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3rd Jul 2022

Germany prompts cancellation of euro summit

  • Van Rompuy (c) is to remain head of EU summits and to chair top-level eurozone events (Photo: consilium.europa.eu)

A meeting of eurozone leaders planned for Friday (2 March) after a two-day EU summit in Brussels has been cancelled because Germany is still saying No to increasing the firepower of eurozone bail-out funds.

Originally scheduled to take place as a lunch on Friday, the eurozone meeting has now been pulled from the official agenda.

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"The only real point on the agenda of the euro-summit was the firewall, but for Germany it is politically not feasible to decide on it now," one EU source told this website on Wednesday, downplaying the cancellation as a "minor" issue.

German Chancellor Angela Merkel earlier this week told parliament her government "does not see the need at this time for a debate over increasing the capacity" of the funds and instead noted that Berlin will pay in its share of capital earlier than planned.

EU leaders in December pledged to come back to the issue of the firewall, currently capped at €500 billion.

But ratings agencies and analysts say it has to go up to prevent market speculation from driving skyward borrowing costs for Italy and Spain.

The International Monetary Fund has also said it wants to see the funds increased before it can commit money to the second Greek bail-out. The US and emerging countries like Brazil and Mexico have pressed for the move as well.

A meeting of eurozone finance ministers on 12 March on approving the €130 billion bail-out for Greece might tackle the firewall question. But if Germany continues to play hardball, eurozone heads of state will have to hold a meeting on the subject later next month.

Friday's eurozone lunch was also to confirm that Herman Van Rompuy will be EU Council chairman for another two and a half years and that he will preside over future eurozone summits. But this topic will now be handled on Thursday evening at the beginning of the EU summit, which is to start at 6.45pm local time.

Meanwhile, eurozone finance ministers are to meet at 3pm on Thursday under the chairmanship of Luxembourg premier and finance minister Jean-Claude Juncker. Later on, Juncker will brief EU leaders on the state of play on further Greek reforms needed for the second bail-out.

On Friday morning, 25 EU leaders are to sign a new intergovernmental treaty on fiscal discipline - the bloc's top-line response to the crisis.

Ireland's surprise decision to hold a referendum before ratifying the pact has reignited political debate. Just 12 out of the 17 euro-using countries need to sign and ratify in order for the pact to become legally valid, but any country which stays out will not be eligible for future bail-outs.

An Irish No would be badly received in Germany, which wants a rigorous new set-up to make sure its bail-out money does not go down the toilet. But if France were to say No as well - the lead candidate for April presidential elections in France is against the treaty - Merkel's whole project would unravel.

Taxes and growth

Meanwhile, draft summit conclusions seen by EUobserver try again to put a positive spin on budget cutting measures despite the advent of recession in most EU countries.

"Fiscal consolidation is an essential condition to return to higher growth and employment. It must be differentiated according to member states' conditions," they say.

When pursuing budget cuts, member states should give "particular care" to investments in education, research and innovation, the leaders are to add.

On taxation, member states should review their systems so as to make them more efficient, "removing unjustified exemptions, broadening the tax base, shifting taxes away from labour, improving the efficiency of tax collection and tackling tax evasion."

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Germany has indicated it remains against boosting the eurozone's bail-out funds, despite it being the expected quid pro quo for the Berlin-pushed 'fiscal compact' - but its position may change after a key vote in the Bundestag end of February.

EU leaders meet on economy, Schengen and Serbia

EU leaders at a two-day EU summit on Thursday will look where each country stands in terms of public deficit, taxes and retirement ages. Schengen enlargement and Serbia are also on the agenda.

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Opinion

The euro — who's next?

Bulgaria's target date for joining the eurozone, 1 January 2024, seems elusive. The collapse of Kiril Petkov's government, likely fresh elections, with populists trying to score cheap points against the 'diktat of the eurocrats', might well delay accession.

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