SHARP DIVISIONS in the euro zone moved into the open yet again yesterday as Germany and Austria played for time against pressure to strengthen the single currency’s bailout fund.
There was little tangible progress when finance ministers gathered for their monthly meetings in Brussels, but high-level sources say the 17 euro countries face the threat of fresh market disruption if they do not strike a deal on a comprehensive rescue pact by the end of next month.
In anticipation of a final agreement at a summit on March 24th and 25th, the European authorities have scheduled a hectic series of mini-summits and ministerial meetings in the coming weeks as they try to settle their differences.
Centre-right leaders meet on March 4th in Helsinki at a gathering organised by the European People’s Party (EPP), Fine Gael’s European affiliate. This is one week after the Irish election but five days before the Dáil resumes to elect a new taoiseach.
A summit of euro zone leaders takes place on March 11th, finance ministers meet on March 14th and 15th, and, if no draft agreement is reached at that point, they meet again on March 21st.
Despite increased urgency in the debate, ministers remained as far apart as ever at their talks yesterday.
“They went around in circles,” said a diplomat of a meeting which started at breakfast and continued until lunchtime.
Still at issue are the funding arrangements for a new permanent bailout fund, the European Stability Mechanism (ESM), and the scope of its operational activities.
These may in turn determine the depth of reforms to the ad hoc rescue fund, the European Financial Stability Facility (EFSF), including lower interest rates for bailout recipients.
Relative calm on markets affords a measure of time for political debate on these questions but euro group chief Jean-Claude Juncker warned that the situation remained “worrying”.
Neither Germany nor Austria is willing in public to accept the requirement to enlarge the EFSF.
As he left for Berlin yesterday, German minister Wolfgang Schaüble said there was no reason to discuss reforming the EFSF, but said EU leaders could move with “lightning speed” if required.
Mr Schaüble’s Austrian counterpart, Josef Pröll, went further, saying there may be no need to boost the EFSF if the push for tougher economic governance rules and deeper competitiveness measures was successful.
“The question is whether this comprehensive package is enough of a signal to markets that the euro can be kept stable. If this is so, the pressure is gone to act on the EFSF now. If not, the EFSF needs to be improved, but I don’t see that at the moment.”
Such remarks went down very badly with Portugal, which is struggling to avert the threat that it might be forced to follow Ireland and Greece into an EU-IMF bailout. “The discussions are taking longer than desirable, and delays and hesitations affect the euro zone and the stabilisation on the euro,” said finance minister Fernando Teixeira dos Santos.
France and Germany are still pushing their proposal for a new “competitiveness pact”. This includes measures, resisted by Ireland and a small number of allies, to harmonise corporate tax rules.
Diplomats said many ministers expressed opposition to the endeavour, reiterating positions taken earlier by their heads of state and government.
