How much longer can the eurozone live an alternate reality?

This week's fun and games are over, with EU leaders concluding their Brussels summit earlier this afternoon.

Once again, this summit is unlikely to be remembered for anything EU leaders could agree on but, rather, for what eurozone leaders, in particular, were unwilling to even discuss. Namely, getting to the root of sorting out the eurozone's short-to-medium-term future.

As the BBC's Paul Mason asks on his blog:

Why, within the space of 12 days, do we get a "grand bargain" to create a Euro Stability Mechanism (11 March), which is then (a) knocked back by Finland (b) defied by Portugal (c) renegotiated at the behest of Germany's FDP coalition partner so they can do a tax giveaway in the coming elections; and (d) excludes Ireland anyway?

Chancellor Angela Merkel's, and by extension Germany's, focus on what are, in the grand scheme of things, minor details is starting to betray a worrying resemblance to an obsessive-compulsive's inability to recognise the bigger and far more important realities in life. Merkel's two 'victories' from this summit appear to be the fact that Germany will now pay in its share of capital to the permanent post-2013 eurozone bailout fund over five years rather than four and an EU commitment to "stress test" nuclear power stations. These are both pretty obvious bones thrown to the domestic German audience - the SPD and Greens are breathing down the neck of Merkel's CDU party in important regional elections - but will do little to reassure people that the eurozone is serious about tackling its problems. Not for the first time, domestic politics is pitted against eurozone imperatives.

True, the proposals on economic governance and tighter fiscal discipline were broadly endorsed, but earlier German proposals have been watered down and there's still much to play for in regards to how much of the package will be credibly enforceable. How will Italy and Greece cope with demands to get their debt-to-GDP below the 60% threshold?

Partly also due to Finnish resistance, eurozone leaders were unable to reach agreement on how to top up the existing temporary bailout fund, which, with Portugal more or less in a state of political and economic crisis seems a little complacent to say the least. We're told that all will be settled at the next summit in June - but haven't we heard this before; "It will all be sorted next time, no need to worry".

Maybe Merkel and the rest of the eurozone's leaders just prefer working under pressure. June really will be cutting it fine: Portuguese elections are expected to have been held only a week or so before and the new attempt at credible stress tests for Europe's banks are due to be published.

How much longer can the eurozone live an alternate reality?

Socrates needs to get philosophical

Looks like Portugal could be asking for a bailout by the end of the week.

Pedro Passos Coelho, Leader of the main opposition party, said on Saturday:

“We need external aid. The Prime Minister does not want to admit that, but the whole country has already understood it.”

He also said he will continue to oppose the new austerity measures, which are due to be voted on by the Parliament tomorrow or Wednesday.

Portuguese Prime Minister, Jose Socrates, announced that:

“Should the Parliament vote against, then the government would no longer have the means to act.”

With massive public protests against austerity in Portugal over the weekend, there seems less and less political incentive for the opposition to cave in and support the new measures. The only thing that everyone seems to agree on is that if the new austerity measures are voted down, Portugal will be forced to ask for a bailout.

However, given Socrates stance the government may fall if he fails to garner the support he needs.

That does not bode well given the EU summit at the end of the week. Socrates needs to get his thinking cap on…as going into summit negotiations without a government cannot be a good strategy.

A third way to bail out struggling countries

Much was discussed and a little agreed during Friday’s eurozone summit, but it was enough to give the euro a bit of a boost. Investors - going into the weekend with exceptionally low expectations - seemed pleased with the news that anything was agreed at all.

The most important and controversial measure agreed over the weekend looks to be allowing the EFSF - the eurozone's main bail-out fund - to purchase government debt, under exceptional circumstances.

The conditions imposed on any country wishing to make use of the EFSF's bond-buying scheme are pretty exceptional as well:

- EFSF can only buy bonds on the primary market (i.e. directly from governments)
- For this to take place, the government must enact an austerity programme as it would under a bailout

So what exactly is the difference between a bailout and using the EFSF to buy government bonds under these conditions? Not much, as far as we can tell.

