walk into the meeting with the recent financial sector restructuring and economic reforms under arm.

Merkel and Rajoy's firmest ally, Italian Prime Minister Mario Monti, openly disagreed last week over granting a bank licence to the Eurozone bailout fund so that it could increase its bond-buying capacity.

Rajoy may also ask Merkel for a clarification of her position on Spain's possible request for additional rescue funds beyond the €100bn already promised to the country's financial sector. Spanish newspaper El Mundo reported on Friday that Merkel had asked Monti and would ask Rajoy to delay any additional bailout requests.

The following is a list of Eurozone meetings scheduled for this week


Tuesday: European Council president Herman Van Rompuy meets with German Chancellor Angela Merkel (11:30 London time). French President François Hollande meets with Italian Prime Minister Mario Monti (to be announced).

Wednesday: European Council President Herman Van Rompuy meets with French President François Hollande (14:00).

Thursday: German Chancellor Angela Merkel meets with Spanish Prime Minister Mariano Rajoy (12:00).

Friday: European Council president Herman Van Rompuy meets with Greek Prime Minister Antonis Samaras (16:00).

Saturday: European Council President Herman Van Rompuy meets with Italian Prime Minister Mario Monti (15:00).



JM

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