Monday

25th Jun 2018

Merkel and Hollande to 'let off steam' at EU summit

EU leaders gathering in Brussels on Wednesday (23 May) evening for an informal summit on how to invigorate the economy are likely to see a sharp exchange of views between France's new President and the German Chancellor on the subject of eurobonds.

France's Francois Hollande in recent days has received broad international support for his ideas on economic stimulus - ranging from US President Barack Obama to the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD), which on Tuesday warned the euro-crisis is the "greatest threat" to the world economy unless leaders get their act together.

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But on the issue of common eurozone guarantees for debt - eurobonds - Germany has dug in its heels, with officials from Angela Merkel's entourage on Tuesday saying this is the "wrong way" to go and that Berlin will not change its mind in the coming month.

"Eurobonds are a controversial subject among several delegations. If it's put on the table, I would expect quite some reactions," one senior EU official told journalists in Brussels on Tuesday.

Another EU diplomat told this website that the summit - an informal dinner with no official decisions planned - will be a "good opportunity" for Merkel and Hollande to "let off steam and see face-to-face where each [of them] stands."

Germany's line is that by mutualising debt, richer and more disciplined countries would have to pay for profligate euro colleagues, leading to a future repetition of the Greek scenario in which a southern country joined the euro and was able to borrow at low interest rates without putting its finances in order.

Austria, Finland and the Netherlands support Germany's thinking.

But the German camp is becoming increasingly isolated, with even former hawkish institutions such as the IMF or the OECD now calling for more lax fiscal policies and growth-stimulating measures to prevent the euro-crisis from damaging the global economy.

Summit organisers expect long discussions over dinner "to take a common approach on what one or another is saying." Talks are likely to drag on, as Greece will be the last topic on the agenda.

The summit is also about "reminding leaders that their ... ministers should implement what is being decided here," the EU official said.

In recent months, national bickering has seen two potential anti-crisis measures - on a common EU patent and on helping catch Swiss-bank-using tax evaders - fall by the wayside.

Meanwhile, leaders are likely to endorse an earlier agreement by their ambassadors and the European Parliament on so-called project bonds - a financing scheme for 2012 and 2013 worth €230 million for various infrastructure projects.

One EU diplomat poured cold water on the scheme, however.

"It is not money we are lacking, it is projects. Greece has all the funding it needs. But there simply are not enough good projects to be financed," the contact said.

Rehn backs 'smart' mutual debt fund

The idea of mutualising eurozone debt remains as controversial as ever but economic affairs commissioner Olli Rehn has spoken out in favour of a halfway house solution.

French president bemused by lengthy EU summit

At his first ever EU summit, French President Hollande scored a victory of sorts by managing to get eurobonds - previously a taboo topic - discussed around the table. Meanwhile, he seemed bemused by the length of the meeting.

Greece and creditors proclaim 'end of crisis'

After late-night talks, the Eurogroup agreed on a €15bn disbursement and debt relief measures for Greece, while setting out a tight monitoring when the bailout ends in August.

Greek bailout exit takes shape

At a meeting next week, eurozone finance ministers and the IMF are expected to agree on new cash, debt relief measures, and a monitoring mechanism to ensure that Greece can live without international aid for the first time since 2010.

Opinion

The risks behind the 'green bond' boom

The EU should not overuse the financial system in order to achieve environmental goals, or it risks the emergence of a green bond bubble which would be detrimental to the financial sector and hinder the achievement of climate targets.

Opinion

Eurozone needs institutional reform

Both the examples of Greece and Italy test the limits of a system with inherent weaknesses that feeds internal gaps, strengthens deficits and debts in the European South, and surpluses in the European North respectively.

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