One argument behind restricting purchases to the primary market is that it bails out governments rather than investors. Although that might be true, if the EFSF did purchase bonds in the secondary market the cost of borrowing for peripheral governments would undoubtedly fall by a lot more. There is also the added advantage of purchasing existing debt rather than issuing new debt and increasing the already heavy burden. In the end it looks like the standard EU compromise where both sides meet somewhere in the middle to achieve very little.

The decision also means that the ECB could well be forced to continue buying bonds on the secondary market, since a struggling country will think twice before signing up to strict conditions in return for the EFSF relieving them of some of their junk bonds.

What is significant, however, is that there are now three avenues through which the cost of failing economies can be transferred onto EU taxpayers - about a year ago, there were none (remember the days when some of us were foolish enough to believe that a guarantee in the EU Treaties, i.e. the no bail-out clause, actually meant something?):

1) Direct loans from one of the bail-out funds (requiring unanimity or a majority vote amongst eurozone governments)
2) The ECB buying government bonds, from the secondary market (at the discretion of the ECB)
3) The EFSF buying government bonds, directly from governments (unclear how decisions will be reached on when this can happen).

Many of the key questions remain, however. Such as:

- What interest rate will the EFSF be charging on government bonds purchased?
- Will this option be open to countries who have already received a bailout?
- How will the activation of the EFSF's bond purchasing programme be decided?
- Will Merkel be able to see this through amid domestic political resistance?

We’d hazard a guess that the EFSF would charge below market rates but above its lending rate, but we’d also expect some differentiation from the bailout loans otherwise it would look completely pointless.

Apart from that, we note that Greece - as we expected - has been granted what can only be described as a debt restructuring, though a limited one.

So on the upside, markets are slightly more re-assured. On the downside, expectations are now raised that a meaningful deal will be struck at the summit in two week's time.

When you do scratch the surface, this looks perilously close to more of the same.

In need of an ice-breaker

The traditional 'family photo' from today's EU summit...



Is it just us, or does it seem as if the couple at the end, Ashton and Berlusconi, don't quite know what to talk about...?

(Which could have something to do with the fact that one is your typical monolingual Brit and the other doesn't speak a word of English. Though, in truth, we suspect that's not the only reason)

What should Cameron be pushing for at the EU summit?

We answer that question over on the Spectator's Coffee House blog - read it here.

Many questions - no answers

Open Europe has today published a briefing looking ahead to the EU summit this week, identifying the crucial, inevitable questions on the future of the eurozone that EU leaders have to find the answers to. The small problem that EU leaders are facing is: there aren't really any good answers and any that there are, in turn, throw up a series of new questions.

One of the big questions is whether the current euro bail-out package will need to be increased to ensure market stability in the New Year, when eurozone governments and banks will face record targets of refinancing.

A very simple calculation shows that the current bail-out package looks worryingly insufficient to deal with Greece, Ireland, Portugal and then - the nightmare - Spain all at once. A conservative estimate from Goldman Sachs puts the cost of taking Spain, Ireland and Portugal off the debt markets for two years at up to €450 billion (other estimates put the cost of bailing out Spain alone closer to €500 billion).

And as has been widely documented by now, while the size of the EU/IMF bail-out package on paper is €750 billion, in reality, it's far lower than that.

First, the contributions from Greece and Ireland have to be subtracted (€19bn between them), as they themselves are receiving aid and are therefore exempt from contributing. Secondly, to ensure a ‘triple A’ credit rating – and therefore low borrowing costs – eurozone governments are guaranteeing 120 percent of each bond raised (allowing for a reserve that can never be used). In addition, as the credit rating agencies like to point out, the share of eurozone governments without a triple A rating must also be discounted, if the triple A rating of the EFSF is to be
guaranteed.

When adding up the figures then - and there are a few estimates flying around - the real size of the European Financial Stability Facility becomes more like €213 billion, with another €60 billion added through the European Stabilisation Fund. The final twist is that under the agreement struck in May, the IMF would only add 50 percent of the sum the EU provides, meaning €136 billion as opposed to the original €250 billion.

