European leaders try to bridge differences
BRUSSELS — European leaders convened here Thursday for a two-day summit, with 27 nations scrambling to bridge deep differences over how to combat the region’s 21 / 2-year-old debt crisis.
The summit — the 19th held thus far in the region's elusive attempt to resolve its economic woes — was shaping up as a showdown between hard-line German Chancellor Angela Merkel and her allies, including the Netherlands and Finland, and the leaders of southern European countries who are looking for more aggressive, short-term action.
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Germany, in particular, is pushing for a long, slow slog toward European integration to shore up the euro, which could take a decade or more. But Italian Prime Minister Mario Monti signaled the concerns of hard-hit countries late Wednesday by saying the region was running out of time and called for immediate actions aimed at bringing down soaring borrowing costs that are threatening economic meltdowns in Italy and Spain — the euro zone’s third- and fourth-largest economies.
There was some indication Thursday that the Germans might be willing to accept an Italian proposal to tap European rescue funds to buy troubled government bonds, a move that could provide a relatively quick boost in market sentiment.
Leaders were gathering for afternoon talks Thursday ahead of a working dinner that night, with more talks and a working lunch scheduled for Friday.
They were expected to endorse at least one short-term measure — a program to pump roughly $165 billion worth of stimulus into the regional economy. While generally welcomed by analysts, the move is widely seen as unlikely to provide a major boost to the region’s moribund economy. Less than 10 percent of the $165 billion would be newly committed funds, with the majority coming from an existing pool of European Union structural funds being redirected toward fighting youth unemployment and other job-creation programs.
Most of the summit will be dedicated to debating longer-term steps toward European integration, including theestablishment of a sort of European Treasury that would vest central authorities with broad powers over national budgets. But leaders are unlikely to set a specific timetable for rolling out these grand schemes. Instead, they are set to agree on a general road map outlining the need for further studies and negotiations given that many nations — particularly Germany and France — have very different notions of how integration should take shape.
One such measure that could come together more rapidly is the creation of a regional banking union, including a financial supervisor who, in about a year, would have the power to do something long considered taboo in the fiercely independent nations of the euro zone: override the authority of national governments.
Yet Monti and his Spanish counterpart, Prime Minister Mariano Rajoy, are demanding far quicker and more dramatic action. Monti has been pushing hard for a plan that would allow a European bailout fund to divert cash to buying up troubled government bonds, thereby bringing down their soaring borrowing rates. But such a plan could drain the European bailout fund — to which Germany is the largest donor — at an alarming rate, and Merkel has thus far resisted such a measure. But in an interview with the Wall Street Journal published Thursday, German Finance Minister Wolfgang Schaeuble suggested Berlin might be willing to concede to such a move, although he said Germany still remains opposed to boosting the fund with more financial firepower.
Merkel has also stood firm against any quick decisions on issuing eurobonds or collective debt that could see the might of the German taxpayer stand behind troubled nations in southern Europe. Merkel told the German parliament on Wednesday that collective debt for Europe — seen by many economists as a vital weapon against the crisis — is “economically wrong and counterproductive.”
On Thursday, Germany — an island of strength and stability in an economically troubled region — began feeling more of a bite from the crisis, with the number of unemployed climbing by 7,000 to 2.88 million. Although Germany’s unemployment rate at 6.8 percent remains one of the lowest in the region, analysts suggested the signs of weakness might encourage Merkel to bend on a more aggressive short-term strategy to fight the crisis.
She gave little public indication that she was preparing to do.
“There are no quick or easy solutions,” Merkel told in the German parliament Wednesday. “There is no magic formula, no coup, by which the debt crisis can be overcome once and for all.” www.washington Post
