EU leaders gather for informal summit in Brussels

Wednesday 23 May 2012 18.34
Informal EU summit to focus on Greece and euro zone pressures
Informal EU summit to focus on Greece and euro zone pressures

EU leaders are meeting for an informal summit in Brussels amid continuing worries about economic and political problems putting pressure on the euro.

Taoiseach Enda Kenny has joined other leaders in looking at ways to boost growth and employment.

The meeting is to also address the implications of the continuing political uncertainty in Greece.

EU officials are insisting that this meeting is a stepping stone to the next formal summit of leaders at the end of June.

The president of the European Council, Herman van Rompuy, has insisted controversial ideas should be on the table, and there should be no taboos.

He wants leaders to reveal just how radical they are prepared to be in order to solve the euro zone crisis, with unemployment rising and deepening concerns over a weakening banking sector.

All eyes will be on the new French president Francois Hollande to see if he spells out his plans for growth.

Ideas such as jointly issued project bonds for infrastructure spending, and more cash for the European Investment Bank are likely to be all but signed off on.

But there are more controversial proposals. Leaders are set to discuss whether the ECB should be allowed to buy government bonds directly. They may also look at the possibility of jointly issued eurobonds, or whether the new bail-out fund - the ESM - be allowed to directly capitalise vulnerable banks in a way that does not load up the debt of the sovereign.

Meanwhile, an external consulting firm charged with evaluating the structure of Europe's new permanent rescue facility has raised questions about whether it will have enough staff to function effectively, according to documents seen by Reuters.

In a May 12 letter addressed to Klaus Regling, the head of the bloc's temporary rescue fund, partners at A.T. Kearney warn that the approved staff of 75 for the European Stability Mechanism (ESM) may prove "too small" if the debt crisis rumbles on for several years.

The opinion comes less than six weeks before the ESM is due to come into force.

Don't rule out euro bond idea: German EU commissioner

The idea of euro bonds should not be ruled out per se, German EU Commissioner Guenther Oettinger said today as Germany faces growing pressure to drop its opposition to such financial instruments.

"My advice to everyone involved would be not to rule out eurobonds fundamentally," Oettinger told the business daily Handelsblatt in remarks published on the day of an EU summit where France and other countries are likely to pressure Berlin to change its stance.

New French President Francois Hollande is pushing eurobonds - the pooling of the debt of euro zone countries - as a solution to the long-running debt crisis. It was "a matter of timing," Oettinger argued.

Eurobonds could be the "keystone" to a new financial architecture, but only once all euro zone countries had ratified a fiscal accord and were firmly on the path to consolidation, the commissioner said.

In the run-up to today's summit in Brussels, Germany hardened its opposition to eurobonds. "This is not a new discussion, we think it is the wrong way," a government source said yesterday.

"This is a fundamental position and it also won't change by June," when EU leaders are set to hold their next summit on the euro zone crisis, the source said.

The European Commission is also strongly in favour and has put forward proposals for stability bonds they believe would drive down borrowing costs for debt-stricken countries such as Italy and Spain.

But Chancellor Angela Merkel fears that this would both push up Germany's ultra-low borrowing costs and reduce the incentive for countries to balance their books.