This leaves a total of €409 billion - as opposed to the official €750 billion.

Pew! Not very helpful, we know, but this amount is cutting it worryingly close. Although no one is saying it out loud, there will probably be plenty of whispers in the corridors of Justus Lipsius this week (where the Council meeting is held) on how to increase the package should the smelly stuff hit the fan in the New Year.

There are, of course, steps that eurozone leaders could take to ease the pain, including restructuring the debts of Greece, Ireland and Portugal in some way (though that would not deal with the underlying competitiveness problem these countries are facing). In addition, banks, not least Spanish ones, should come clean on their loan losses, so that we can flush out Europe's over-leveraged banking system once and for all (here real, rigorous stress tests could help). And, subsequently, the ECB must stop acting as a rubbish dump for bad government and bank debt and become a solid, independent central bank again - its current role is simply unsustainable.

So many questions, so little time...

When the driving force of policy is not to cause a fuss

Over on his blog, the WSJ's Iain Martin is today making clear what he thinks of Cameron's performance at the EU summit last week, and the Coalition's Europe policy more widely:

Cameron’s priority on Europe has been, as it has been throughout his leadership, that it shouldn’t flare up and cause him a problem. In coalition with the Lib-Dems, he now has even more reason to avoid the issue. Around him are former Euroskeptics, such as William Hague, who are prepared to go along with the European project (as currently constituted) in return for a quiet life and the perks of office.

But it’s been obvious for a while that the tectonic plates are shifting in the EU. The sovereign-debt crisis was only dealt with because Germany agreed to underwrite the temporary arrangements put in place to allow for a bailout. Angela Merkel was always going to come back and demand that permanent arrangements be put in place, and that other members of the single currency start to play by German rules...

...Last week Cameron indicated that Merkel could get the changes she wanted to Lisbon, etc., in return for… er, nothing. This is what happens when the driving force of a policy is the desire to not cause a fuss.

So not a fan of the limited EU budget increase then?

"I deplore this initiative. This letter is provocative and has clearly been written for reasons of domestic policy."

- The caretaker Prime Minister of Belgium, Yves Leterme, in response to the letter signed by Cameron, Merkel, Sarkozy et. al. backing a 2.9% increase to the 2011 EU budget.

Has Cameron underplayed the UK's hand in Europe?

Over at Conservative Home, we examine how David Cameron is getting on in Brussels - the performance so far is a mixed bag, but there's a clear risk that he has underplayed the UK's hand in the negotiations.

Meanwhile, German media praises Angela Merkel's "poker skills". She has now achieved backing from EU leaders, in principle at least, for changing the Treaty in order to introduce a permanent crisis mechanism for the eurozone.

How Cameron should play his cards in Europe

Over at the Spectator's Coffee House blog, we take a look at how David Cameron should approach today and tomorrow's EU summit - and how he should play his cards in negotiations in Europe moving forward.

We argue,

The British media woke up this week, realising that Europe still exists. As David Cameron travels to Brussels, questions loom over what, exactly, he can achieve in Europe – at this summit, and more importantly, moving forward.

Much of the commentary surrounding the summit has focussed on the increase to the EU’s 2011 budget, which Cameron is fighting. And for good reason. It’s insane that Britain – or any other net contributing state – should be forced to accept any increase to the EU budget, at a time of tough austerity at home.

Cameron has spent considerable time talking up the negotiations on the budget increase, so he may have an ace up his sleeve to achieve a cash freeze tomorrow or in the coming weeks. But a 2.9% hike is not unlikely, meaning that an extra £430 million would be added to UK taxpayers EU bill – or even more once the European Parliament has had its greedy hands on it.

However, as outrageous as it is, the annual budget increase is only a side show in a far bigger act.

Even if he were to achieve a freeze to the EU budget, there’s nothing stopping MEPs and other member states from pushing through a substantial increase in 2012 or 2013 to make up for it. The EU budget is negotiated in seven-year periods (though that can vary), with minor adjustments being made on an annual basis. Sadly, negotiations over this budget period have already been lost – courtesy of Tony Blair in 2005.

