EU summit to gloss over euro crisis

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On the cusp of another EU summit to address the Greek crisis and Europe's economic future, diplomats speak of a "shambolic union" while draft summit conclusions seen by EURACTIV boast progress. 

A summit in Brussels today (23 June) will attempt to move forward on a litany of disagreements including further Greek aid and reforms to a body of laws to tackle national debts.

But draft Council conclusions due for publication tomorrow, and obtained by EURACTIV, speak more of progress than do lawmakers involved.

Diplomats who have followed a two-year journey of economic reforms in countries riddled by debt speak of a "shambolic" reform process. 

Stories don't match

"There is a huge contrast between the enormous stakes and concerns at play on one hand and on the other hand the rather narrow step-by-step approach taken," said one diplomat, speaking on condition of anonymity.

However, Council conclusions tomorrow will pat EU countries on the back for steps they have taken so far or are about to take. 

"The European Council notes the clear determination of all member states to do everything that is required to fully implement the Stability and Growth Pact," read the conclusions.

This statement carries a hint of irony, diplomats point out, as countries, in particular France, are still reluctant to sign off on an overhaul of the Stability and Growth Pact, the newly-named economic governance package.

France, and to a lesser extent Italy and Spain, are reluctant to sign up to demands from the European Parliament, which is co-legislator of the overhaul, that Brussels has more say on countries' deficits, debts and imbalances.

In technocrat-speak, the countries' finance ministries and MEPs disagree on the use of Reverse Qualified Majority Voting (RQMV). This means that countries have to vote to save a country from automatic EU scrutiny or sanctions, the rationale being that countries are less likely to ignore problems when they have to take a formal vote.

The European Parliament wants to extend this voting procedure to an earlier stage in the process when countries have failed to heed European Commission guidelines to reduce debts and are on the cusp of receiving a second warning.

France is also worried that the Parliament wants to be just as tough on export-led economies which cause imbalances as on countries with unmanageable deficits and debts.

Greece on back-burner

To add to the delay in establishing better debt vetting, a decision on a possible second Greek rescue package to the tune of €120 billion has been deferred to an extraordinary meeting of finance ministers on 3 July to give the Greek parliament more time to approve an austerity package attached to the aid.

"It is hard to escape the view that the process has been fairly shambolically handled over the last few weeks," a diplomatic source complained, openly showing his frustration with the EU's handling of the Greek crisis.

What stress tests?

Diplomats also poured doubt on the usefulness of pending bank stress tests designed to determine the liquidity of the sector under potential scenarios of economic decline.

The June summit's conclusions will stress the importance of the completion of these tests "in full respect of the methodology and guidelines issued by the European Banking Authority".

One source in particular pointed out that the stress exercise did not include sovereign debt and scenarios of government restructuring, currently being undertaken in Greece, which would "weigh heavily on the credibility of the tests".

"I highly doubt they will change the terms of reference now," the diplomat added.

The summit conclusions also boast a "collective EU assessment of national measures foreseen by member states" under the European Semester, an annual six-month review of national budgets administered by the European Commission.

Striptease! 

However some diplomats from the EU new member states say they have been unimpressed by the European semester procedure and that they want it to have more teeth, like sanctions if plans are not implemented.

"We need to have a collective striptease!" said one diplomat from a smaller East European country.

The diplomat insisted that real discussions on national reforms would only take place when countries begin to speak to each other and not in a Commission-led review alone. 

Claire Davenport

US Federal Reserve Chairman Ben Bernanke warned on Wednesday (22 June) that much more than the future of Greece was at stake. "If there were a failure to resolve that situation, it would pose threats to the European financial system, the global financial system, and to European political unity, I would conjecture, as well," he said. "I think the Europeans appreciate the incredible importance of resolving the Greek situation," he added.

Italy's Foreign Minister Franco Frattini urged Europeans on Wednesday (22 June) to act "as soon as possible" to help Greece in order to prevent a contagion of the crisis to other countries. "To not intervene now in favour of Greece would risk a credibility crisis in the markets for the whole of Europe," Frattini told the Italian parliament. EU leaders should "respond to Greece's requests with a second aid package as soon as possible," he said.

A majority of European countries have been plagued by unsustainable debts and deficits since the onset of the financial crisis in 2008. A realisation that Brussels-based debt vetting of member states failed has prompted lawmakers to reform the process, the Stability and Growth Pact.

Several task forces, including one which worked under the leadership of Herman Van Rompuy, have attempted to rework how the EU prevents countries from spiraling into insurmountable debt, including further checks and sanctions.

These reforms are currently being held hostage by disagreements between the European Parliament and the EU's bigger countries, France, Germany and others.

The reform process has been overshadowed by severe debt crises in several countries including Greece and Ireland which have required urgent action. Greece is currently in the running for a second package of aid subject to a parliamentary endorsement of tough reforms.

  • Mid-July: European Banking Authority to publish stress test results.
  • 23 June: European Parliament to vote on economic governance package but will withhold final agreement for further talks with member states.
  • 3 July: Finance ministers to meet at extraordinary council to approve further aid to Greece.
  • July: European Parliament expects to have final vote on economic governance package.

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