Summit of Euro leaders expected to agree tougher budgetary rules
The leaders are expected to commit to tougher rules, both on their national budgets and on financial institutions, and discuss setting up a European credit rating agency.
But it waits to be seen if they will go further and propose a permanent structure to support any eurozone state that runs into difficulty, and so prevent another Greek debacle
The €110 billion loan to Greece has already been agreed by their finance ministers and by the time they meet over dinner it is expected that both German houses of parliament will have joined the Greek legislature in voting for the package.
German chancellor Angela Merkel wanted the summit to be held on Monday, after the local election vote in her country’s biggest region, North Rhine Westphalia, which takes place on Sunday.
However, she and the French President Nicolas Sarkozy, the eurozone’s most powerful countries, have set the tone for the summit in a joint letter issued yesterday.
In it they commit to preserving the strength, stability and unity of the eurozone, but say they must find ways to prevent a crisis of this nature from happening again.
Such steps must include tighter controls on national budgets to ensure governments do not run up huge debts and overspend annually. But they stopped short of putting proposals on the table that would see budgets peer reviewed by each member state before being finalised by national governments.
They call for stronger regulation of markets and focus specifically on credit rating agencies, which they point out downgraded Greek’s credit worthiness to junk even before the details of the rescue package were known.
The agencies – there are just three main ones, all US-based – must be registered and supervised and the two leaders also appear to suggest that a European agency be established to provide some competition.
In what should be music to the ears of Irish taxpayers, they said states should not be forced to rescue banks and banks must be set up in such a way that if they go under, they do not threaten the stability of the entire financial sector.
The Socialist group in the European Parliament has been pressing for a European Financial Stability Mechanism for some time. They envisage it as a trustee fund managed by the commission with money borrowed from the markets and which could lend to euro states at affordable rates, provided certain conditions were met.
Labour MEP Proinsias De Rossa said it would protect euro states against unscrupulous speculators, adding that in the current circumstances Ireland is at just as much risk as Greece, Spain and Portugal.
“We have had enough of the delaying tactics by conservative governments. The spinelessness in the past two months has turned a crisis for Greece into a catastrophe for Europe”, he said.
But with all the eurozone countries and 25 of the 27 EU members now in breach of the rules on budget deficits, some question whether the leaders will be willing to propose punishment and surveillance they would have to impose on others.
