Eurozone's big four in Rome for talks on crisis
Friday, 22 June 2012 04:42 GMT
Leaders of the eurozone's four biggest economies gather in Rome Friday to thrash out ideas to tackle the debt crisis, with calls for the bloc's bailout fund to intervene on bond markets set to top the agenda.
The talks, which will also focus on efforts to kickstart much-needed growth in the eurozone's struggling economies, will set the stage for a crucial European Union summit in Brussels on June 28 and 29.
Italian Prime Minister Mario Monti will host German Chancellor Angela Merkel, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy for the talks at 2:00 pm (1200 GMT), with a news conference at 4:00 pm.
With the eurozone's relentless debt crisis threatening to engulf Spain and Italy and weighing down the global economy, Europe's leaders are under intense pressure to find solutions to the two-year-old crisis.
Monti has urged fellow European leaders to back a plan for the eurozone rescue fund -- the European Financial Stability Facility (EFSF) -- to ease pressure on struggling countries by buying their bonds on the secondary market.
Both Madrid and Rome have been hit with rocketing borrowing costs, despite a series of structural reform packages in Italy and a eurozone rescue loan of up to 100 billion euros ($125 billion) in the works for Spain's stricken banks.
Italy's foreign ministry said Thursday that Paris and Madrid were open to the idea, but that Berlin still needed to be convinced.
"While Germany considers the plan theoretically doable, it holds that there would have to be clear conditions for the EFSF to intervene," it said.
The ministry also said the fund would need to be granted a banking licence to allow it to borrow from the European Central Bank.
European leaders last year enabled the EFSF and its permanent successor the European Stability Mechanism to buy sovereign bonds, but so far governments have not opted to do so.
A senior member of the ECB, Benoit Coeure, told the Financial Times on Thursday it was "mystery" why the tool was not being used, saying it would ease the "very severe strain" felt by Italy and Spain.
Merkel said this week there were "no concrete plans" for the EU bailout funds to buy the bonds of struggling countries, though it was "one of the options" being considered.
Friday's talks are also expected to look at refocusing eurozone economic policy on growth instead of austerity, with observers hoping Monti can act as a mediator between Paris and the bloc's pay-master Germany.
Hollande has proposed a 120 billion euro "growth pact" for the eurozone including a financial-transactions tax and infrastructure investments to boost job creation.
Funds for the pact would come from three sources: 55 billion euros from unused European structural funds, 60 billion euros raised by the European Investment Bank and 4.5 billion euros in project bonds for infrastructure works.
The idea of eurobonds -- mutualising the bloc's sovereign debts -- could also be on the table, but after an initial push Hollande appears to be backing away from the proposal amid fierce opposition from Berlin.
Paris has instead proposed "euro-bills" with short maturities and limited volumes.
While no concrete moves are expected on Friday, the four leaders will discuss broader efforts towards closer political integration, and the banking or financial union that economists see as essential to getting to the root of the debt crisis.
The United States, the International Monetary Fund and the European Central Bank have all urged greater banking integration in Europe, as the debt crisis boomerangs from financial sectors to sovereigns.
After Thursday's talks between eurozone finance ministers in Luxembourg, French Finance Minister Pierre Moscovici said Spain would formally request eurozone financial assistance on Friday.
Minister also agreed to send international creditors back to for talks with the new government there.
The Luxembourg talks will widen on Friday with the inclusion of the finance ministers of Britain and other non-euro states for what is expected to be a tough fight over calls for a financial-transactions tax.