€130bn growth deal agreed but division on credit crisis
Leaders of the eurozone's four largest economies -- Germany, France, Italy and Spain -- pledged yesterday to back a €130bn growth package and defend the euro, but remained divided over the credit crisis.
After a four-way summit in Rome's Renaissance Villa Madama, Italian Prime Minister Mario Monti said the European Union should adopt a series of growth measures worth about 1pc of the region's gross domestic product at a summit next week.
But Germany continued to resist proposals to issue common debt and use bailout funds to stabilise financial markets.
The growth measures, already in the works in Brussels, include increasing the European Investment Bank's capital, redirecting unspent EU regional funds and launching project bonds to co-finance major public investment programmes. No new measures were announced yesterday.
"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," Mr Monti told a joint news conference after talks that lasted just an hour and 40 minutes.
French President Francois Hollande appeared to voice impatience with Berlin's reluctance to back common bonds, 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. The German position essentially amounts to the reverse.
"I consider euro bonds to be an option . . . but not in 10 years," Mr Hollande said in a direct challenge to the German Chancellor. "There can be no transfer of sovereignty if there is not an improvement in solidarity."
However, Angela Merkel said Europe needed to respect existing rules and had to work towards common structures to regulate the euro rather than have policies emanating from "17 parliaments each with national sovereignty".
"If I am giving money to Spanish banks . . . I am the German chancellor, but I cannot say what these banks can do," she said.
Their 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 Mr 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 eurozone banks.
After a meeting of eurozone finance ministers late on Thursday, IMF chief Christine Lagarde demanded rapid progress on a number of other fronts, raising the heat on Ms Merkel.
Olli Rehn, the EU's senior economic official, and Ms Lagarde have both said direct injections into teetering banks should be adopted.
Dangerously high Spanish borrowing costs have eased a little on market hopes for policy initiatives at the Brussels summit. 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".
He added: "The euro is here to stay and we all mean it." (additional reporting Reuters)