Europe waits on Germany as Greece deadline looms

22 March 2010

The summit opens on Thursday, the subject isn’t even on the agenda and the markets have control of the political keys, even as Germany debates what to do about Greece.

As one experienced observer notes, it’s as if German Chancellor Angela Merkel is busy planning what to do with the summer holidays, just as the family car is sliding off the edge of a cliff.

The leaders of the 27 European Union nations gather this week for a summit officially called to decide on a long-term strategy for competing with rival, emerging economies.

Despite the head of the body that manages the bloc’s day-to-day affairs – responsible for supervising Greek efforts to quit blowing the budget – pushing for early agreement, the EU’s serious powerbrokers are still caught in a conundrum.

Under intense pressure from peers, traders and his own counterparts, Ms Merkel’s finance minister, Wolfgang Schaeuble, has made it known that Berlin could stomach bilateral, voluntary loans in an effort to close a deal among eurozone nations.

Brussels officials were busy last weekend trying to drum up support, in an effort to head off Greek threats to call in the financial cavalry, the International Monetary Fund (IMF).

They want loans from the likes of Belgium, through Dexia bank, France and, yes, Germany, through regional money lenders that don’t need a federal constitutional court go-ahead to help.

European Commission chief Jose Manuel Barroso went out on a limb last Friday night to demand that Ms Merkel, French President Nicolas Sarkozy and the rest reach a meaningful political agreement later this week.

There is time yet, but some pointed remarks from Ms Merkel, essentially the EU’s boss, mean anyone looking for a rapid turnaround is likely to be disappointed.

‘I don’t believe that Greece has need for money at the moment, and the Greek government will confirm that,’ Ms Merkel said on German radio yesterday morning.

‘That’s why I advise against causing turbulence in the markets by raising false expectations about the European Council meeting this Thursday,’ she underlined.

Pressure from Greece, whose prime minister was in town last week, from fellow EU heavyweights like Mr. Barroso, and from markets, which had dragged down the euro and raised the bond yields representing the interest rates Greece needs to pay on critical borrowings, didn’t do much there.

The EU needs to act, but Ms Merkel seems to think not just yet.

So what is this week’s summit going to achieve? A deal on broad-brush strategy going forward to 2020? Even before last weekend, EU officials could show you the final conclusions on the issue behind the spring summit – all that’s missing is a greenlight from leaders, almost all of whom will be long gone from their national political scene before the time to judge these pledges comes up.

Another on fighting climate change? Again, anyone following the summit in Brussels will, more than anything else, want to know if Europe is going to cough up real money of its own to stop Greece’s problems threatening the euro currency and its economy as a whole.

Europe, as it would like to be known, has other issues to contend with – not least sorting out who controls the top jobs in a new multi-billion-euro service designed to articulate its strength on the global stage over the coming years.

There are also local elections, whether in non-eurozone Britain, a staunch backer of the IMF as the lender of last resort, or in the Netherlands, an influential eurozone peer whose political paralysis has ensured that no-one who doesn’t want to offer Greece money is obliged to do so.


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