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Europe

Which way at the EU summit?

The EU faces difficult decisions on the bloc's future at a summit which has just started in Brussels. Solving the immediate euro crisis is only one of them.

The intervals between summit meetings have been getting ever shorter, while the problems remain the same.

Following the latest official requests for aid by Spain and Cyprus, a total of five of the 17 eurozone nations will soon be depending on support from the European Union's bailout fund. Markets are jittery. For Spain and Italy, borrowing costs have reached what amount to unsustainable levels in the long run. And Greece has a new government that has only promised to fulfill the lenders' requirements up to a certain point: Prime Minister Antonis Samaras has demanded better conditions. At the same time, the country appears to have fallen well short of meeting previous reform and austerity targets.

"Europe is facing a major test that we Europeans will and must pass," German Foreign Minister Guido Westerwelle said at an EU foreign ministers meeting this week in Luxembourg. "This debt crisis requires reliability from all partners," he said, adding the EU could grant no discounts: "It will be a very crucial week for Europe, but I am confident we will succeed."

No quick fix

German Chancellor Angela Merkel,

Angela Merkel holds the eurozone's purse strings

If the German government had its way, everything could be so easy: every state would put its own budget in order and would increase its competitiveness. A handful of nations would go along with that plan: the Netherlands, Finland and Austria in the eurozone, and Sweden outside it.

But they're sailing against the wind, and even Germany's close ally France is opposed. The labor and pension policies of the country's new Socialist President Francois Hollande's are the exact opposite of what Berlin wants. Italian Prime Minister Mario Monti appears to have lost his initial eagerness to initiate reforms. "Sooner or later, there will be opposition against the financial and structural discipline the EU is trying to enforce," Monti recently said in Rome. "That is something to be considered by those countries which have the great merit of having infused the EU with a culture of stability in the first place, mainly Germany."

Warding off specters

Monti, Hollande and others believe austerity plays too large a role in the EU, while not enough is being done to boost growth and employment. In Greece and Spain, youth unemployment has reached levels of up to 50 percent.

The Brussels summit is expected to agree on a growth package. In principle, Chancellor Angela Merkel is not opposed as long as it doesn't mean that countries go even further into debt; she is convinced states will have to work hard for growth and regards many suggestions, whether from Italy, the US or the EU Commission, as a cheap way out to avoid having to make an effort. A banking union, sinking funds and mutual debt - as far as the German government is concerned, they all boil down to a joint debt liability at the expense of Germany. Merkel says such measures would reduce overall budget discipline and could overtax even a country as strong as Germany.

But won't the chancellor be forced to give in to the pressure at some point? No, says Herbert Reul, a Christian Democrat member of the European Parliament. "There are some issues where even the strongest pressure can't make a politician do things that are sheer nonsense. Pooling European debt is one of them."

Change is necessary

Rompuy, Barroso

European leaders have worked out a blueprint of proposals

All parties involved have come to the conclusion they must take a different tack to solve the eurozone crisis. Merkel is convinced the eurozone - even better, the entire EU - must take a big step toward integration. Top EU officials appear to agree. Commission President Jose Manuel Barroso, EU President Herman Van Rompuy, euro group head Jean-Claude Juncker and Central Bank President Mario Draghi - dubbed the "gang of four" by reporters in Brussels - have drafted a roadmap for the next decade, to be presented at the summit.

Barroso indicated what was at the heart of the plan: "At the center, there's the principle that greater solidarity and greater responsibility must go hand-in-hand," he said.

That may appease the German Chancellor, who has said time and again she will not agree to an increased German liability without more European control over national budgets.

The blueprint by the "gang of four" is not final, and Barroso has admitted some of the provisions would necessitate changes in existing treaties. The question remains whether other heads of state will go along with the EU roadmap. They may not want to give up so much sovereignty or be unable to so for constitutional reasons - perhaps both. The constitution could turn out to be a stumbling bloc in Germany, too, even though the chancellor has so far poured cold water on proposals by the finance minister, Wolfgang Schäuble, for a referendum to change the German constitution to allow for more European integration.

But Europe has clearly come to a conclusion: if nothing changes, the currency union is bound to break apart sooner or later. In order to save it, the eurozone members must move closer together.

Author: Cristoph Hasselbach, Brussels / db
Editor: Michael Lawton

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