The EU's crisis summit dragged on until early Thursday but failed to make significant progress. Franco-German differences over eurobonds remain, as do concerns over Greece's future in the eurozone.
A growth program as the French promote it - or the German path of rigid austerity? Eurobonds - or separate national debt policies? Greece within the eurozone - or outside? The issues on the table at the EU summit were controversial - and a solution to the problems does not seem to be imminent.
New French President Francois Hollande promoted "more growth" at the Wednesday summit - Germany's Angela Merkel insisted on structural reforms and the need to strengthen the domestic market.
"The central difference is in how far you can strike a new balance between cuts and reforms on the one hand and stimulating growth on the other," says Janis Emmanouilidis of the Brussels think-tank, the European Policy Centre.
Role of the ECB
Germany for instance still rejects Hollande's calls for the European Central Bank (ECB) to issue direct loans to eurozone members. And Berlin's stance on that is unlikely to change, thinks Stefan Seidendorf of the Franco-German Institute in Ludwigsburg.
"From a German perspective, it is clear that the role of the ECB is not up for discussion," he says. "There will be no movement on that. And while Francois Holland wants to widen the possibilities for the ECB, he has never said that the Lisbon Treaty was to be renegotiated. Little will change here."
Angela Merkel also refuses to rewrite the fiscal pact - yet with France going into parliamentary elections in June, Hollande is forced to deliver on some of his election promises. It therefore seems like a done deal that the fiscal pact will be amended with a growth pact to satisfy France's demands.
No consensus over eurobonds
Paris also calls for eurobonds and has the support of eurogroup chief Jean-Claude Juncker and Italian Prime Minister Mario Monti. At the Brussels summit, Hollande said eurobonds were "not the end point of an integration process" but a logical next step in European integration. Merkel once more strongly rejected eurobonds - pointing out they would in fact be in violation of EU regulations. Yet she is increasingly isolated on the issue, says Emmanouilidis.
"There are more and more countries that are trying to push Berlin in that direction. But also domestically, in Germany there are a growing number of pundits who believe that some form of common bonds on a European level will be necessary. So the pressure is mounting."
Adding to that pressure is also the German president of the European Parliament, Martin Schulz. At the opening of the summit he criticized the fact that Germany had been successfully issuing government bonds with zero interest while "other countries in Europe have to pay six percent. This imbalance is destroying the European Union. And that's why the debate on the eurobonds is also a debate on how we want this union to survive. It can not be that Germany can issue bonds like that while other countries are crumbling under the pressure of financial speculation."
Quo vadis Greece
Also on the table was whether Greece would be able to remain in the single currency eurozone. There are more and more voices calling for the country's departure, especially in the wake of the country's recent parliamentary elections. The poll saw huge wins by parties which firmly reject the EU's demands for austerity. The radical left alliance Syriza has refused to form a coalition with any of the traditional mainstream parties and Greece therefore will go to the polls once more, on June 17.
Many observers believe that Syriza might do even better then, making it even more difficult for the EU and Greece to agree on how to proceed. EU leaders in Brussels insisted they want Greece to remain in the fold, but at the same time warned that Athens will have to stick to its austerity obligations if it wants to continue receiving aid from Brussels.
"We want Greece to remain in the euro area while respecting its commitments," EU President Herman Van Rompuy said after the talks.
Emmanouilidis, however, does not believe that radical parties from the left or right will prevail in the end. "There will be a coalition that will bundle different political strains. Should Syriza be part of that coalition, it remains to be seen whether the party will be able to follow up on their campaign promises to ditch past commitments to the European partners and the International Monetary Fund."
After all, he adds, leaving the eurozone would not only pose a legal problem, but the political and economic consequences would be catastrophic for Greece and unpredictable for the EU.
Author: Daphne Grathwohl / ai
Editor: Michael Lawton