Juncker, left, heads Eurogroup of 17 euro finance ministers. Rostowski, right, the Ecofin of all 27.
UPDATE 2: The Polish presidency has just made the official announcement. They say the cancellation allows heads of government to decide the things finance ministers were originally going to tackle. Despite negative market reaction to the news, several EU diplomats insist this is a diplomatic miscue by the Poles rather than a sign of things to come.
UPDATE: European diplomat confirms meeting of 27 EU finance ministers has been cancelled.
It’s getting uncomfortably close to crunch time for eurozone leaders, with just over 24 hours left before the summit-to-end-all-summits. But will they actually be able to agree on the big euro rescue plan? A letter sent last night by Jacek Rostowski, the Polish finance minister, makes it seem doubtful.
Since Poland currently holds the European Union’s rotating presidency, Rostowski is charged with convening a meeting of all 27 EU finance ministers tomorrow ahead of the big summit to lay the groundwork for a final agreement.
But officials tell Brussels Blog the so-called “Ecofin” council meeting is now likely off, and in a letter to Jean-Claude Juncker, the Luxembourg prime minister who chairs the group of 17 eurozone finance ministers, Rostowski makes it appear the cancellation is due to a failure to agree on outstanding issues. Read more
France and Germany may be divided over the key issues on the agenda of today’s European Union summit. But President Nicolas Sarkozy and Chancellor Angela Merkel have found common ground in the need to hammer Italy over its heavy debt load.
The leaders of the EU’s biggest and most powerful member states called in Silvio Berlusconi, the Italian prime minister, this morning for a pre-summit tongue-lashing. The message they delivered, according to one diplomat familiar with the discussion, was that Italy must deliver “specific and convincing reform measures soon.” They communicated a similar message to Berlusconi at a gathering on Saturday evening held by the centre-right European People’s Party.
Sarkozy also expressed his displeasure with Italy’s refusal to make way for a Frenchman on the European central bank’s executive board, according to the diplomat. France is due to lose its seat when Jean-Claude Trichet steps down as ECB president at the end of the month to be replaced by Mario Draghi, the outgoing president of the Bank of Italy. Berlusconi infuriated the French this week when he declined to free up a seat on the powerful decision-making committee by refusing to name current board member Lorenzo Bini Smaghi as Draghi’s replacement. Read more
French president Nicolas Sarkozy arrives at the summit this morning.
The big European Union summit will be divided in two parts today, with all 27 EU leaders meeting in the morning before the session is narrowed to the 17 members of the eurozone in the afternoon.
The Brussels Blog has obtained a copy of the 12-page draft of the morning gathering’s communiqué, circulated to summiteers this morning, and unless things change at the meeting, it looks like there will be no final decision on the one thing the 27 had hoped to finish today – a plan to recapitalise Europe’s banks.
The draft “welcomes progress made” by EU finance ministers during their 10-hour meeting on Saturday, but says the work will not be officially signed off until another meeting on Wednesday – the first official acknowledgement that leaders from all 27 EU countries (and not just the eurozone) will have to meet again next week. Whether that meeting will be the heads of all 27 governments or just their finance ministers remains to be seen. Read more
Demonstrators camping out in front of the ECB in Frankfurt on Wednesday morning.
UPDATE 5: The gathering has broken up with nobody speaking to the press. Lagarde left first, followed by Sarkozy. The EU’s Barroso, Van Rompuy and Rehn then left together. Merkel exited by the back door.
UPDATE 4: The meeting is expected to break up shortly so Trichet and Draghi can attend an 8pm concert in their honour.
UPDATE 3: Ralph Atkins, our man in Frankfurt, reports the meeting of leaders is now underway at the Alte Oper, Frankfurt’s concert hall.
UPDATE 2: European officials are now saying that Nicolas Sarkozy will also be flying to Frankfurt to meet with his counterparts, after the arrival of his new daughter.
UPDATE: Our Frankfurt bureau chief, Ralph Atkins, reports that IMF cheif Christine Lagarde is also in attendance.
If anyone is looking for where deals on the highly-anticipated Sunday summit might be struck today, they may want to cast an eye towards Frankfurt.
