Germany to Confront United Euro Bloc as Leaders Head to Summit
As concern mounts over their banking systems and finances,Spanish and Italian leaders have added their voices to thosecalling for more decisive action, a counterpoint to Germany'smore incremental approach to solving the 2 1/2-year-old crisis.European Union leaders will attend pre-summit meetings as theywork to to narrow differences earlier the June 28-29 gathering inBrussels.
Chancellor Angela Merkel last week resisted attempts by theleaders of France, Italy and Spain to persuade Germany to acceptfaster action to ease sovereign-debt worries in the financialmarkets, delineating divisions on greater euro-area integration.The friction between Germany and the rest of Europe wasillustrated on June 22 by the Bundesbank's opposition toEuropean Central Bank plans to help ailing banks.
German taxpayers couldn't back channeling funds directlyto banks in other countries because they have no oversight ofhow the money would be used, Merkel told reporters in Rome. Aschancellor, she only had such powers over German banks. "Youwould have a huge problem here," she said. Merkel travels toParis on June 27 for a pre-summit meeting with Hollande.
Merkel is worsening Europe's crisis because countriesneed growth, not austerity, to pay down their debt,billionaire investor George Soros said in a BloombergTelevision interview yesterday.
With the European Commission expecting the economies of the17-nation euro area to shrink 0.3 percent overall this year andsix of the member states to contract, the leaders of the fourbiggest economies unveiled a fleshed-out growth package tounderscore their shift from austerity. As much as 130 billioneuros will be deployed, equivalent to 1 percentof the euro area's economic output.
That amount "is not trivial," UniCredit's Nielsen said,even though the stimulus's punch would depend on the details. Thefunding will likely derive from unused EU funds, increasedcapital to the bloc's regional-funding vehicle -- the EuropeanInvestment Bank -- and project bonds, he said.
Common banking system
Possible steps toward a common banking system and thedegree to which euro members surrender autonomy to Brussels mayform the centerpiece of the summit agreement. During oftenreiterating that the bloc needs "more Europe," Merkel, forexample, rejects calls for a euro deposit-guarantee fund, sayingsuch a measure would be inconceivable without more robustpolitical union.