European leaders gathering Thursday in Brussels are set to sign off on a series of measures to boost economic growth but expectations of a breakthrough on the pooling of debt have fallen by the wayside.
Germany’s Chancellor Angela Merkel, who has resolutely opposed the issuing of mutual debt, is the woman to watch — or fear, or confront — at the two-day summit.
Many leaders have backed the idea of eurobonds as a key way of fixing the eurozone’s problems as they would help lower indebted countries’ borrowing costs. But Merkel has been reluctant to expose her country to new potential costs, and is concerned that eurobonds may minimize the pressure on countries like Greece and Spain to reform their economies.
The plan to stimulate growth, and so increase government tax revenues, is relatively modest. Though worth €130 million ($162 million), it is expected to consist mostly of European funds already earmarked for development.
Far more urgent, in the short term, is finding a way to keep the cost of borrowing money sustainable for weaker EU countries.
The leaders of Italy, France and Spain are pressing Germany to agree to share debts before markets push the eurozone any closer to collapse. The EU’s top officials and the International Monetary Fund have argued the same.
Markets and investors, who felt burned in the past by promises they saw as too weak to solve Europe’s debt crisis, want a breakthrough this week to ensure the region’s debt crisis doesn’t engulf the world economy, but they aren’t expecting one.
Any breakthrough would hinge on Merkel.
Merkel isn’t likely to budge. She has argued repeatedly — as recently as Wednesday — that short-term solutions such as pooled debt or a more active European Central Bank are useless unless governments prove they can manage their budgets. She wants a grand, ambitious political union first.
And she brings the weight of the continent’s biggest, strongest economy with her to the meetings in Brussels.
While they may not be able to change Merkel’s mind, other leaders who avoided confronting her in the past may not hold back this time.
Italy’s Prime Minister Mario Monti, at risk of losing his job because of voter frustration with austerity measures, is increasingly outspoken (Further Reading FoxNews)
Merkel – Hollande (Where is Nicholas?)