x Abu Dhabi, UAEFriday 28 July 2017

Greek debt casts shadow on EU summit

Europeam leaders talk of fiscal pact and bid to focus on growth and jobs for young but struggle to stay upbeat amid doubts over stability of the euro.

France's President Nicolas Sarkozy, Germany's Chancellor Angela Merkel and Italy's Prime Minister Mario Monti relax together prior to a meeting at the European Council in Brussels ahead of the European Union leaders summit yesterday, but there was little cheer at the meeting proper.
France's President Nicolas Sarkozy, Germany's Chancellor Angela Merkel and Italy's Prime Minister Mario Monti relax together prior to a meeting at the European Council in Brussels ahead of the European Union leaders summit yesterday, but there was little cheer at the meeting proper.

AMSTERDAM // European leaders meeting in Brussels yesterday for their first summit of 2012 struggled to shake off the atmosphere of crisis that dogged the continent last year.

But efforts to focus on growth and job creation were frustrated by continuing concerns over Greece's debt and doubts over the European Union's ability to stabilise the euro single currency.

A transport strike yesterday in Belgium, affecting trains and airports, made it harder for some of the 27 leaders to reach the summit venue in Brussels. It underlined the social tensions generated by the on-going financial and economic crisis.

The summit discussed a collection of financial measures that had been addressed at earlier meetings, reinforcing the impression of only limited progress. A draft final declaration put a special emphasis on jobs, especially for young people, amid concerns that a focus on austerity and budget cutting measures was blocking growth in the 27-nation bloc.

The EU is expecting a modest recession early in 2012 and the draft statement noted that growth is slowing and unemployment is rising. In some member states, youth unemployment stands at about 50 per cent. "A particular effort needs to be made immediately to improve labour supply and reduce youth unemployment," the statement read.

EU officials in talks with youth movements have brought up the possibility that €30 billion (Dh144bn) that is still available in the European Social Fund can be all or partly spent on tackling youth unemployment, Peter Matjaši, president of the European Youth Forum, told The National.

"What we want from the member states is that they commit to solving the problem, not only talking about it, which is what they have done until now," said Mr Matjaši. The problem was especially dire, he said, in the countries that have been hard hit by the debt crisis: Greece, Portugal, Italy and Spain.

Several of the leaders said they were confident that austerity measures could be combined with strategies to boost growth. But the difficulties of agreeing on a common policy among the diverse members were also on show.

Much attention was focused on a leaked German proposal to put a European commissioner in charge of the Greek economy in exchange for that country receiving future bailout money. Athens has rejected the plan.

At the summit Angela Merkel, the German chancellor, played down the row, saying: "We are having a debate that we shouldn't be having. This is about how Europe can be supportive so Greece can comply, so there are targets." Many other leaders, possibly worried about the precedent it would set, expressed reservations about the German idea. But the pressure on Greece to implement promised structural reforms also increased.

Talks between Greece and private debtors, including banks and hedge funds, on reducing the country's debt by some €100bn are said to have made some progress but have not concluded yet. The summit was not expected to draw conclusions on Greece while these and other bailout discussions are in progress.

The leaders were set to approve a set of mandatory rules for limiting national deficits - a so-called fiscal pact insisted on mainly by Germany. The pact had been announced at the last EU summit in December and was touted as a way of reassuring the financial markets.

But Janis Emmanouilidis of the European Policy Centre in Brussels emphasised the political importance of the pact for getting Germany to fund more of the EU's growth measures. "The real importance of this treaty cannot show itself today, or when it will be signed, but it is the political importance of the treaty that matters," he said.

The rules on tighter fiscal discipline could help Mrs Merkel persuade the German parliament to release more money to Europe, he said.

Such an extra injection of cash may be needed as the summit also discussed boosting the new European bailout facility, the European Stability Mechanism (ESM), before it was even born. The launch of the permanent, €500bn ESM was brought a year forward from what was originally planned and it will become operational in July. But many governments now worry that it will need more money.

The ESM is set to replace the temporary emergency fund that the EU put in place in 2010 to address debt crises in several EU countries. It was boosted to €300bn last year and there is speculation that it may continue to operate alongside the new fund while the crisis lasts.

Lingering divisions among the 17 members of the euro zone and the 10 EU countries outside it, were also on display. Non-Euro Poland threatened to torpedo the fiscal pact if it did not get more of a say over its implementation.

fbeidermann@thenational.ae


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