Informal European Council
EU leaders to ink growth pact in June
By Sarah Collins | Thursday 24 May 2012
EU leaders have sketched the outline of a 'growth pact' they hope to finalise in June, promising to redirect EU grants and European Investment Bank loans to fund infrastructure upgrades and youth employment schemes in needy states. The plan, given momentum after the election of Socialist President François Hollande in France, will include the launch of project bonds to raise private capital for energy, transport and broadband upgrades, a possible boost in EIB capital and a better use of Structural Funds - including the possibility of using unspent funding to guarantee EIB lending to vulnerable economies.
“Reforms must go hand-in-hand with investment, and EU funds can play an important role in this regard,” said European Council President Herman Van Rompuy after the 23 May Informal European Council, which lasted over six hours. However, Hollande insisted the EU come up with “new instruments” to help revive the bloc’s growth prospects, including eurobonds, a financial transaction tax and the use of the eurozone’s rescue fund, the European Stability Mechanism, to directly recapitalise banks. “There is not enough investment to allow European countries to raise their growth levels,” he said. German Chancellor Angela Merkel - backed by the Netherlands and Finland - has consistently opposed the creation of eurobonds, where euro countries would issue common debt, but diplomats said the subject was still on the table after the 23 May meeting. “Was I alone in defending eurobonds,” Hollande said. “No, I was not alone.” The issue of allowing the ESM to recapitalise banks directly - without going through sovereigns as is currently foreseen - and gain access to European Central Bank funding proved more divisive, though Irish Taoiseach Enda Kenny said there had been “very strong support from some quarters” for the idea.
The two issues are expected to feature in a report to be drawn up by Van Rompuy, Commission President José Manuel Barroso and Eurogroup head Jean-Claude Juncker next month, and presented to EU leaders at summit, on 28-29 June. “We need to take Economic Monetary Union to a new stage,” Van Rompuy said, adding that leaders had also discussed pan-European banking resolution and deposit guarantee schemes.
Meanwhile, EU leaders issued a statement saying they “want Greece to remain in the euro area while respecting its commitments”. “Continuing the vital reforms to restore debt sustainability, foster private investment and reinforce its institutions is the best guarantee for a more prosperous future in the euro area,” leaders said. “We expect that after the elections, the new Greek government will make that choice.” Greek political parties are going to the polls for a re-run of the general elections, on 17 June, which it is feared might result in a win for the radical leftist and anti-bailout group Syriza, an outcome that some fear would cast Greece out of the single currency.