Wednesday

21st Feb 2024

EU to hold second summit next week

European leaders are to have a second summit on the eurozone crisis, most likely on Wednesday (26 October), amid Franco-German discord on a series of key issues to do with solving the single currency's problems.

A joint statement by Paris and Berlin, released late Thursday evening, said that all the elements of the planned "global and ambitious response" to the eurozone crisis would be examined in a "profound manner" on Sunday.

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Decisions, however, will only be taken "during the second meeting at the latest on Wednesday."

The two-step approach - which runs the risk of turning the Sunday meeting into a damp squib gathering - comes after deep disagreement between Paris and Berlin on several fronts, including on how to provide sufficient additional resources to the eurozone bailout fund to stop contagion spreading to Italy; how to recapitalise European lenders and the extent to which private investors should be forced to write down Greek debt.

In their statement, President Nicolas Sarkozy and Chancellor Angela Merkel said that the "response" to the crisis would include the "operational implementation" of the recently-boosted bailout fund, the European Financial Stability Facility (now able to inject capital into banks and purchase bonds); a plan to increase the capital of European banks and strengthening economic governance in the eurozone.

However, there is no mention of increasing the firepower of the bailout fund nor of how to deal with Greek debt.

Recent days have exposed profound differences between the two sides on how to deal with the two issues. France, whose banks are greatly exposed in Greece, has been reluctant to accept a push by Germany that private investors take a 50-60% haircut on Greek debt.

Meanwhile Germany has been opposed to France's idea to link the EFSF to the European Central Bank, which would theoretically give it an unlimited supply of money.

In addition, disagreements have stretched the self-imposed timetable of finding a solution to all of these problems during Sunday's summit to breaking point.

It meant that Chancellor Merkel was unable to present plans to the parliament before heading to Brussels, a requirement recently laid down by the country's highest court.

The extra days give the chancellor time to talk to German MPs, many of whom are strongly sceptical about recent moves to help troubled eurozone countries.

"EU summit to be held in two stages. Sunday deliberations. Decisions next week. Sufficient parliamentary participation possible in this way," German government spokersperson Steffen Seibert tweeted Thursday.

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