After a series of meetings about the Libyan crisis, the euro zone's leaders will meet at 5pm today to discuss the European Financial Stability Facility (EFSF) and a package of reforms to monitor and reduce national debt.
Pressure is mounting to up the facility's 440bn ceiling as borrowing costs for the euro zone's most indebted countries – Portugal, Spain, Ireland and Greece – continue to rocket and Moody's downgraded Spain's credit rating by one notch yesterday.
National resistance
Indeed, the pressure is coming from all directions. Regional elections in Germany and parliamentary debates in both Finland and the Netherlands affirm that leaders' hands are tied by discontent among their national electorates over the euro bailouts.
Germany's objections to bailouts have been known since the first loans were disbursed to Greece in May 2010. Now it emerges that both the Netherlands and Finland will resist attempts by Brussels to extract more money from them for the rescue facility, say EU diplomats.
The Dutch parliament reacted with surprise to the news that the Netherlands would be expected to provide another 20 billion euro for the EFSF, according to reports in Dutch newspaper Trouw.
In addition, there was outrage at a proposal originated in Berlin to lower wages and to raise pension ages and tax revenues. The Franco-German 'competitiveness pact,' was presented to other eurozone nations at a summit in February.
The proposal, presented by Paris and Berlin as an attempt to complete monetary union with an economic union, has now been taken on by the European Commission in a watered-down version. But the draft EU paper has riled many member states fearful of too much Brussels and shrinking national sovereignty.
Finnish and Dutch opposition
"Brussels will not decide whether wages will rise, at what age we retire and whether we have to raise our corporation tax," Mark Rutte, the Dutch prime minister, told national parliamentarians at a debate on Wednesday.
Yesterday (10 March), the Finnish parliament's Grand Committee, which deals with EU policy, voted against giving its government a mandate to increase the contribution of Finland's loan guarantee in the EFSF.
Finland's current share is €8 billion and there has been talk that this amount could double. The Finns appear to be deadly serious, as the vote was taken even despite the government having not yet formally asked for a mandate.
Growing resentment of the EU in Finland is playing into the hands of the country's burgeoining anti-euro party, True Finns, and their leader, Timo Soini, who is being portrayed as a dark horse in upcoming national elections this spring.
"Now [we must help] those people who have lied – this is the suspicious mind up north, because quite many people think the south is milking the cow," Soini was quoted as saying about euro bailouts.
Lastly, the German electorate has made its objections to being Europe's paymaster loud and clear. Their resistance is now bleeding into regional elections, where, in the past, EU affairs have scarcely mattered.
The German chancellor's Christian Democratic Union (CDU) party has suffered a series of setbacks, including losing their seat in Hamburg, previously traditional CDU territory.
Observers lament that Merkel will take an untypical backseat in talks today as she faces another crucial regional poll in Baden Wuerttemberg on 27 March, two days after an EU summit aimed at increasing the EFSF's capacity.
Economic analysts rage that politicians have not got their priorities right.
"It would not be an exaggeration to say that the future of Europe is being increasingly decided by and held hostage to parochial, populist, ill-informed and short-termist politics in certain member states," argues Sony Kapoor, an economic adviser at the Re-Define think-tank.
Zsolt Darvas from the Bruegel think-tank agrees that markets need to be reassured now and stresses that resolving Europe's bank liquidity crisis and national insolvencies should be ministers' main priorities right now.
"Ministers will need to reassure markets that they have found a solution for their liquidity problems. Problems in th banking industry should be cleared first and then they should tackle Greek solvency."
"They need to increase the effectiveness of the lending capacity," he added.
