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| At the E.U. Summit, Cohesion May Be Elusive | |
| (about 2 hours later) | |
| BRUSSELS — With market pressure on their single currency easing for now, will European Union leaders meeting here Thursday and Friday return to a familiar pattern: bickering and delaying promised reforms that could solve the euro crisis? | BRUSSELS — With market pressure on their single currency easing for now, will European Union leaders meeting here Thursday and Friday return to a familiar pattern: bickering and delaying promised reforms that could solve the euro crisis? |
| A pledge in September by the European Central Bank to buy unlimited quantities of bonds has steadied borrowing costs in some of the most vulnerable euro-area countries like Spain. That, in turn, has bought more time for the Spanish prime minister, Mariano Rajoy, to decide whether and when to make a formal request for aid. | A pledge in September by the European Central Bank to buy unlimited quantities of bonds has steadied borrowing costs in some of the most vulnerable euro-area countries like Spain. That, in turn, has bought more time for the Spanish prime minister, Mariano Rajoy, to decide whether and when to make a formal request for aid. |
| And with negotiations still up in the air over providing more assistance to Greece, the focus of the E.U. meeting here is expected to be on making Europe’s economic and monetary union more cohesive. | And with negotiations still up in the air over providing more assistance to Greece, the focus of the E.U. meeting here is expected to be on making Europe’s economic and monetary union more cohesive. |
| But that could prove a combustible topic for France and Germany. Agreement between governments in Paris and Berlin is seen as vital to any steps toward further integration in Europe that could ensure the survival of the common currency for the 17 E.U. countries that now use it. | But that could prove a combustible topic for France and Germany. Agreement between governments in Paris and Berlin is seen as vital to any steps toward further integration in Europe that could ensure the survival of the common currency for the 17 E.U. countries that now use it. |
| An immediate concern at the summit is the conflicting positions of France and Germany. Paris emphasizes speedy adoption of legislation to tighten budget discipline across the euro zone; ideas to put all European banks under a central supervisor, and moves toward pooling at least some of the euro zone countries’ debt. Germany, though, is pressing for even greater powers of intervention by the most solvent countries to enforce budgetary discipline in the euro zone. | An immediate concern at the summit is the conflicting positions of France and Germany. Paris emphasizes speedy adoption of legislation to tighten budget discipline across the euro zone; ideas to put all European banks under a central supervisor, and moves toward pooling at least some of the euro zone countries’ debt. Germany, though, is pressing for even greater powers of intervention by the most solvent countries to enforce budgetary discipline in the euro zone. |
| The summit is “likely to pit Germany and its allies against various coalitions of E.U. countries on a number of issues,” said Christian Schulz, a senior economist at Berenberg Bank. “This should be no surprise: as market pressures recede, the pressure to compromise for Germany is receding, too.” | The summit is “likely to pit Germany and its allies against various coalitions of E.U. countries on a number of issues,” said Christian Schulz, a senior economist at Berenberg Bank. “This should be no surprise: as market pressures recede, the pressure to compromise for Germany is receding, too.” |
| Mr. Schulz also warned that such “disagreements could revive investors’ doubts about Europe’s resolve to overcome the crisis” and “could leave the euro-zone more vulnerable to the next bout of panic which can occur at any time.” | Mr. Schulz also warned that such “disagreements could revive investors’ doubts about Europe’s resolve to overcome the crisis” and “could leave the euro-zone more vulnerable to the next bout of panic which can occur at any time.” |
| The summit could quickly bog down over thorny questions of how far, and how fast, nations sharing the euro should move toward knitting together their banking systems and budgets. | The summit could quickly bog down over thorny questions of how far, and how fast, nations sharing the euro should move toward knitting together their banking systems and budgets. |
| Ahead of the summit, German Chancellor Angela Merkel staked out a maximalist position. | Ahead of the summit, German Chancellor Angela Merkel staked out a maximalist position. |
| "We are of the opinion — and I speak for the whole German government on this — that we could go a step further by giving Europe real rights of intervention in national budgets," Mrs. Merkel told lawmakers in Berlin on Thursday. | "We are of the opinion — and I speak for the whole German government on this — that we could go a step further by giving Europe real rights of intervention in national budgets," Mrs. Merkel told lawmakers in Berlin on Thursday. |