So the bigger prize – which may or may not be discussed in corridors at the summit – is clearly a reduction in the size of the budget from 2014 onwards. Cameron has rightly stated that this is his priority moving forward.

But here Cameron could be committing a strategic mistake. The temptation is to try to ask for concessions on the post-21014 EU budget, in return for supporting Merkel’s repeated calls for a Treaty change to fix the eurozone.

Thing is, the UK already has a veto over the negotiations on the post-2014 budget. If the UK refuses to agree, an effective cash freeze will be achieved anyway as the previous budget will be carried over. Secondly, member states are desperate to get rid of the UK’s rebate from the EU budget – in itself a powerful bargaining chip.

So if Cameron trades budget concessions for Treaty change, he will effectively be giving his EU partners two for the price of one.

A better way forward for Cameron is to horse trade on the EU budget and possible Treaty change separately.

Despite strong opposition from EU leaders, German Chancellor Angela Merkel continues to push for a Treaty change to fix the eurozone. And she won’t cave in easily.

As we’ve argued before, Cameron should back Merkel’s calls for Treaty change in return for repatriating powers to Britain. It Treaty change actually materialises, the whole package can then be put to a public vote in a genuine referendum on EU reform. Many Tory backbenchers are now picking up on this idea as well.

Cameron and Merkel will meet on Saturday night over dinner to discuss the way forward for the EU. The Prime Minister must think carefully about how to use the unusually fluid European situation to put Britain’s relationship with the EU on a more sustainable path.

The scope for a new Anglo-German grand bargain is greater than in a long-time. But for Cameron to give away his hand this early would be a serious mistake.

Merkel refuses to fold

German Chancellor Angela Merkel is a tough cookie.

Sandwiched between Deauville and tomorrow's EU Summit, Dr. Merkel took to the podium today to defend the controversial pact with President Sarkozy on economic governance in the eurozone that has left both German politicans and EU leaders incensed (but in different ways).

Addressing the Bundestag this afternoon, a firm Merkel said both President Sarkozy and herself will relentlessly insist on a "culture of stability" at tomorrow's European Council summit. She stressed the necessity of taking "precautions today for dealing with future crises" in the eurozone.

Such precautions, she said, will simply have to include a Treaty change. Merkel stated that the measures taken earlier in the year to bail out Greece were "unavoidable" but did not provide long-term solutions. She insisted on a new, robust and legally unassailable "crisis management framework" anchored firmly in a new EU treaty; a move that she admitted is "ambitious". But she confidently asserted that, for the EU

success will only come with a change to the treaty...improvement is always possible, even if the road is rocky.

Presumably responding to Luxembourgish Foreign Minister Asselborn's and others' sneer that Europe does not work with only a "two-stroke engine", the German chancellor said, "the Franco-German union is not everything in the EU, but, without a German and French union, it is not much."

Tomorrow's summit could be really interesting...

As Bitter As Bile

It has been labelled in all manner of different terms: "a violent clash", "a virile confrontation", "a furious row". But today's Le Monde finally sheds a little light on what Sarkozy and Barroso told each other during their squabble over the Roma deportations at last week's EU summit.

The paper has published a transcript of the row, under a new headline: "A lunch as bitter as bile in Brussels". Unfortunately for our French-speaking readers, we aren't able to provide a link, as the article is only available to subscribers of Le Monde's website. However, we provide some of the more juicy excerpts below. (Only thing to bear in mind is that the transcript has been put together thanks to the contribution of several witnesses - both direct and indirect - and therefore might not always reflect what was said verbatim.)

With no further comments needed from us, we step aside and leave the stage to the protagonists:

European Council President Herman Van Rompuy: "Nicolas [Sarkozy] has asked me to give him the possibility to make some remarks on a current issue. Indeed, I leave him the floor".

