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EU holds back on eurozone overhaul

Dec 14 2012 07:59

Brussels - European leaders doused hopes of a radical eurozone overhaul on Friday, after brokering deals to control banks and refloat Greece seen as adequate to stem the immediate crisis.

The last EU summit of a year that saw Greece close to bankruptcy and bigger Latin countries pressured to overhaul their economies in line with German demands saw a series of ambitious proposals effectively kicked into the long grass.

Despite worries over political uncertainty in Italy, flagship plans to fix fundamental flaws criticised since the introduction of the single currency were put to one side until late 2014 at the earliest.

Europe's effective paymaster, German Chancellor Angela Merkel, hinted that "financial aid" could in the future be given to countries committing to reforms as part of moves towards greater economic co-ordination in the bloc.

In the eurozone alone, joblessness is heading towards the 20 million mark after a year of devastation and with recession set to last throughout much of 2013.

However, the sense of imminent panic on financial markets that dominated much of 2012 decision-making has receded significantly since the European Central Bank (ECB) issued a long-resisted but near-unlimited guarantee in the summer to stand behind countries in financial difficulty.

'No doors closed'

"No doors were closed," said Jose Manuel Barroso, the head of the executive European Commission.

Yet ideas heavily promoted by EU President Herman Van Rompuy over the last six months, including a central eurozone budget, seemed to fizzle out.

Van Rompuy said he would present another report to leaders in June 2013, as well as proposing that national governments sign up to contracts with the EU on reforms.

"All the hard work is beginning to pay off. A lot has been achieved over the course of a year," he insisted.

"This work is not over: the dynamic will carry on in the coming year," pledged Van Rompuy.

French President Francois Hollande said that late-2014, when a new Commission is installed, "would be the time we could envisage a new phase with a modification of the treaties."

The resumption of loans to Greece followed a successful plan to wipe tens of billions of euros from the country's debt pile.

A first payment of €34.3bn would be flowing to Athens "as early as next week," said outgoing Eurogroup chair and Luxembourg Prime Minister Jean-Claude Juncker.

The accord prompted Greek Prime Minister Antonis Samaras to declare that "Grexit", the idea that Greece would be forced out of the 17-nation bloc, was "dead."

"Greece is back on its feet," declared an ecstatic Samaras, who has pushed through painful economic reforms demanded by international creditors, sometimes in the face of violent street protests.

Meanwhile, the deal for the eurozone's largest banks to come under the aegis of the ECB from March 2014 was hailed by its head Mario Draghi as "an important step towards a stable economic and monetary union, and towards further European integration".

Closing ranks around Monti

Despite a noticeably more bullish tone at the summit, fears over Italy lurked in the background, after Prime Minister Mario Monti, credited with important reforms there, said he was stepping down soon.

Former leader Silvio Berlusconi had hinted that he might stand for a fourth time but appeared to row back, telling Belgian television that he had "so much to do" outside politics.

Hollande downplayed the chance Berlusconi would run in a future election, saying: "I don't think there is a very serious likelihood" of this."

Merkel underlined a closing of ranks at the summit. "I made clear that the government of Mario Monti has done a great deal of helpful work for the confidence that Italy is now enjoying again," she said.

Leaders were to reconvene later Friday at 10:00am (09:00 GMT) to discuss moves towards a common security and defence policy as well as to take a position on the Syria crisis.

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european union  |  eurozone  |  europe debt crisis



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