| She also voiced support for the idea proposed by her finance minister, Wolfgang Schäuble, of a European currency czar that would have wide-ranging powers to intervene in national budgets. | She also voiced support for the idea proposed by her finance minister, Wolfgang Schäuble, of a European currency czar that would have wide-ranging powers to intervene in national budgets. |
| Mr. Schäuble has already questioned the effectiveness of proposals by Herman Van Rompuy, the president of the European Council, who has prepared a report on reforming economic and monetary union for the leaders to discuss. In the German finance minister’s view, Mr. Rompuy’s options are still far too weak to ensure the survival of the euro zone. Mr. Schäuble says the E.U. needs to go beyond them by implementing treaty changes. | Mr. Schäuble has already questioned the effectiveness of proposals by Herman Van Rompuy, the president of the European Council, who has prepared a report on reforming economic and monetary union for the leaders to discuss. In the German finance minister’s view, Mr. Rompuy’s options are still far too weak to ensure the survival of the euro zone. Mr. Schäuble says the E.U. needs to go beyond them by implementing treaty changes. |
| By contrast, President Francois Hollande of France has emphasized the need for swift moves to sharing debt as a way of shoring up the stability of the single currency, and he has put a new emphasis on creating so-called Eurobonds. Such bonds would make euro area countries jointly liable for debts run up by individual members of the currency union. It is a move steadfastly opposed by Germany, which says shared debt if it ever is allowed should could come only after greater political integration of the euro zone — to give Berlin, for example, greater say in how other countries are managing their share of the debt. | By contrast, President Francois Hollande of France has emphasized the need for swift moves to sharing debt as a way of shoring up the stability of the single currency, and he has put a new emphasis on creating so-called Eurobonds. Such bonds would make euro area countries jointly liable for debts run up by individual members of the currency union. It is a move steadfastly opposed by Germany, which says shared debt if it ever is allowed should could come only after greater political integration of the euro zone — to give Berlin, for example, greater say in how other countries are managing their share of the debt. |
| “Political union is for later,” Mr. Hollande bluntly told a number of international newspapers on Wednesday that included French daily Le Monde. | “Political union is for later,” Mr. Hollande bluntly told a number of international newspapers on Wednesday that included French daily Le Monde. |
| Mr. Hollande also emphasized that euro zone countries should be given the capacity to stimulate internal demand with salary rises and tax cuts. “If we don't breathe some life into Europe's economy, budget discipline measures won't work,” said Mr. Hollande. | Mr. Hollande also emphasized that euro zone countries should be given the capacity to stimulate internal demand with salary rises and tax cuts. “If we don't breathe some life into Europe's economy, budget discipline measures won't work,” said Mr. Hollande. |
| French officials also have underlined their support for plans to set up a single banking supervisor for euro area banks by the end of the year that would cover all 6,000 lenders in countries that use the single currency. | French officials also have underlined their support for plans to set up a single banking supervisor for euro area banks by the end of the year that would cover all 6,000 lenders in countries that use the single currency. |
| Yet there are problems here, too. | Yet there are problems here, too. |
| Britain, which is an E.U. member but has its own currency, is seeking to secure a voting system that ensures that decisions cannot be imposed on British banks by the euro zone countries working together as a bloc. Eastern and Central European countries have their own concerns about a potential run on banks not regulated by the new single supervisor and backstopped by the European bailout fund. | Britain, which is an E.U. member but has its own currency, is seeking to secure a voting system that ensures that decisions cannot be imposed on British banks by the euro zone countries working together as a bloc. Eastern and Central European countries have their own concerns about a potential run on banks not regulated by the new single supervisor and backstopped by the European bailout fund. |
