Euro's big four agree
growth boost, split on bonds
(Reuters) - German Chancellor Angela Merkel
resisted pressure on Friday for common euro zone bonds or a more flexible use
of Europe's rescue funds but agreed with leaders of France,
Italy and Spain on a 130
billion euros ($156 billion) package to revive growth.
After four-way talks
in Rome's
Renaissance Villa Madama, Italian Prime Minister Mario Monti said the European
Union should adopt pro-growth measures worth about 1 percent of the region's
gross domestic product at a crucial summit next week.
But the three others
made no perceptible progress in pushing Merkel, who leads Europe's most
powerful economy and the main contributor to its rescue funds, towards
mutualising Europe's debts or using existing
bailout resources more flexibly.
"Growth can only
have solid roots if there is fiscal discipline, but fiscal discipline can be
maintained only if there is growth and job creation," Monti told a joint
news conference after talks that lasted just an hour and 40 minutes.
The measures, already
in the works in Brussels,
include increasing the European Investment Bank's capital, redirecting unspent
EU regional aid funds and launching project bonds to co-finance major public
investment programs. No new steps were announced on Friday.
The four leaders did
agree to move ahead on creating a tax on financial transactions even though not
all EU members will be on board. About a dozen EU states support setting up the
so-called "Tobin tax", more than the nine required to go ahead as a
group within the EU, a French presidential source said.
Merkel made no
mention, however, of any move towards mutualising past euro zone debt or new
borrowing.
French President
Francois Hollande voiced impatience with Berlin's reluctance, saying it should
not take 10 years to create jointly underwritten euro bonds.
He said greater
solidarity was needed among member states before they abandon more sovereignty
to EU institutions.
"I consider euro
bonds to be an option ... but not in 10 years," Hollande said in a direct
challenge to Merkel. "There can be no transfer of sovereignty if there is
not an improvement in solidarity."
The German position
essentially amounts to the reverse. Merkel argues that members of the 17-nation
currency union must transfer control over national budget and economic policies
to Brussels before Germany would consider common debt
issuance.
"Liability and
control belong together," she said, citing as an example that EU treaties
ruled out letting euro zone rescue funds lend directly to Spanish banks because
only the Spanish state could enforce conditions on the banks.
The contrasting
comments left much work for diplomats to produce a convincing blueprint for
closer fiscal and banking union at a full EU summit next Thursday and Friday,
which Monti called a defining moment in the crisis.
That plan is expected
to include the first steps towards a banking union, starting by putting the
European Central Bank in charge of supervising large cross-border euro zone
banks.
Without progress on
bank sector integration or other financial stability measures, France is not
ready to commit to ratifying an EU budget discipline pact agreed earlier this
year, French diplomatic sources said.
SPANISH BAILOUT?
Dangerously high
Spanish borrowing costs eased a little on market hopes for policy initiatives
at the Brussels
summit.
The European Central
Bank took a supportive step on Friday, relaxing its collateral rules to let
financial institutions pledge a wider range of assets in exchange for cash. The
move helps counter the impact of credit rating downgrades.
If it falls short, Madrid may be pushed
closer to eventually needing a sovereign bailout.
Without a convincing
result, "there would be progressively greater speculative attacks on
individual countries, with harassment of the weaker countries", Monti said
in an interview with several European newspapers ahead of the mini-summit.
"A large part of
Europe would find itself having to continue to
put up with very high interest rates that would then impact on the states and
also indirectly on firms. This is the direct opposite of what is needed for
economic growth," he said.
The technocratic
Italian premier, who needs a success to shore up his weakening domestic
authority, sounded slightly more optimistic after the talks, saying next week's
summit should "put at ease the financial markets' expectations",
switching to English to add: "The euro is here to stay and we all mean
it."
Spanish Prime
Minister Mariano Rajoy, on the brink of requesting up to 100 billion euros in
euro zone rescue funds to recapitalize struggling banks, said the four had
agreed "to use any necessary mechanism to obtain financial stability in
the euro zone".
An audit released on
Thursday found Spanish banks would need up to 62 billion euros in extra capital
to weather adverse circumstances.
After a meeting of
euro zone finance ministers late on Thursday, IMF chief Christine Lagarde
demanded rapid progress on a number of other fronts, raising the heat on
Merkel.
Lagarde said a
banking union was a top priority, alongside fiscal union and the principle of
mutualising debt. Germany
refuses to countenance common bond issuance and will not soften until economic
union is complete. It is also opposed to the early introduction of a bloc-wide
bank deposit guarantee scheme.
HIGH STAKES FOR MONTI
While Spain's needs are most pressing - its medium
term borrowing costs hit a euro era high at auction on Thursday - the political
stakes may be higher for Italy's
Monti.
With his popularity
sinking, the parties that back Monti in parliament are increasingly reluctant
to support his reform proposals at home, but demand he get results in the
European arena to ease the pressure on Italy's recession-bound economy.
"Monti knows he
has to get his ducks in a row on the European side so he can tell the parties
that he's sorted that part out, and now it's their turn to help sort out
Italy," said James Walston, politics professor at Rome's American
University.
Though hugely popular
when he came to office in November, Monti's approval rating has halved as tax
hikes and pension cuts exacerbated an already severe recession, and his labor
reform estranged both unions and the business establishment.
But for the markets,
Monti remains the man most likely to tackle Italy's debt mountain and
uncompetitiveness. If he comes under serious threat, Italy
could quickly supplant Spain
as the euro zone's main flashpoint.
Monti's hand was
weakened by comments on Wednesday by his predecessor, Silvio Berlusconi, who
said the prospect of Italy
quitting the euro was "not blasphemy" and that he failed to
understand why it would hurt Italy's
economy.
Berlusconi's People
of Freedom party is one of the two main groups that guarantee Monti a majority
in parliament.
Monti proposed on the
sidelines of this week's G20 summit using the euro zone's rescue funds to buy
the bonds of Spain and Italy to bring
down their borrowing costs.
Hollande said after
Friday's talks he supported the Italian idea. But Merkel has played down the
notion, which investors said might be counter-productive by quickly burning
through scarce rescue capital, unless the European Central Bank stepped in
decisively in support.
Other proposals from
Monti, such as stripping some forms of public investment from budget deficit
calculations, or commonly issued euro zone bonds, are also broadly supported by
France and Spain but opposed by Germany, at least for now.
(Additional reporting
by Stephen Mangan in London; Philip Pullella, Emmanuel Jarry, Catherine Bremer
and Andreas Rinke in Rome, Erik Kirschbaum in Berlin; Writing by Paul Taylor;
Editing by Peter Graff)
Angela Merkel
http://en.wikipedia.org/wiki/Angela_Merkel
Mario Monti
http://en.wikipedia.org/wiki/Mario_Monti
François Hollande
http://en.wikipedia.org/wiki/François_Hollande
Mariano Rajoy
http://en.wikipedia.org/wiki/Mariano_Rajoy
Villa Madama
http://en.wikipedia.org/wiki/Villa_Madama
fotosi,štiva
https://www.google.com/search?q=villa+madama&hl=en&client=opera&hs=aXs&rls=en&channel=suggest&prmd=imvnsb&tbm=isch&tbo=u&source=univ&sa=X&ei=eY_oT83WBbGM4gSUidmQAQ&ved=0CHsQsAQ&biw=991&bih=637