Financial News

  • 24 May 2012, 21:26

PM Angry At Euro Summit's Failure To Agree

A summit of European leaders has ended without clear agreement on how best to restore confidence in the euro, despite pleas from the British PM to get a grip on the crisis.

The informal dinner stretched into the night as the 27 leaders chewed on ways to boost growth.

These ranged from lending more money to small and medium businesses and redeploying structural funds to help generate youth employment.

The President of the European Council, Herman Van Rompuy, said the discussions were "focused and frank" and ended with broad agreement that in order for the single currency to survive, economic and monetary union needs to be taken to "a new stage".

Jose Manuel Barroso, the head of the European Commission stressed that everyone wanted Greece to remain in the euro but warned: "We will stand by Greece while Greece stands by its commitments" to international lenders.

That was echoed by the German Chancellor Angela Merkel, who said after the summit: "We want Greece to stay in the euro but we insist that Greece sticks to commitments that it has agreed to."

Greek voters go back to the polls on June 17 after an election failed to produce a viable coalition.

But sources say the dinner exposed deep divisions between Germany and France over how to tackle the crisis.

The new French President Francois Hollande suggested so-called eurobonds, backed jointly by all 17 euro countries, would help bring down borrowing costs in troubled nations.

Ms Merkel remains implacably opposed to the idea, which she believes runs contrary to EU laws and would let governments off the hook in countries like Greece.

Mr Hollande also suggested that Europe's new permanent bailout fund should be allowed to dip into the European Central Bank's reserves and pump cash directly into the troubled banking sector.

He thinks that would help avoid another credit crunch, but Germany believes it would set a dangerous precedent.

Also at the meeting, David Cameron delivered an uncompromising message to eurozone leaders: you must get a grip on the issues undermining confidence in the currency.

He told the 26 other leaders that no new money should be thrown at the crisis, but existing funds could be re-prioritised to kick-start growth and encourage youth employment.

Leaving the summit in the early hours, Mr Cameron said: "There were good innovative ideas that can help growth in Europe, but frankly there were some bad ideas too.

"A financial transactions tax is a bad idea, it will put up the cost of people's insurance, put up the cost of people's pensions, it would cost many many jobs, and it would make Europe less competitive and I'll fight it all the way."

Mr Cameron also said the European Central Bank should be "used" more effectively to deal with the crisis.

The Prime Minister is understood to have supported continued belt-tightening in countries such as Greece and Spain, but he has moved further away from the German stance that austerity measures should be the main response to the crisis.

Earlier in the Commons, the Labour leader Ed Miliband derided Mr Cameron as the "high priest" of austerity, who was losing the economic argument.

The Brussels summit was never designed to produce concrete proposals, but feed ideas on how to stimulate growth into a formal European Council summit on June 28.

However, the market reaction to continued stalemate in Greece, as well as problems with the banking system in Spain had put greater expectations on this gathering to produce a roadmap for growth.

Expectations which, once again, have been dashed.

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