EU leaders swap ideas as crisis eases
BRUSSELS – EU leaders gather in Brussels for a summit Thursday on strengthening the bloc's shaky foundations as Spain appears set finally to ask for financial aid, easing a key eurozone pressure point.
With Spain edging closer to asking for what diplomats describe as a precautionary credit line after months of hesitation, the 27 European Union states will meet from 5:45pm (1545GMT) for two days of talks free from the worst fears of previous debt crisis summits. The meeting, which will also review relations with China, and discuss hotspots Syria, Iran and Mali, is the first of three before Christmas aiming to end the year with a deal on a stronger economic and monetary union.
"On the exit from the eurozone crisis, we are close, very close," said French President Francois Hollande, insisting it was the eurozone and EU's "duty" to implement rapidly decisions agreed at a June summit.
Greece's long-paused bailout also figures again, after representatives of its EU and IMF lenders left Athens on Wednesday saying they expected to close a deal "over the coming days."
If the atmosphere is less tense, Europe still has to contend with a deepening recession and social unrest as well as divisions between the major powers on how to ensure the euro single currency can survive the debt crisis.
German Chancellor Angela Merkel is expected to push for tighter coordination and oversight of fiscal policy, which in practice could mean states will have to account for their national budgets in Brussels.
Germany also wants, in the name of a stronger union, changes to the base EU treaty to strengthen the role of the commissioner for economic and monetary affairs, currently Olli Rehn.
On both counts there is strong opposition from countries such as France or non-euro member Britain which are reluctant to give Brussels any more power over national taxation policy.
While not originally on the agenda, news that Spain could now ask for a limited bailout changes the tone of the meeting.
One diplomatic source said Spanish Prime Minister Mariano Rajoy could use the summit to "make explicit the conditions that would be imposed in exchange for aid" over and above those agreed in June to help Spain's battered banks. Preparing the terrain in this way could eventually mean the first use of the eurozone's new rescue fund, the European Stability Mechanism (ESM) and would in turn allow the European Central Bank (ECB) to intervene on public debt markets, pushing down borrowing costs for Madrid.
The net effect would be to set in motion the measures agreed in June to bolster the bloc with a new rescue system plus tighter economic and fiscal policy coordination.
If the EU were to find itself in such new territory, the June plan for a single European bank regulator, the first step towards allowing the ESM to directly help ailing lenders, would likely stoke some debate.
The 17 eurozone nations largely support the proposal, although serious differences over timing remain, but their non-euro peers are uneasy that their banks operating in the bloc might face new regulation without their say-so. Berlin has made clear that the idea, agreed at the breakthrough June summit, should go slower and be less ambitious than some, including Paris, would like. Britain in turn opposes any measure that could harm the interests of the City of London, one of the world's biggest financial markets.
The leaders will be discussing proposals to reinforce economic and monetary union drawn up by EU president Herman Van Rompuy, with input from ECB chief Mario Draghi, Eurogroup head Jean-Claude Juncker and European Commission chief Jose Manuel Barroso.
Van Rompuy has suggested that reforms might include the pooling of debt through the sharing of risk, by strong and weak alike.
"You can phrase it any way you like – 'Treasury bills, debt redemption funds or eurobonds,' this type of debt issuance will not fly with our government," said Germany's Europe Minister Michael Link.
Berlin fears this would give weaker eurozone states a free ride in the markets at its expense, although France says it won't give up. AFP