French President Nicolas Sarkozy: "I have the highest respect for the [European] Commission. I have done a lot for it. I have done a lot for the Commission and to bring France back to the heart of Europe [...] It's normal for the Commission to investigate. But before any investigation, one of the Commission's Vice-Presidents [Sarko obviously referring here to Justice Commissioner Viviane Reding] has used expressions like 'disgusting', 'disgrace', 'Second World War'. These are words I can't accept. I don't say that the Commission is disgusting [...] I've come here only because she [Ms. Reding] has apologised. I had told [Commission President] Barroso that I would not come if she didn't apologise".

Commission President Jose Manuel Barroso: "The substance and the form [of Reding's declarations] are two separate issues. We have rules against discrimination, and it's the role of the Commission to defend them [...] The Commission has distanced itself from Viviane's statement. She has said that she regrets the interpretation which has been made of her declarations".

Sarkozy (interrupting Barroso): "The interpretation?! It's not for this that she had to apologise, but for saying that [France's Roma policy] is 'disgusting'".

Barroso (keeping his cool): "I understand Mr. Sarkozy's emotion [...] Ms. Reding has said that she regretted her statement. I note that the French Secretary of State for European affairs has not done the same".

A quick footnote is needed here. French Europe Minister Pierre Lellouche had replied to Viviane Reding saying that according to him the French people were the real guardian of the EU Treaties, rather than the European Commission.

Italian Prime Minister Silvio Berlusconi: "We need to withdraw speaking rights for Commissioners and their staff. Only Barroso must be allowed to speak [in public]".

German Chancellor Angela Merkel: "We need to convey an image of serenity at the end of the summit. We need to avoid using certain expressions".

At this stage, the Cavaliere's interruption and Iron Angie's words of wisdom might have calmed the atmosphere. But not quite. Sarko insists that he wants his counterparts to adopt a common position on the Roma issue, specifying that the Commission has the right to ensure the respect of EU law, but member states have the final word on the measures to address the question. Barroso loses his patience.

Barroso: "These pressures must stop [...] The Commission must be allowed to do its job. Otherwise, we will not have the kind of Europe we want. The European Court of Justice will have the final word".

Sarkozy: "We can't say that the Commission will refer the matter to the Court. There has to be an investigation before. By the way, I have to pay tribute to Jean-Claude Juncker [Prime Minister of Luxembourg, Ms. Reding's home country], who has urged this lady to apologise".

Sarko avoids calling Ms. Reding by name...

Luxembourgish Prime Minister Jean-Claude Juncker (trying to mediate): "Ms. Reding should not have talked the way she did. Nicolas should not exaggerate, though. It's only by chance that she was born in Luxembourg".

Barroso (interrupting Juncker): "But it was you who appointed her [as EU Commissioner representing Luxembourg]. Three times!"

Juncker: "Yes, but at your request..."

Sarkozy: "Let Van Rompuy speak".

Van Rompuy reminds the EU leaders that journalists from all over Europe are waiting outside and proposes to draft some conclusions to settle the matter, at least for the moment. Barroso tries to set his own conditions.

Barroso: "We will not target a specific Commissioner. Otherwise, we will also refer to other people".

French Europe Minister Pierre Lellouche obviously springs to mind...

Sarkozy: "Barroso can't tell us what to say!"

Barroso: "I've the right to express my opinion, because I'm a member of the European Council myself. And I even have a special statute [...] We have done everything to help you with the European Parliament, which is furious on this issue. Let's not turn all this in an institutional quarrel. That would be excessive".

Berlusconi: "We need to silence the Commissioners!"

And the row reportedly terminates here, with Chancellor Merkel suggesting they move on to a different topic.

Keeping the dream alive

One of the more interesting aspects of EU politics at the moment is the crumbling Franco-German axis. The frictions between Nicolas Sarkozy and Angela Merkel – which are well documented by now - defined today’s EU summit in many ways .

As we outline in a new report published yesterday, Sarkozy wants an ‘economic government’ for the 16 eurozone members (meaning more influence over the ECB and possibilities to put pressure on Germany to stimulate domestic demand), while Merkel is pushing for tougher budgetary rules, backed by sanctions, but want them done primarily at the level of all 27 member states - fearing the politicisation of monetary policy if France gets its way.