Several of the European Union’s big hitters will be in Germany’s financial capital for a leaving celebration for Jean-Claude Trichet, who departs from the helm of the European Central Bank at the end of the month. Read more
If the eurozone’s presidents and prime ministers were hoping to get home at a reasonable hour Sunday night after their much-anticipated summit, they can pretty much forget it.
The European Council, which organises such gatherings, just released the schedule of events for Sunday, and the meeting of the 17 members of the single currency won’t even begin until 4pm, with a “working dinner” scheduled to start at 7:15pm. Read more
Italian foreign minister Franco Frattini
The euro and European stock markets rallied today after Herman Van Rompuy delayed Monday’s EU summit by a week, a rally pegged to market hopes the new date was a sign European leaders were finally preparing a comprehensive agreement to deal with the worsening debt crisis. Read more
Enda Kenny, the Irish prime minister
Although the crisis summit is focused on Greece, there are signs that Portugal and Ireland may benefit from today’s deal, too. According to a senior European official, leaders are close to an agreement that would see lending rates on Lisbon’s and Dublin’s bail-out loans be cut – though no word on how much.
Currently, Portugal and Greece pay 200 basis points above the borrowing costs of the eurozone’s €440bn bail-out fund, while Ireland – because of an arcane dispute with France over corporate tax rates – still pays 300 basis points. There’s been some talk that this could be lowered to as little as 50 basis points for all three, but our source was mum on that point. Read more
Josef Ackermann, CEO of Deutsche Bank
UPDATE: According to our crack team in Paris, Baudouin Prot, chief executive of BNP Paribas, is also in Brussels participating in the talks. Read more
Senior eurozone officials – including finance ministry negotiators in the “euro working group” and sherpas to all 17 presidents and prime ministers – have moved their pre-summit meeting in Brussels (originally scheduled for this evening) to 9am tomorrow, a sign they still need more time to hammer out a deal on a Greek bail-out ahead of Thursday’s much-anticipated emergency summit.
But as we reported in today’s paper, after the working group held a teleconference on Friday, the European Commission prepared a “policy options” paper outlining the possibilities they’re looking at (our worthy rivals at Reuters also got their hands on a copy).
As has become our practice, we thought we’d give Brussels Blog readers a bit more insight into what the leaked options paper had to say, after the jump. Read more
Greek taxis block Athens streets during a 48-hour strike. A similar Greek roadblock in Brussels?
If this morning’s media accounts are any indication, European leaders are still scrambling to come up with a deal on a second Greek bail-out ahead of Thursday’s emergency eurozone summit here in Brussels. Read more
Over at the largest pre-summit gathering, the centre-right European Peoples’ Party which is meeting across from the Belgian royal palace, the most highly-anticipated arrival was Antonis Samaras, the Greek opposition leader.
Heading into the caucus, Samaras repeated what he said in today’s Financial Times: that although he supports reform efforts, he can’t back the package proposed by the ruling Socialist government. Read more
On Monday, we had a scoop on a new effort by the European Union’s two presidents, José Manuel Barroso and Herman Van Rompuy, to revive a “pact for competitiveness” – an economic coordination scheme among the 17 eurozone countries that would entail significant new austerity measures. Read more
Angela Merkel, the German chancellor, was one of the last to arrive at the pre-summit gathering of centre-right leaders outside Brussels, but on the way in, she had some calming words to offer.
Some diplomats had feared Merkel would insist on new language to be included in the otherwise benign treaty amendment scheduled to be debated tonight, making the approval process more complicated.
But she told reporters she is backing “very limited treaty change”, a signal there will likely be little opposition from Berlin. Read more
It is still two hours before the summit, but it seems that one of Germany’s principal initiatives is already sinking badly: a drive to suspend EU voting rights from countries that violate budget rules.
Jose Manuel Barroso, the European commission president, broke his relative silence of recent days to condemn an idea championed by Angela Merkel, the German chancellor.
