EU leaders met in Brussels today, with little hope that it would produce any tangible results.Meanwhile, tensions between German Chancellor Angela Merkel and French President Francois Hollande seemed to continue unabated, a further sign that the Franco-German partnership seen under “Merkozy” (with former French President Nicholas Sarkozy had deteriorated.
Now all we have is Merde.
As analysts had predicted, eurobonds and deposit insurance for banks were discussed at the summit, but it does not appear that substantial progress has been made on either of these issues. Leaders reiterated support for Greece, yet framed the important Greek parliamentary elections next month as a referendum on the country’s euro membership.
European Council President Herman van Rompuy told reporters that leaders hope to make more headway on growth measures at their next meeting in five weeks.
He appeared to fire back at attempts to throw off austerity policies: “It is obvious that opposing deficit reduction and growth is a false debate. they are two sides of the same kind.”
At the same time, he highlighted that the euro area will have to adopt measures that targeted growth in the struggling periphery. He also said that the European Investment Bank would look to boost its capital in the next month.
European Commission President Barroso added that there was consensus between leaders that growth as well as austerity were needed to fix fiscal problems of the euro area. To that end, he cited agreement between EU leaders on “project bonds,” bonds which finance select euro-area energy, infrastructure, and technology projects. A pilot project to test the effectiveness of these bonds with a €230 million issue began yesterday.
These project bonds are not to be confused with eurobonds, which would amount to mutualized debt issuance.
Meanwhile, comments by French President Francois Hollande and German Chancellor Angela Merkel suggested that the Franco-German partnership is rightly referred to as “Merde.”
While Hollande told reporters that Greece must respect its commitments, he also called for European international institutions to support the Greek government and its banks with funding. He even supported the integration of EU bank deposit guarantee mechanisms, according to Dow Jones.
He told reporters that he disagreed with Merkel over eurobonds, who does not see the common bonds as a growth mechanism for the euro. Doubtless the German leader did not approve of bank deposit insurance either.
While these disagreements are nothing new, optimists had hoped that one leader might give into pressure from the other at a euro-wide event, and particularly in light of the dire situation in Greece. This was not the case.
It is also worth noting that European Central Bank President Mario Draghi took Merkel’s side on eurobonds, describing them as an “end of process” scenario for fiscal integration. He also told reporters that leaders had not discussed giving the ESM a banking licence that would allow the bailout fund to lend to troubled banks, nor had they considered any changes in the ECB’s mandate.