EU leaders discuss bailout for Greece
EU leaders including Taoiseach Brian Cowen will consider bailing out Greece today in a move to restore global confidence in the single currency.
The reluctant German-led move to tackle the Greek debt crisis is on the cards at a Brussels summit which was originally called to consider long-term plans for jobs and growth.
Instead it has been overshadowed by one EU government’s deep financial troubles which threaten to spread to other “eurozone” countries already in difficulties.
The Greek crisis faces the euro with its biggest-ever test of credibility as a world currency.
Spain and Portugal are also facing financial difficulties which are testing the single currency’s ability to keep “eurozone” states within agreed limits on debt and annual deficits.
Member states adopting the euro are governed by rules obliging them to keep deficits to less than 3% of GDP, and debt at no more than 60% of GDP.
But the stresses and strains of the global economic downturn have tested the system to its limits, reinforcing eurosceptic claims that there can be no “one size fits all” economic plan for Europe.
Even Germany, EU paymaster and architect of the single currency rules, broke ranks, with Chancellor Angela Merkel insisting on domestic tax cuts to get the national economy going even at the risk of exacerbating Germany’s breach of the deficit rules.
Now Germany is reluctantly championing a bail-out for Greece, only days after ruling out the option.
Guarantees and loans to Greece are on the cards, if the share of the bail-out burden can be agreed.
The alternative is to turn to the International Monetary Fund – an option not excluded by the EU, but one which could reinforce fears in some markets that the euro is in deep trouble.
Assessing the scale of Greek needs to steady its financial sector and restore confidence is the first task of the first summit to be called by Europe’s new permanent president, Herman Van Rompuy.
He intended to hold an informal chat on the long-term economic situation – even moving the meeting from the usual formal summit building to a cosier library setting.
The increasing global jitters about the scale of Greece’s economic problems and the implications for the euro put paid to that.
Greece already submitted an economic recovery plan to Brussels which received formal approval last week, coupled with an unprecedented decision by the European Commission to set up a strict monitoring of the Greek recovery programme, with regular, compulsory reporting to Brussels.
The move is seen as the start of an attempt to tighten central supervision of national EU economies.
Only on Tuesday European Commission president Jose Manuel Barroso defended the euro, insisting: “Our common currency, the euro, will continue to constitute a major tool for our development and those who think it can be put in question must realise we will stick to our course.
The European Union has the necessary framework to address any challenge that appears in this respect.”
Hinting at tighter supervision he said: “I believe that our economic and social situation demands a radical shift from the status quo. And the new Lisbon Treaty allows this.”
The one-day summit will also discuss the climate change situation after December’s UN environment talks in Copenhagen, and Cathy Ashton, the EU’s new “foreign minister”, will update EU leaders on Europe’s contribution to the Haiti earthquake relief effort.
