Debt Crisis: Pressure mounts on eurozone leaders to find solutions for area’s problems
THE 17 finance ministers of the eurozone hve converged on EU headquarters in a desperate bid to save the currency - and to protect the global economy from a debt-induced financial tsunami.
They discussed ideas that would have been taboo only recently, before things got so bad: countries ceding fiscal sovereignty to a central authority; some kind of elite group of euro nations that would guarantee one another's loans - but require strong fiscal discipline from anyone wanting membership.
The fear is that the crisis - which has already forced bailouts of Greece, Ireland and Portugal - could engulf bigger economies such as Italy, the eurozone's third-largest. If Italy were to default on its debt the fallout could spell ruin for the euro project itself and send shockwaves throughout the global economy.
In a reminder of the urgency, Italy's borrowing rates shot up to rates above 7%, an unsustainable level on a par with rates that forced the others to seek bailouts.
At the top of the agenda is finding a means to more fully integrate the eurozone's disparate nations - ranging from powerful Germany to tiny Malta - both politically and financially. And the ministers must do it fast, without the delays caused by democratic niceties like referendums that have led many EU reforms to take years to implement.
France's finance minister, Francois Baroin, said that countries should integrate their budgets more closely and monitor one another's spending.
He said France and Germany - which have largely been calling the shots on efforts to overcome the crisis - will make proposals on how eurozone countries can monitor one another under such a new system.
The 17 ministers are expected to discuss jointly issuing so-called eurobonds - an all-for-one, one-for-all way of having the different countries guarantee one another's debts. Right now each nation issues its own bonds, meaning that while Italy pays above 7pc, Germany pays about 2pc.
Having stronger countries like Germany stand behind the general European debt would lower Italy's borrowing rates - and perhaps avoid a debt spiral that leads to a national bankruptcy. At the same time, it would raise Germany's cost of borrowing, and that is why Germany has been fiercely opposed to the eurobond proposal.
Proponents of elite bonds say the proceeds could be used to help the eurozone's weaker countries deal with their debts, in return for strict conditions being imposed on their budgets. Critics argue that further fragmenting the eurozone into strong countries and weak countries would benefit no one.
Arriving in Brussels for the meeting today, Finance Minister Michael Noonan said it would be another 10 days - when EU leaders hold their summit - before what he called "the serious issues" on solutions would be discussed.
He said at this stage it is hard to separate fact from rumour, but tonight's meeting was focused on a report on Greece and expanding the EU bail-out fund.