“If treaty change is to reduce the rights of member states on voting, I find it unacceptable and frankly speaking it is not realistic,” said Mr Barroso, who has thus far remained quiet on the key questions that will dominate this summit. “It is incompatible with the idea of limited treaty change and it will never be accepted by the unanimity of member states.” Read more
Rumours are flying thick and fast that the troubles of Spain’s banking sector will require emergency attention at Thursday’s summit of European Union leaders in Brussels. But it appears highly improbable that Spain will ask for help from the emergency financial stabilisation fund that EU finance ministers agreed to set up last month. For one thing, the fund is not yet fully up and running. For another, the Spanish government is emphatically not shut out of credit markets – a point underlined this morning by the successful issuance of €5bn worth of short-term government bills.
Spain’s economic vulnerabilities are obvious, and the implications of a Spanish crisis for the rest of the eurozone are no less clear. French and German banks alone are exposed to some $450bn of Spanish debt, according to a report just published by the Bank for International Settlements.
But it is worth repeating that Spain is not Greece. The Greek crisis originated in decades of mismanagement of the public finances, plus an unhealthy culture of corruption and use of the state for political patronage. Although such practices are not unknown in Spain – and not unknown in the US, China and numerous other countries, for that matter – they have never attained Greek levels. Read more
At last week’s European Union summit in Brussels, most people were so focused on the Greek debt crisis that they missed an interesting development on the sidelines. This was an informal proposal from Herman Van Rompuy, the EU’s full-time president, to convene summits of EU heads of state and government once a month.
It would be a significant departure from the way the EU conducts its affairs. At present the EU holds four scheduled summits a year, usually in March, June, October and December. Since the financial crisis erupted in 2007-08, there have been various emergency summits as well. President Nicolas Sarkozy of France, who ran the EU’s rotating presidency in the second half of 2008, holds the record for calling unscheduled summits. Apart from those dealing with the financial crisis, he also convened one in response to Russia’s war with Georgia. Read more
Today’s European Union summit in Brussels will set out the framework for a financial rescue operation for Greece. This much is clear is from various briefings being given by officials from countries as varied as Austria, Lithuania, Poland and Spain. But financial markets will have to wait until next week to see the full details of the plan.
The central question is how far Germany has been pushed to swallow its words and offer help for Greece, after weeks of denying that it would do anything of the sort. Only this morning Otmar Issing, the German former chief economist of the European Central Bank, was telling German television viewers that Greeks enjoyed “one of the most luxurious pensions systems in the world” and it was unreasonable to expect German taxpayers to fund it. Read more
An unambiguous message of solidarity among eurozone states will come from Thursday’s European Union summit in Brussels, but it is still unclear if this will translate into a specific financial rescue plan for Greece. Debate among governments is continuing. However, expectations in financial markets have been raised so high over the past 24 hours, what with European Central Bank president Jean-Claude Trichet flying in for the summit from Sydney and officials in Berlin hinting at a German-led rescue, that it would be risky for the EU leaders not to commit themselves to some sort of initiative.
There are various possibilities: bilateral loans from Germany and France, with perhaps Italy and the Netherlands chipping in; an International Monetary Fund-style standby facility, organised among the 16 eurozone countries; or an EU-wide loan, involving a show of support from all 27 member-states. It is quite likely that the IMF will be asked to continue providing Greece with expert technical advice, but I don’t think the eurozone countries will go further and call on IMF financial resources. Apart from anything else, there is a fear that the US may raise objections on the grounds that the IMF’s firepower should be reserved for fighting emergencies not in prosperous Europe but in other, more disadvantaged financial hotspots. Read more
Europe’s leaders are getting radical. On Thursday the presidents, prime ministers and chancellors of the European Union will meet for a day of economic policy discussions in Brussels – but not in their normal location, the marble-and-glass Council of Ministers building, famous for its charmless, disinfected atmosphere and its 24km of headache-inducing corridors. No, this time they will get together in a nearby building called the Bibliothèque Solvay, which is a pleasant old library rented out for dinners and receptions.
The switch of location was the brainwave of Herman Van Rompuy, the EU’s first full-time president, who thought it would encourage a more creative, informal exchange of views. He has introduced another innovation: each leader is to be restricted to just one adviser at the talks. This isn’t a problem for countries with leaders who are masters of economic policy detail. But others are less happy about the arrangement. It is whispered that the Italians are swallowing especially hard, wondering what on earth Prime Minister Silvio Berlusconi will say once he’s on his own. Read more