EU LEADERS are facing into five days of high-stakes politicking as they embark on a final drive to reach a decisive deal by Friday night to calm the debt crisis.
Much remains in the balance, however, as German chancellor Angela Merkel pushes for changes to the EU treaties and the European Central Bank frets over a big new intervention in debt markets.
The likelihood that the chancellor will get her way increases the prospect of another EU referendum in Ireland, something Taoiseach Enda Kenny has been resisting for months.
As leaders prepare for the summit in Brussels on Thursday and Friday, the talks come amid concern that the single currency could implode if they fail to eliminate uncertainty.
With Italy and Spain struggling to gain market confidence, leaders within and outside the euro zone are concerned that any failure to seize the initiative could see the crisis spiral out of all control. “This week, the stable future of the euro and thus the economic recovery in Europe and employment are at stake,” said EU economics commissioner Olli Rehn. “This calls for a convincing package of measures from the European Council,” he said in reference to the summit.
By adopting tough new measures to enforce EU budget rules, the leaders hope to convince the ECB to escalate its bond-buying and lend to the IMF so it can deepen its involvement in the rescue effort.
While the anticipation of a new pact helped rally markets, EU officials say entrenched divisions over the scope and pace of the new plan still linger.
In a sign of increased international concern, US treasury secretary Timothy Geithner meets this week with French president Nicolas Sarkozy, ECB chief Mario Draghi and Italian prime minister Mario Monti.
Mr Sarkozy remains at odds with Dr Merkel over key elements of the plan and they meet today in Paris to seek a compromise. In spite of their differences they are agreed on the need for treaty change, which means the process is probably unstoppable.
However, EU officials believe the tension between Berlin and Paris now threatens the Deauville pact in which Dr Merkel and Mr Sarkozy resolved to move together to set the parameters of Europe’s response to the crisis. The chancellor and many other governments say the EU institutions should have the right to scrutinise and reject draft budgets, but Mr Sarkozy has been insisting that the scheme should operate as an intergovernmental arrangement outside the framework of EU law.
Dr Merkel still says private investors should bear losses in future bailouts. However, Mr Sarkozy and many other leaders – the Taoiseach among them – say any defaults should be confined to Greece.
