European leaders yesterday began a day of talks aimed at resolving the region’s debt crisis and keeping another recession at bay. The European Council’s autumn summit convened amid fears that problems in Greece threaten to spread to Italy and Spain, the BBC reported. German Chancellor Angela Merkel said she believed the leaders will devise a plan by Wednesday to protect the euro. Following the morning meeting of all 27 EU leaders, the 17 countries that use the euro were to hold a special summit of their own in the afternoon. This will then be followed by another meeting on Wednesday, as announced by Germany and France. According to Merkel, in comments taken over by EUObserver, no final decision on the eurozone crisis would be made before Wednesday. “I believe we can come to a final decision on Wednesday,” Merkel told journalists at a meeting with centre-right leaders near Brussels. “Talks are difficult,” she said, especially with France. The Sunday meeting is “preparatory,” she added.
A joint Franco-German statement posted on the website of the Elysée Palace mentions the three areas where the two countries’ leaders still seek agreement: the operational implementation of new forms of intervention of the eurozone’s bailout fund, the European Financial Stability Facility (EFSF); a plan to recapitalise European banks; the implementation of eurozone economic governance and strengthening European integration. On the basis of the package of austerity measures approved by the Greek parliament, as well as the latest EU-IMF report, France and Germany call for negotiations with the private sector to “start immediately” with the aim of “reinforcing the sustainability” of Greece’s public debt, according to Euractiv.
According to insiders, Germany had proposed that the Sunday twin summits be scrapped until Paris and Berlin reach agreement on how to boost the firepower of the EU’s EUR 440 billion bailout fund, the European Financial Stability Facility.
But Sarkozy had insisted on keeping the summit, which had already been postponed once, to agree on a “comprehensive” solution to the eurozone debt crisis for the November G20 summit in Cannes.
Before the morning meeting yesterday, Greek Prime Minister George Papandreou urged Europe to “act decisively and effectively” to contain the troubles. “It’s been proven now that the crisis is not a Greek crisis,” he told reporters. “The crisis is a European crisis. So now is the time that we as Europeans need to act decisively and effectively.”
Shortly before the summit began, Italy’s Prime Minister Silvio Berlusconi held private talks with EU President Herman Van Rompuy, Merkel, and French President Nicolas Sarkozy. There is concern that budget cuts passed by the Italian parliament do not go far enough. According to various diplomatic sources, Merkel and Sarkozy tried to increase pressure on Berlusconi to continue reforming Italy’s pension system and labour market, in order to increase its economic growth potential.
New euro ‘empire’ plot
European Union chiefs are drawing up plans for a single “Treasury” to oversee tax and spending across the 17 eurozone nations, according to ‘The Telegraph.’ The proposal, put forward by Herman Van Rompuy, the European Council president, would be the clearest sign yet of a new “United States of Europe” – with Britain left on the sidelines. British sources said Van Rompuy, who is regarded as being close to the German government, suggested plans for a “finance ministry” to be based either in Frankfurt or Paris. The EU already has its own “foreign ministry”, headed by Baroness Ashton, the former British Labour minister, and based in Brussels.
The plan came amid reports that the International Monetary Fund indicated privately that it is not willing to further bail out Greece. Any suggestion that the IMF would not be part of a new bail-out of Greece could spark panic in the markets and worsen the eurozone crisis, the British publication said.
Deal reached on how to recapitalise banks
Meanwhile on Saturday, EU finance ministers reached a deal on how to recapitalise banks, the BBC said. The provisional deal will see banks raise more than EUR 100 bln euros in new capital to shield them against possible losses to indebted countries. It is conditional on a wider accord, including a write-down of Greek debt.
The EUR 100 bln agreed in the deal will be provided to banks by commercial investors, national governments and the EU’s bailout fund.
Speaking after the 10-hour meeting on Saturday, UK Chancellor of the Exchequer George Osborne said: “Britain will keep up pressure in the next few days to a comprehensive package to resolve the European crisis and to make sure that we get jobs and growth.”