An emergency session of finance ministers in Brussels late yesterday failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new Greek aid package with European Central Bank warnings backed by France that the move might constitute the euro area's first sovereign default.

Germany and France, Europe's two biggest economies, are on opposite sides of the dispute, with France indicating backing for the ECB's view. While French Finance Minister Christine Lagarde has ruled out any action that constitutes a "credit event," her German counterpart, Finance Minister Wolfgang Schaeuble, said June 10 that Europe's biggest economy "has to insist on the participation of the private sector" in Greece.

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