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EU summit

Christoph Hasselbach / cbJune 28, 2013

Differing views on coping with youth unemployment are set to divide EU leaders at a two-day summit in Brussels. Finance ministers, however, agreed on who will have to pay first when it comes to future bank bailouts.

People wait in a queue to enter a government-run employment office in Madrid April 25, 2013. Spain's unemployment rate rose to a new record of 27.2 percent in the first quarter of this year, with 6.2 million people out of work, data from the National Statistics Institute showed on Thursday. REUTERS/Sergio Perez (SPAIN - Tags: POLITICS BUSINESS EMPLOYMENT)
Spanien Arbeitslosigkeit Junge MenschenImage: REUTERS

The financial crisis in the EU has subsided and talks about a country leaving the eurozone have stopped. But the recession still has a hold on the union and influences the employment numbers: 26 million Europeans are unemployed and a record 6 million of them are young people.

That's led EU member states' heads of state and government will convene in Brussels on Thursday (27.06.2013). Before the summit, the President of the EU Commission José Manuel Barroso called on the national leaders to address the social crisis created by struggling economies.

"We need to deliver effective measures against this social crisis, here and now," he said, adding that the EU needs a "European consensus" about ways of growth, employment and competitiveness. "If we can't get together, we will be torn apart."

A drop in the ocean?

One goal is a youth employment project. Starting in 2014, 6 billion euros ($7.8 billion) would be available to the hardest hit regions. Compared to the hundreds of billions spent to save banks, though, this amount is minuscule, said Martin Schulz, president of the European Parliament. Another problem: the money is part of the upcoming seven-year EU budget for 2014 to 2020. And the most recent attempt by the Irish council presidency to achieve an agreement between European Council and EU Parliament about the budget has just failed.

Hannes Swoboda, head of the Socialist parliamentary group in the European Parliament called for "a reasonable budget, otherwise the fight against youth unemployment will merely remain an announcement."

A man in Spain walks down stairs away from camera with a plastic bag in his hand Photo: Julian Stratenschulte/dpa / Eingestellt von wa
In Spain and Greece, roughly every second youth is unemployedImage: picture-alliance/dpa

Others see even small sums that European nations want to shore up together to tackle youth unemployment as money thrown out the window. One of them is the British European delegate Martin Callanan. Such a plan would only lead to "higher taxes, more regulation, more Europe" and would be pointless, Callanan said.

France refuses to tolerate "dictates" from Brussels

The "European consensus" demanded by Barroso is especially lacking in the question of how close the states should economically cooperate, and how much control the Commission should have when it comes to national budgetary discipline and competitiveness. German Chancellor Angela Merkel has demanded the Commission have both and claimed that otherwise, Europe would not be able to hold on to its prosperity.

The Commission today regularly releases its country-specific recommendations and tries to steer the nations in what it considers the right direction. But whether its recommendations need be followed is disputed. The French government has recently refused to tolerate any "dictates" from Brussels regarding consolidation policies. This shows how difficult it is to enforce a European obligation. After all, the Commission had even taken a step towards France, offering the country more time to reduce its deficit. This doesn't bode well for the goal of introducing even more national obligations to the Commission, as Merkel would like.

Agreement on liability

Another problem area: the question of who has to pay when a bank goes bankrupt. Until now, it was mostly the state and taxpayers. But this is considered not just socially unfair. The cases of Cyprus and Ireland have shown that a state can go too far when saving its banks and might then need help itself.

Spain's Economy Minister Luis de Guindos listens to Ireland's Finance Minister Michael Noonan (R) during an European Union finance ministers meeting in Brussels June 26, 2013. Photo: REUTERS/Francois Lenoir
The ministers negotiated for seven hours, before they came to an agreement early Thursday morningImage: Reuters

To prevent that, on the night before the summit the EU finance ministers have agreed on a system of "cascading liability." In this system, shareholders will be approached first when a bank starts to slip followed by wealthy bank bond holders and clients. The state is only the last resort for saving the banks. The member states can deviate from this system if the consequences of loss sharing would be too damaging.

National exceptions

These national exceptions were contentious up to the last minute of negotiations. The exceptions will determine whether banks can receive money from the ESM stability fund, which makes saving banks a question of European solidarity.

It was important to German Finance Minister Wolfgang Schäuble that taking money from the communal fund would not be too easy. The late-night agreement is an important step towards a European banking union, which is intended to help stabilize the European banking system.

Yet, tension and differences of opinion remain omnipresent at the EU.

"The inability to come to an internal agreement on integrated economic policy leads to an utter lack of responsibility to the outside world," said Rebecca Harms, co-chair of the Green parliamentary group in the European Parliament.

Also on the agenda

Despite the differences of opinion on current EU economic policy, there are also clear signs that both the European Union and the idea of integration remain attractive.

The best example for this is that Croatia will become the EU's 28th member on July 1. And that won't be the end of it. The heads of state and government want to give permission to begin negotiations with Serbia about joining, and maybe even set a date to them.

A Croatian national flag (R) and a European Union flag (L) fly side by side in front of the government building in Zagreb, Croatia, 24 June 2013. Photo: EPA/ANTONIO BAT
Croatia will become the EU's newest member on July 1Image: picture-alliance/dpa

German Foreign Minister Guido Westerwelle said this represented recognition for the efforts Serbia and Kosovo have made to normalize their relationship, "Both of them have made a serious effort to implement the political agreements in front of their own front door."

Despite some doomsday prophecies, the European currency union remains attractive as well. Latvia wants to introduce the euro on January 1, and the EU summit will attest that the country fulfills the requirements.