Eurozone crisis: Talks to save euro begin in Brussels

 

Chancellor Merkel says the credibility of the euro must be restored EU leaders in Brussels have opened a summit to tackle the eurozone debt crisis and save the single currency.

The key item on the agenda is a Franco-German proposal on budgetary discipline, with automatic penalties for eurozone nations that overspend.
Pre-summit talks between Britain, France and Germany broke up without agreement as each set out its position.
Earlier, German Chancellor Angela Merkel said the euro had "lost credibility".
UK Prime Minister David Cameron has said he will veto anything which harms British interests.
Mr Cameron, Chancellor Merkel and French President Nicolas Sarkozy held a 45-minute meeting on the eve of the summit, but sources told the BBC there was "no movement" with each side setting out their respective ground.
Downing Street sources said the negotiations were "going to be difficult" and they did not expect any wider agreement among EU leaders until the early hours of the morning, if that, the BBC's Iain Watson, in Brussels, reports.

Germany and France seem to be coming into this summit saying: "Here's the deal - take it or leave it." Germany in particular is becoming Europe's most important political power, as well as its most important economic one - and that is causing some unease.
But President Sarkozy defended Franco-German leadership and - using dramatic language - said memories of brutality between them during World War Two mean they have a special duty to act.
The trouble is the European Union is much bigger than it was. Every country - all 27 of them - has a red line somewhere. That is why reaching an agreement is going to be so difficult.
But Angela Merkel has made it clear that she wants a treaty change of some kind. She would prefer all member states to be involved, but at the very least the 17 countries in the eurozone have to act.
Beyond the battle over treaty change there is a bigger picture for the leaders gathered here. Can they find more financial firepower to help member states with huge debts? And can they persuade the markets that struggling countries are serious about years of austerity?
In other words, can they do enough to ensure that the eurozone survives.

In a speech in Marseille earlier on Thursday President Sarkozy warned that "never has the risk of disintegration been greater" for Europe.

The leaders of the 27 EU nations were sitting down for an informal dinner, and their talks - behind closed doors - were expected to last well into the night, ahead of a number of working sessions on Friday.
Penalties Germany and France are pushing for changes to the EU treaty, saying stricter fiscal rules should be made part of basic EU law.
The Franco-German plan is based on the following key provisions:

• the European Commission to have the power to impose penalties for nations that run excessive budget deficits
• all 17 eurozone nations should amend their national legislation to require balanced budgets
• the eurozone countries to have common corporation and financial transaction taxes
• any future bailouts would not require private investors to absorb part of the costs, as happened in the case of Greece

As Mrs Merkel arrived at the summit venue in Brussels, she told journalists: "The euro has lost credibility and that needs to be restored."
She said the European Commission and the European Court of Justice would have more powers in future to enforce the rules, declaring: "We must make clear that we accept more co-ordination."
"Never has Europe been so necessary. Never has it been in so much danger," said Mr Sarkozy at a meeting of EU centre-right leaders in Marseille.
He said the eurozone economies still had a few weeks to decide, but that time was working against them.
Earlier on Thursday, the European Central Bank (ECB) cut interest rates back to their historic low of 1%, as expected by financial markets. Mario Draghi ECB President

ECB President Mario Draghi called again for governments to cut their borrowing and reform their economies, but did not mention any new financial support from the ECB for struggling governments.

"We have a treaty that says no monetary financing to governments," he told reporters.
European Council President Herman Van Rompuy has put forward an alternative plan, a fast-track "fiscal compact" that does not need lengthy ratification by parliaments or national referendums.
The EU's most recent treaty, adopted in Lisbon in 2007, took eight years to negotiate.
But Swedish Prime Minister Fredrik Reinfeldt warned that changing the treaty would take time and trigger the need for a referendum.
In recent days, smaller EU nations have complained they are being forced to follow the agenda of Germany and France, with very little room for discussion, says the BBC's Chris Morris, in Brussels.
An advisory committee to the Finnish parliament has warned that the Franco-German plan may be unconstitutional because it replaces the majority veto on the fund for future bailouts with majority voting.