EU leaders toil over crisis solutions at summit

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Báo Tuổi Trẻ English - 12 month(s) ago 4 readings

EU leaders toil over crisis solutions at summit

Europe's leaders are expected to shift their focus from austerity to growth at a summit Wednesday amid deepening worries over Greece's eurozone future and Spain's troubled banks.

spain Students demonstrate against austerity cuts in Barcelona on May 3. Photo: AFP

Europe's leaders are expected to shift their focus from austerity to growth at a summit Wednesday amid deepening worries over Greece's eurozone future and Spain's troubled banks.

Germany enters the dinner talks under mounting pressure to give more ground on its hardline austerity doctrine as France's new socialist president leads a push to re-balance economic policies so as to kickstart growth.

But non-euro Britain remains a force to be reckoned with, blocking core ideas put forward by European Union officials and backed by Francois Hollande as ways out of the morass -- including a tax on financial transactions.

The risk of knock-on effects from a Greek eurozone exit remains real: in the hours before the meeting, European shares dived and the euro hit a 21-month low, while the Germany's central bank said the picture in Athens awaiting June 17 elections is "highly alarming."

Leaders can be expected to underline a message to Greek voters that Athens must honour a 237-billion-euro ($300 billion) bailout deal agreed in March after a repeat general election in Greece on June 17.

"I don't believe we can afford to allow this issue to be endlessly fudged or put off," said British Prime Minister David Cameron in London.

Urging a "straightforward" in-or-out choice for Greek voters, he said: "Europe as a whole needs to have contingency plans in place for both eventualities," to strengthen banks and prevent contagion.

Recently-departed caretaker Greek premier Lucas Papademos himself said in in interview with Dow Jones on Wednesday that the Europe-wide consequences of an Athens exit would be "profound and long-lasting."

There are arguably even greater worries about Spain and Italy -- a report by Fitch Rating agency released on Wednesday showing that foreign investors fled Spanish and Italian government debt in huge numbers in the first quarter of 2012.

"The time has come to put more emphasis on the measures more directly linked to encouraging growth and jobs," said EU president Herman Van Rompuy, calling for "no taboos."

A no-holds-barred debate then is expected to see Hollande and German Chancellor Angela Merkel tackle everything from eurobonds -- the pooling of mutually guaranteed government borrowings -- to the tax on the finance industry, which Brussels says could raise 50 billion euros a year to invest in growth and jobs.

Berlin fiercely eurobonds, fearing they would only result in German taxpayers permanently underwriting the public finances of weaker eurozone economies also including Italy.

London equally vehemently rejects the financial transaction tax, home as it is to three quarters of Europe's financial services industry.

Wednesday's talks were never intended to deliver concrete decisions, but eurobonds backers saw signs of progress on Hollande's agenda when EU governments agreed on Tuesday to trial "project bonds" in a bid to attract long-term private investment for Europe's incomplete energy, transport and digital networks.

These would not be mutually guaranteed, but use 230 million euros from the EU budget this year and next, and are expected to unlock 4.5 billion euros of total public and private-sector investment.

Former Belgian prime minister and leading centrist MEP Guy Verhofstadt though said the EU would need to unleash "one trillion euros over the next seven years" for this strategy to work.

Other ideas on the table include a 10-billion-euro boost to European Investment Bank (EIB) capital designed to release what the Commission said would be 180 billion of new private investment.

Likewise a call to unlock EU "structural funds" that the Commission says are worth some 82 billion euros, much of which is stuck in national coffers.

In Paris, the EIB plan is seen as "the best instrument at our disposal," but Britain is unconvinced of the validity of either plan, one high-ranking diplomat saying of both schemes: "We have seen nothing to suggest those numbers might be right."

"The hard truth is that there are no magic solutions to solving this crisis," said Dutch Prime Minister Mark Rutte.

"We will all have to keep our spending in check, pay off our debts and swiftly introduce healthy reforms."

Finnish Prime Minister Jyrki Katainen echoed that stance, suggesting much talking remains to be done in the run-up to a decisive June 28-29 EU summit.

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