| The banking union proposals are also a problem for Germany. The government in Berlin wants to ensure that the European Central Bank, which is meant to take over the supervisory role, first has the proper capacity to do that job. Meanwhile, a number German regional leaders are opposed to greater supervision of state and local banks by the E.C.B. | The banking union proposals are also a problem for Germany. The government in Berlin wants to ensure that the European Central Bank, which is meant to take over the supervisory role, first has the proper capacity to do that job. Meanwhile, a number German regional leaders are opposed to greater supervision of state and local banks by the E.C.B. |
| Some analysts characterize some of Germany’s demands, in particular changes to the E.U. treaties, as merely a negotiating position rather than a red line during the upcoming talks in Brussels. | Some analysts characterize some of Germany’s demands, in particular changes to the E.U. treaties, as merely a negotiating position rather than a red line during the upcoming talks in Brussels. |
| “By staking out an extreme position on treaty change which no other countries have appetite for, Germany may actually get what it really wants,” Mujtaba Rahman, an analyst with the Eurasia Group, said Thursday. | “By staking out an extreme position on treaty change which no other countries have appetite for, Germany may actually get what it really wants,” Mujtaba Rahman, an analyst with the Eurasia Group, said Thursday. |
| Those German desires include, above all, another form of fiscal surveillance, which have been dubbed “contracts,” in exchange for agreement on a separate budget for the euro zone that could be backed by a central treasury that would have the ability to borrow money. | Those German desires include, above all, another form of fiscal surveillance, which have been dubbed “contracts,” in exchange for agreement on a separate budget for the euro zone that could be backed by a central treasury that would have the ability to borrow money. |
| Talks to create such a budget still could gain traction at the summit, partly because France has strongly argued in favor of creating a new pool of money available to fight sudden shocks to individual euro area economies. | Talks to create such a budget still could gain traction at the summit, partly because France has strongly argued in favor of creating a new pool of money available to fight sudden shocks to individual euro area economies. |
| That new weapon would differ in important ways from the new European Stability Mechanism, the “bazooka” fund that held its first board meeting during the past week. Instead of loans, which the E.S.M. is set up to provide, the pool that the French are describing would provide direct aid to troubled countries. | That new weapon would differ in important ways from the new European Stability Mechanism, the “bazooka” fund that held its first board meeting during the past week. Instead of loans, which the E.S.M. is set up to provide, the pool that the French are describing would provide direct aid to troubled countries. |
| For all the expected debate, though, some analysts warn of what they see as an absence of urgency to tackle the most pressing problems still overhanging the eurozone. | For all the expected debate, though, some analysts warn of what they see as an absence of urgency to tackle the most pressing problems still overhanging the eurozone. |
| “While political pressure on Spain to request a bond-buying program is mounting, market pressure on Spain is waning,” said Nicholas Spiro of Spiro Sovereign Strategy in a note. The credit agency Moody’s last week down-graded Spain’s debt to just above junk-bond status. But, Mr. Spiro wrote, “the decision by Moody's not to ‘junk’ Spain has, paradoxically, made it even less likely that the Rajoy government will apply for a bond-buying program any time soon.” | “While political pressure on Spain to request a bond-buying program is mounting, market pressure on Spain is waning,” said Nicholas Spiro of Spiro Sovereign Strategy in a note. The credit agency Moody’s last week down-graded Spain’s debt to just above junk-bond status. But, Mr. Spiro wrote, “the decision by Moody's not to ‘junk’ Spain has, paradoxically, made it even less likely that the Rajoy government will apply for a bond-buying program any time soon.” |
| In the case of Greece, little is expected from the summit beyond a statement designed to paper over the slow pace of the negotiations with Athens, and to lend support for Prime Minister Antonis Samaras. | In the case of Greece, little is expected from the summit beyond a statement designed to paper over the slow pace of the negotiations with Athens, and to lend support for Prime Minister Antonis Samaras. |
| “The language will welcome action that Saramas has taken, and it will encourage him, but it won’t put pressure Greece or take the pressure off of Greece,” said one diplomat, who spoke on condition of anonymity ahead of the formal meetings in Brussels. | “The language will welcome action that Saramas has taken, and it will encourage him, but it won’t put pressure Greece or take the pressure off of Greece,” said one diplomat, who spoke on condition of anonymity ahead of the formal meetings in Brussels. |