Tuesday

26th Jul 2016

Divided EU leaders meeting for 'big leap' summit

A stormy two-day summit kicks off on Thursday (28 June), with EU leaders still at odds over ceding core national powers to Brussels in return for debt-pooling, as well as creating a "banking union" with central supervision and deposit guarantees.

The weather in Brussels is forecast to match the mood of the EU event, which starts at 3pm local time: a stuffy summer's day ending with "violent" thunderstorms.

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The less contentious items are piled up in the afternoon: a "growth and jobs" plan of €130 billion, mostly consisting of unused EU money, and a discussion with the head of the European Parliament on the bloc's next budget for 2014-2020.

Since no decision is expected on the matter until the end of the year, the talks are not make-or-break.

A press conference tactically placed after this first session is set to deflect any questions on the controversial plan for the future of the EU to be debated later that evening during dinner.

European Council chief Herman Van Rompuy, who drafted the plan together with the heads of the EU commission, European Central Bank and the Eurogroup of finance ministers, will present it, with markets expecting some sort of deal on further integration, especially in the eurozone.

German Chancellor Angela Merkel in recent days has made it clear that she thinks the focus is wrong - too much talk about shared debt in the eurozone and too little on giving national budgetary powers to Brussels.

"Accountability and control clearly stand in disproportion in this report," she told her parliament on Wednesday.

At the other end are France and Italy, who insist that more "solidarity" and short-term actions are needed first.

A football match between Germany and Italy on Thursday evening - Merkel is a keen supporter of her team - is set to provide an interesting sporting backdrop to the political discussions.

Italian Prime Minister Mario Monti in recent days has issued stark warnings to his fellow leaders on what would happen if the summit does not come up with credible answers.

Rome is under market pressure due to its high debt and contagion from the rest of the bailed-out southern countries - Greece, Portugal, but especially heavyweight Spain.

Meanwhile, Italy's former Prime Minister Silvio Berlusconi is adding to Monti's woes by stirring up anti eurozone sentiment. The Citi banking group warned in a note to investors on Wednesday that the technocrat premier may face a political crisis at home if the summit is inconclusive.

Monti last weekend invited Merkel along with France's Francois Hollande and Spain's Mariano Rajoy in order to form a compromise ahead of the summit. He failed.

So did Hollande, who on Wednesday night received Merkel in Paris.

Apart from "polite" statements, Der Spiegel noted, the two leaders did not achieve a consensus on the Van Rompuy plan. A fudge tasking Van Rompuy to further explore the options and report back at a summit later this year is the most likely outcome.

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