A finance ministers’ meeting scheduled in preparation for a eurozone summit was cancelled at the last minute, over lack of progress in negotiations to expand the EU’s rescue fund. Definitive agreement might take days to finalise, diplomats say.
BRUSSELS – EU leaders were gathering for an emergency summit in Brussels yesterday evening aimed at tackling the eurozone debt crisis, the BBC said. A meeting between eurozone leaders was held earlier in the day.
But with disagreement on how to expand the EU’s bailout fund for debt-ridden countries, there is growing doubt a comprehensive deal will be reached. Urging legislators to support measures to boost the fund, German Chancellor Angela Merkel said Germany’s prosperity depended on a solution to the crisis. There are fears that the Greek debt crisis could spread to Italy and Spain.
Ahead of the summit in Brussels, the German parliament was expected to vote on whether to strengthen the bailout fund without involving more German taxpayers’ money. The measure was expected to pass. Speaking before the vote, Merkel said it was worth taking the risk to maximise the bailout fund’s spending power in order to safeguard Germany’s future prosperity. She also said she would work towards reaching sustainable decisions at the EU summit in Brussels later on Wednesday, but nobody should expect quick solutions. Merkel said it would be necessary to stand by Greece for “quite some time to come”.
French Prime Minister Francois Fillon meanwhile said that if Wednesday’s summit ended in failure, “this could tip the European continent into unknown territory”.
The Bundestag vote was to be followed by a meeting of foreign ministers, with attempts to boost the European Financial Stability Facility (EFSF) and the EUR 100 bln recapitalisation of European banks on the agenda. But the meeting was cancelled at the last minute, over lack of progress in negotiations to expand the rescue fund, EurActive said. A statement by the Polish EU Presidency said: “Further work at the level of Ministers of Finance will be conducted based on the outcome of the [EU summit] meeting,” suggesting that yesterday night’s summit would not provide the “comprehensive agreement” initially promised by Merkel and French President Nicolas Sarkozy. A definitive agreement might still take days to finalise, diplomats suggested.
Some diplomats intimate that finance ministers would have little reason to enter into discussions on bank recapitalisation when other issues are still up in the air such as how to boost the EFSF and how big a haircut banks will take on Greek debt. In other words, leaders have agreed that banks need more capital but not how much nor where they will get it. Banks say they could live with a 40% haircut on Greek debt while Merkel said she will look for no less than 50%. The same muddle goes for the EFSF: the exact figure of a bigger fund, that could reach nearly EUR 2 trillion, is reportedly not on the cards as officials are still in difficult talks with members of the Institute for International Finance, a pressure group for banks.
Italian cabinet ‘averts split’
Italian Prime Minister Silvio Berlusconi’s government averted a potential crisis over economic reforms after reaching a deal Tuesday with its main coalition partner, Italian media reports said, according to CNN. Ministers had warned the government could collapse after the Northern League rejected Berlusconi’s pension reform proposals, which would raise the retirement age by two years to 67. European leaders have pressed Italy to agree to reforms before yesterday’s summit. Northern League leader and minister for reform Umberto Bossi told Italian media late Tuesday that his party had reached a deal on the reforms, although he remained pessimistic, he said.
Bossi had earlier told reporters the government was dangerously close to a collapse. “It’s a dramatic moment. That is how I would describe it,” he said.
Bossi also denied a newspaper report that Berlusconi is to step down, according to the BBC. Berlusconi would leave at the end of December or the beginning of January, according to ‘La Repubblica,’ with fresh polls to be held in 2012. The Northern League told the BBC it was an attempt to undermine Berlusconi.