Summit hopes fade as crisis escalates
By Sarah Collins | Wednesday 27 June 2012
Hopes have again been dashed that a summit of EU leaders, on 28-29 June, will end the speculation about the bloc’s ability to overcome the debt crisis. While there is now a long-term plan on the table to save the eurozone, one of its central ideas - that of pooling sovereign debt - has been shot down by German Chancellor Angela Merkel, who said there would be no eurobonds in her lifetime. However, more pressing is the need to proffer solutions to the still-raging debt crisis, which prompted Spanish Premier Mariano Rajoy to complain, on 27 June, that his government could no longer afford to finance itself at current market rates.
“The challenge for this European Council is, more than ever before, to signal, in a clear and concrete manner, that we are doing everything required in response to the crisis,” said European Council President Herman Van Rompuy in a letter to the heads of state and government, on 27 June. Euro leaders will meet over lunch, on 29 June, to discuss the latest developments, which saw Cyprus this week become the fifth single currency country to apply for a rescue loan (see separate article).
What officials seem to be pinning their hopes on is getting a broad agreement for Van Rompuy to take work forward on his plan - co-authored by the presidents of the European Commission, European Central Bank and Eurogroup - to create a “genuine economic and monetary union,” including the “phased” introduction of eurobonds. “I would like them to make some serious investigations of some form of short-term common issuance,” says Sharon Bowles (ALDE, UK), the head of the European Parliament’s influential Committee on Economic and Monetary Affairs (ECON). “To say they would come forward with work on that - and if Germany had come that far - that would be a major step.”
However, officials are more downbeat on the possibility of any real progress on solving the current crisis, despite comments from Italian Prime Minister Mario Monti that he was prepared to work all weekend if needed. Italy has also been battered by rising borrowing costs, with Monti pushing strongly for the eurozone’s rescue funds - the EFSF or the ESM - to buy bonds on the open (secondary) markets, a power the funds already have. Germany has already ruled out the option, while Spain’s hopes of tapping EFSF and ESM funding for its banks without the debt going on the sovereign’s books is also out after a Eurogroup decision of 27 June.
The only real decision to be made at the summit is to ink the ‘compact for growth and jobs’, a multi-billion euro growth plan that included a €10 billion boost in capital for the European Investment Bank, the launch of an EU-backed series of bonds to help fund private investments in transport and energy infrastructures, and a better use of EU Structural Funds - including to further guarantee EIB lending.
The summit starts an hour earlier than usual on 28 June - at 15:00 - and begins with talks on the multiannual financial framework. The ‘growth compact’ is to be inked that evening, while talks on eurozone matters are reserved for 29 June.
The draft conclusions are available at
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