This week the leaders of all EU countries will meet for a summit and of course as usual the debt crisis will be up for discussion. According to the draft agenda the Council will focus its discussions on initiatives to boost growth and jobs including structural reforms while aiming to agree an “EU growth agenda” based on discussions which took place at the previous informal meeting held on May 23. However, discussion will probably concern proposals put forward at last Friday’s four party summit in Rome between Merkel, Monti, Hollande and Rajoy concerning a EUR 130bn growth plan and how to finance it. Seeking greater pan-EU involvement in finding a solution, Euro-zone countries will seek to involve their non-euro counterparts. In addition, increasing the EIB’s lending capacity and employing unused EUfunds have been suggested as sources of finance. In addition, discussions concerning a the new plan for increased fiscal integration and a banking union will be on the agenda and considering its potential impact on national sovereignty it will be very interesting to observe the reactions on this plan. Increased fiscal integration is probably inevitable to keep the euro. However, summit negotiations are unlikely to address subjects such as common euro bonds or a more flexible use of both temporary and permanent rescue funds, as leaders have opposing opinions on these issues, which was further underlined in a speech by Merkel on Monday. While expectations regarding the forthcoming summit are probably low based on previous experience, risks suggest a disappointing outcome. Consequently, this week’s meeting is likely to reinforce negative pressure on the common currency.
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