Both the French and the German press seem to agree that Merkel now has the upper hand – and the conclusions from today’s Summit bears the Chancellor’s fingerprints.

Sarkozy and Merkel seemed to reach an uneasy – and just about face-saving – compromise earlier in the week, saying that “The natural frame for economic governance is at 27.” They also agreed on the possible need for Treaty change to introduce tougher sanctions to underpin the stability pact.

But tensions still persist. Sarkozy appears to be clinging on to his idea of an economic government for the eurozone. At a press conference following today’s summit, he said of his drive towards an economic government:

We are only at the beginning of the concept. Only four months ago, the words ‘economic governance’ were taboo. But the idea is progressing…The idea of economic government is not only about dealing with budgetary issues. It will allow us to put into place a strategy for competitiveness in several domains, such as research, social rights and universities.

He went on,

There will be sanctions for those who do not fulfill their commitments on debt. Fines are not the best solution. Together with Angela Merkel, we support the withdrawal of voting rights…Several countries want the sanctions to be the same for all member States […] Sanctions and obligations must be tougher for Eurozone countries.

Not the strongest stuff ever to come out of Sarkozy, but it still shows that he’s probably not going to give up on his dream of a euro economic government just yet – and that a new grand bargain between the Germans and the French won’t be achieved so easily this time.

Managing expectations over an English breakfast

David Cameron has today participated in his first EU summit and has secured a preliminary assurance (assurances are never quite for certain in EU politics) that Britain will not have to submit its national budget to the Commission before it goes to the UK Parliament. At the same time, sanctions for violating the Growth and Stability Pact will primarily apply to countries in the eurozone. The actual proposal for an ‘EU economic government’ (which some EU leaders still insist on calling it) won’t be tabled until October, so there’s still a bit to play for – particularly on whether some of these proposals will be based on Qualified Majority Voting (meaning no veto for Cameron) or unanimity. The Commission, which initiates the legislation, has arbitrarily changed legal basis before, so nothing is for sure.

But this is definitely a fight that David Cameron can win – which is probably why the he chose to focus on it in the run-up to the summit. The draft conclusions (which helpfully are always available on the Danish Parliament’s website a few days before the Summit but still not through the UK Parliament - will that change now?) made this clear. As ever, managing expectations is key in politics. The pre-budget report, which is published in December in the UK, offers a convenient way out for the UK government and is the item that presumably will be ‘peer reviewed’ by the Commission and other national treasuries.

In fact, this has turned out to be the most uneventful EU summit in years – the most exciting event appears to have been that Commission President Jose Manuel Barroso served Cameron an English breakfast in order to make him feel at home (was Fredrik Reinfeldt served Swedish oatmeal?).

But remember, it’s been a very dramatic Spring and it’s hard to rival the drama of the “Super Weekend” back in May, when the ECB lost its independence and European taxpayers became liable for some €500 billion in eurozone bailout loans.

You have to give Cameron and George Osborne credit though. They’re in a very awkward position, simultaneously having to maintain peace within the coalition, keeping their backbenchers at bay and convincing their European partners that they’re not the devil incarnate. So far they’ve managed that balancing act exceptionally well. How long that will last is a different matter – as Benedict Brogan points out in today’s Telegraph. A number of run-ins are looming – the EU budget, UK taxpayers’ exposure to the bailout package and regulations to rein in the City.

Under the surface, of course, there are issues in the summit conclusions that should worry the Cameron government. The conclusions call on EU leaders to adopt the AIFM Directive “before the summer”. As we’ve noted before, for various reasons, passing this directive in a flawed form would land a blow to the UK economy and national interest.

The conclusions also call for “the Council and the European Parliament to rapidly adopt the legislative proposals on financial supervision to ensure that the European Systemic Risk Board and the three European Supervisory Authorities can begin working from the beginning of 2011.”

