German Chancellor Angela Merkel has resisted pressure for common eurozone bonds or a more flexible use of Europe's rescue funds but agreed with leaders of France, Italy and Spain on a €130 billion package to revive growth.
After four-way talks in Rome's Renaissance Villa Madama on Friday (22 June), Italian Prime Minister Mario Monti said the European Union should adopt pro-growth measures worth about 1% of the region's gross domestic product at a EU summit on 28-29 June.
But the three others made no perceptible progress in pushing Merkel, who leads Europe's most powerful economy and the main contributor to its rescue funds, towards mutualising Europe's debts or using existing bailout resources more flexibly.
"Growth can only have solid roots if there is fiscal discipline, but fiscal discipline can be maintained only if there is growth and job creation," Monti told a joint news conference after talks that lasted just an hour and 40 minutes.
The measures, already in the works in Brussels, include increasing the European Investment Bank's capital, redirecting unspent EU regional aid funds and launching project bonds to co-finance major public investment programmes. No new steps were announced on Friday.
The four leaders did agree to move ahead on creating a tax on financial transactions even though not all EU members will be on board. About a dozen EU states support setting up the so-called "Tobin tax", more than the nine required to go ahead as a group within the EU, a French presidential source said.
Merkel stands firm on Eurobonds
Merkel made no mention, however, of any move towards mutualising past eurozone debt or new borrowing.
French President François Hollande voiced impatience with Berlin's reluctance, saying it should not take 10 years to create jointly underwritten eurobonds.
He said greater solidarity was needed among member states before they abandon more sovereignty to EU institutions.
"I consider eurobonds to be an option … but not in 10 years," Hollande said in a direct challenge to Merkel. "There can be no transfer of sovereignty if there is not an improvement in solidarity."
The German position essentially amounts to the reverse. Merkel argues that members of the 17-nation currency union must transfer control over national budget and economic policies to Brussels before Germany would consider common debt issuance.
"Liability and control belong together," she said, citing as an example that EU treaties ruled out letting eurozone rescue funds lend directly to Spanish banks because only the Spanish state could enforce conditions on the banks.
The contrasting comments left much work for diplomats to produce a convincing blueprint for closer fiscal and banking union at a full EU summit on 28-29 June, which Monti called a defining moment in the crisis.