Eurozone-four promise 1% of GDP to stimulate growth
By Honor Mahony
A high-profile meeting of the eurozone's biggest economies on Friday (22 June) saw commitment to boost growth by adopting measures worth €130 billion, but disagreement on eurobonds and how to fund ailing banks.
"The first objective we agree on is to relaunch growth, investments and to create jobs," said Italian leader Mario Monti after meeting his counterparts from France, Germany and Spain.
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"We want there to be a significant European growth package, that is worth about 1 percent of Gross Domestic Product (GDP), or €130 billion," he added.
It was unclear how much of the pledged money will come from new sources, with the eurozone already poised to boost the capital of the European Investment Bank and redirect unspent EU aid money.
Monti said the meeting was primarily about boosting confidence. He said the euro is "irreversible."
The four also declared themselves in favour of a financial transactions tax.
French President Francois Hollande pledged to get such a levy off the ground as soon as possible. But there are multiple technical and legal questions. Only a few member states want to go ahead with the tax, and even these differ on the details.
Meanwhile, there was no breakthrough on two increasingly noisy issues - eurobonds (the mutualising of eurozone debt) and whether eurozone bail-out funds should directly fund banks.
German Chancellor Angela Merkel stuck to her line that the Spanish government should take on the €100 billion loan that has been offered to plug the credit hole in Spain's banks.
Madrid had been pressing for the money to go directly to its financial institutions so that the debt is kept off its own books.
The Chancellor took refuge in the rules.
"It's not that I don't want to, but the treaties are made that way," she said, referring to the rulebooks behind the current temporary and upcoming permanent bail-out funds. She said it is up to the Spanish government - in the interest of German taxpayers - to oversee that the banks tidy themselves up.
Eurobonds also continue to remain a contentious issue. Germany remains opposed unless budget discipline rules are made stronger. But France in particular continues to push the idea.
"I consider euro bonds to be an option ... but not in 10 years. As long as there is a Union, an integration, euro bonds will be a useful instrument in Europe and I will continue to work in this direction," said Hollande.
The press conference, while cordial in tone, only served to highlight the elements where there was no agreement. Hollande pointed out that he was "against austerity" while Merkel repeatedly stressed the need for sound rules and budget discipline.
The meeting comes ahead of a gathering of all 27 EU leaders next week.
The summit is expected to agree steps to a banking union and how to proceed towards further economic and political integration of the eurozone - considered by most analysts as the only way it will emerge from the crisis.
An exchange between Hollande and Merkel highlighted the Franco-German misstep at the heart of the crisis.
While Merkel said the need to move toward political union to ensure that budget rules are adhered to, Hollande said there would be no "transfer of sovereignty" without an "improvement in solidarity."