This proposal gives three new EU supervisors the power to overrule national regulators on financial oversight and technical standards. The Council and European Parliament are currently working out the details in negotiations. The Council’s version is significant (and transfers some supervisory powers from the UK to Brussels) – but the European Parliament’s proposal is potentially dynamite. It would create an effective single European regulator, located in Frankfurt with the power to make decisions over the recapitalisation of banks, for instance. According to the proposal, the FSA would be an “agent” of this new supervisor - not the other way around. By any definition, this would mean a transfer of powers.

It probably won’t be as bad as the EP’s draft but it will be very difficult for the UK to compltetly hold its position on these proposals – a legacy left by the previous Government.

Indeed, there are many EU summits to go before the UK’s coalition experiment is over and they will certinaly be tougher than this one.

EU 'solidarity' in action

As details of a possible bailout plan for Greece, which could emerge from tomorrow's EU summit, are leaked, it is becoming clearer that 'solidarity' for some EU leaders is not a one way street.

And we are not necessarily referring to German demands for renewed fiscal discipline in exchange for financial aid to Greece.

Instead, Reuters is reporting that France and Germany are trying to land plum defence contracts from Greece. Under the headline "Broke? Buy a few warships", the article reports that, in an unexpected twist to the Greek debt crisis, France and Germany are pressing their beleaguered neighbour to buy six frigates, 15 helicopters and up to 40 top-of-the-range Rafale fighter aircraft (pictured), even as the country struggles to get its public finances in line.

The article quotes an advisor to the Greek PM George Papandreou saying: "No one is saying 'Buy our warships or we won't bail you out', but the clear implication is that they will be more supportive if we do what they want on the armaments front".

Possibly not the kind of solidarity that Mr Papandreou had in mind when he said he was expecting EU solidarity.

Bang on the head

The EU's finance ministers, and a handful of heads of state, are meeting today in another attempt to come up with answers to the 'Greek question'. No details are expected to be announced, although an agreed declaration will give Greece a month to get down to business and deliver real deficit cuts (it's unclear what the EU will do if these cuts aren't delivered).

Apart from various wild swipes at the 'markets', EU leaders seem to be in disagreement over the involvement of the IMF in a possible Greek bailout. Sweden's able Finance Minister Anders Borg is one of the biggest proponents of a strong role for the Washington-based outfit, making several comments to that effect in the last week (in addition to refusing to rule out a role for non-eurozone countries in a rescue operation).

But Jean-Claude Juncker, the Luxembourg PM and arch-federalist who heads the group of eurozone finance ministers, won't have any of that. He apparently declared Borg's call for greater IMF surveillance and monitoring of Greece to be an "absurd" irrelevance "fuelling by Anglo-Saxon voices" seen as hostile to the shared currency. "If California had a refinancing problem, the United States wouldn't go to the IMF", he said.

Well, California to the US is not exactly the same as Greece to the EU - although in Juncker's world it probably should be.

As a side, according to Swedish news site Europaportalen, Juncker was seen banging Borg jokingly on the head with a copy of the Financial Times on their way in to yesterday's summit. When arguments aren't enough to persuade...

The answer to everything: more summits

It seems that yesterday was a rather gruelling day for EU leaders with hours of squabbling over how to handle the looming Greek tragedy. Then cue left enters EU President, Van Rompuy, who, we assume, wanting to lighten the atmosphere, decided to announce that he wants to triple the number of Commission summits from four to 12 a year!

Why oh why must the EU's answer to everything be to call a pow-wow at which they can take yet another group picture to set on their mantelpieces?

It is a frustratingly common trend for European leaders to equate summits with power. Remember that rotating Spanish President Zapatero is organising no less than fourteen of them for his six month stint. But there comes a time to admit that quality and not quantity should be the key - as the by now infamous 'Obama snub' made embarassingly clear.

By the way, Van Rompuy seems to be on a bit of a roll, holding court in an old library and calling for an EU 'economic government', in addition to costing EU taxpayers some £20 million a year.

As we've argued before, it would be a mistake to write this guy off as a non-factor in the EU elite's pursuit of ever closer union.