BRUSSELS, BELGIUM - European leaders concluded the latest round of talks over their prolonged economic crisis early Thursday morning but emerged still divided over how to boost a eurozone that faces a dizzying array of problems.
With banks in Spain, Italy and elsewhere dangerously short of capital, Europe's leaders met for a dinner that lasted six hours and ended well after midnight -- but seemed only to solidify the divisions between a German-led camp that favors following through with austerity measures and a group led by new French President Francois Hollande that favors increased spending to stimulate the economy.
No new measures are likely until after next month's crucial Greek parliamentary elections, in which voters are expected again to reject the tough spending cuts mandated by a European bailout plan, a move that could trigger a Greek default, panic in the financial markets and a potential rupture in Europe's grand experiment in political and fiscal union.
In a statement, the leaders said they wanted Greece to remain in the eurozone but follow through on the commitments to austerity it had made under the bailout plan.
"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," the statement said. "We expect that after the elections, the new Greek government will make that choice."
Hollande said afterward that he had pressed the issue of Europe-wide bonds, backed by the creditworthiness of the entire monetary union, and that while some leaders were supportive, others were "totally hostile" to the idea. He mentioned German Chancellor Angela Merkel by name, saying that she disagreed with his view that the bonds could help inject much-needed cash into sagging economies.
"Mrs. Merkel doesn't consider euro bonds as an element of growth but a long-term tool of [European] integration," Hollande said. "I have a different view."
The debate over the bonds crystallized the philosophical differences that have brought European policy makers to a stalemate: Germany, which as Europe's most successful economy would effectively have to risk its credit rating to underwrite any new spending, is loath to add to the continent's debt without tighter fiscal controls. Over the long term, however, Germany has said it might favor the so-called euro bonds as a step toward closer fiscal integration.
Germany's central bank said in a report issued earlier Wednesday that a default by Greece -- possibly followed by its exit from the common currency, the euro -- was a real possibility. But the Bundesbank's harshly worded report made it clear that Germany won't back any relaxation of the terms of the bailout and suggested that a Greek exit could be "manageable."
"Greece is threatening not to implement the agreed reforms and consolidation measures in return for extensive aid, and this could jeopardize the continuation of the aid -- with Greece having to bear the consequences," it said. "The challenges this would create for the euro area and for Germany would be considerable but manageable given prudent crisis management."
Wednesday's meeting -- billed as an informal dinner among the leaders of the 27 European Union nations, including the 17 that use the euro as their currency -- came a day after the Organization for Economic Cooperation and Development, a Paris-based research center, forecast that the eurozone would finish the year in recession and that it threatens to derail the fragile U.S. recovery. The OECD report gave a boost to the pro-spending camp led by France, saying that all measures available, including Europe-wide bonds, should be tried.
0 comments:
Post a Comment