ANGELA MERKEL has attacked “fake solutions” for the Eurozone’s debt crisis, demanding long-term structural reforms from struggling countries like Spain and Italy ahead of two days of talks between EU leaders in Brussels.
As the European Council – the body of all 27 European heads of state or government – meets today and tomorrow, officials are reportedly working on a plan which would ultimately allow the Eurozone’s bailout funds to buy the bonds of struggling countries.
The firepower of these funds would, ideally, trigger enough demand in those bonds to keep the prices low – thereby stopping Spain and Italy from being charged unaffordably high prices, as Greece, Italy and Portugal were before they were forced into needing a bailout.
The Financial Times reports, however, that Merkel has dismissed the plans as “eyewash and fake solutions” – instead demanding a more long-term programme of reforms to permanently avoid the risk of those countries needing bailouts.
Speaking in the Bundestag yesterday during a debate on this week’s summit, Merkel admitted she was beginning to cut an isolated figure – commenting that “many eye will be focussed on Germany” – but affirmed her demands that struggling countries take action to get their own houses in order.
The Chancellor said the possibility of joint liability for debts – in either the banking sector, through the creation of a European banking union, or in national terms through the introduction of Eurobonds – should only come after individual states pay the price for earlier errors.
Spain’s cry for help
By comparison, the FT adds, Spanish premier Mariano Rajoy had urged the ECB to resume its programme of bond-buying – which has been inactive for about two months – to keep his government’s cost of borrowing down.
“The most important thing today is being able to finance ourselves in the markets,” Rajoy warned, adding: “We can’t finance ourselves at the prices we are paying for very long.”
This morning the cost of borrowing for Spain rose back above the crucial 7 per cent mark for a 10-year loan – a mark most analysts see as a key watermark for whether the country can afford to continue borrowing at the rate it currently does.
This evening’s agenda at the summit will include the presentation of a joint paper from Europe’s ‘four wise men’ – Council president Herman van Rompuy, Commission chief Jose Manuel Barroso, Eurogroup president Jean-Claude Juncker, and ECB president Mario Draghi – on the future of the economic and monetary union.
Their paper – which is now available online – includes proposals for more integration between national budgets, but does not feature much discussion on Eurobonds, as had been reported earlier this week.
Greece’s new prime minister Antonis Samaras – who would be attending his first Council meeting since taking power earlier this month – is unable to attend, as he recuperates from surgery on a detached retina.
His absence will mean that Karolos Papoulias – the country’s president, whose role is similar in neutrality and ceremony to that of Ireland’s president Michael D Higgins – will step in, presenting other leaders with a pre-prepared communique from Samaras.
The Greek Reporter said that letter would outline the current state of affairs in the country, underscoring both the public desire for Greece to remain in the eurozone, as well as the need for Europe to respond to the needs of Greece and its people.
Before the summit gets underway this afternoon, the European People’s Party – the centre-right European political grouping of which both Fine Gael and Merkel’s Christian Democrats are members – will hold its own meeting in Brussels to discuss the ongoing problems.
It is likely that this meeting – at which van Rompuy and Barroso, being EPP members, will also attend alongside Kenny, Merkel, Rajoy and others – will see a significant amount of preliminary horse-trading as leaders seek to agree common platforms before heading into the European Council summit itself.