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EU summit stage set for growth vs austerity war

European leaders will try to breathe life into their stricken economies at a summit late on Wednesday, but disagreement over a plan for mutual bond issuance and other measures to alleviate two years of debt turmoil has already been laid bare.

business Updated: May 23, 2012 23:46 IST

European leaders will try to breathe life into their stricken economies at a summit late on Wednesday, but disagreement over a plan for mutual bond issuance and other measures to alleviate two years of debt turmoil has already been laid bare.

For the first time in more than two years of debt-crisis meetings, the leaders of France and Germany have not huddled beforehand to agree positions. Instead, new French President Francois Hollande will meet Spanish Prime Minister Mariano Rajoy in Paris to discuss policy.

Despite fears Greeks could open the exit door if they vote for anti-bailout parties at a June 17 election, Spain, where the economy is in recession and the banking system is in need of restructuring, is at the frontline of the crisis, with concerns growing that it too could need bailing out.

Hollande’s election victory has changed the terms of the debate in Europe, with his call for greater emphasis on growth rather than debt-cutting.

That has set up a showdown with German Chancellor Angela Merkel, who supports growth but whose primary objective is budget austerity and structural reform.

At his first EU summit, Hollande has chosen to make a stand on euro bonds — the idea of mutualising euro zone debt — despite German opposition.

He will have support from Italian Prime Minister Mario Monti and European Commission President Jose Manuel Barroso, among others.

The Netherlands, Finland and some smaller euro zone member states support Merkel.

No decisions will be made at the summit, which is intended to promote ideas on jobs and growth ahead of another meeting at the end of June.


Hollande vows to avert Greek exit

Hollande SAID he would do everything to keep debt-hit Greece in the eurozone after talks with Mariano Rajoy. “I will do everything I can in my position to convince the Greeks to choose to stay in the zone and everything to convince Europeans who might doubt of the necessity of keeping Greece in the eurozone.” paris/AFP