Sunday

12th Jul 2020

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.

Michel lays out compromise budget plan for summit

Ahead of expected tense discussions next weekend among EU leaders, European Council president Charles Michel tries to find common ground: the recovery package's size, and grants, would stay - but controls would be tougher.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

EU plans tougher checks on foreign takeovers

The EU and its member countries are worried that foreign powers, such as China and its state-owned companies will take advantage of the economic downturn and buy up European firms

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