Defining eurozone deal ruled out as Angela Merkel and François Hollande clash

 

A Franco-German clash over eurozone recovery tactics has ruled out a defining deal to solve the growing economic crisis at the latest EU summit in Brussels.

Eve-of-summit talks in Paris between the eurozone "big two" failed to bridge the gulf between German chancellor Angela Merkel and French president Francois Hollande over the balance between austerity and growth.

The pair agreed on the need for a 130bn euro (£104 billion) "compact for growth" expected to be adopted by all 27 leaders at the summit.

But Germany is resisting the idea of "mutualisation" of eurozone debt - pooling the debt burden to lower the risk. Mrs Merkel wants bail-out nations to meet tough new budget controls first and even then is reported to have ruled out anything more than taking a partial debt burden, saying: "I don't see total debt liability as long as I live."

The stand-off spotlights the key summit question: what strategy now will keep markets calm and give the EU a breathing space to get growth and jobs back on track?

EU officials said one crisis meeting among so many could not solve the problem, but summit chairman Herman Van Rompuy said in a letter to EU leaders: "The challenge for this European council (summit) is, more than ever before, to signal in a clear and concrete manner that we are doing everything required in response to the crisis."

Foreign Secretary William Hague said: "This is just one of a whole string of European meetings that have taken place this year. I think it is wrong to put too great an expectation on any one of those meetings.

"We do want the eurozone to sort out its problems and be able to stand together. Clearly they have a lot of issues to resolve."

Long term plans on the table call for a banking union, a fiscal union and - ultimately - a political union to shore up EU integration. But there are no proposed short-term fixes.

One EU official said: "Various overlapping initiatives are coming together at this summit. There is now clearly a systemic problem of confidence in the euro. Markets want to see a move to fiscal integration and we need to send a credible signal that the eurozone will go for integration, because that commitment, at this stage, would probably do as much to calm markets as throwing more money at the problem."

Another said: "The test of this summit will be, is it the one that turns the corner in restoring confidence in the euro?"

Prime Minister David Cameron, who has irritated some eurozone leaders with repeated calls on them to take the necessary action to solve the crisis, will again be urging the others on, particularly towards a banking union to reinforce the eurozone.

But he will emphasise that the UK will not be taking part.

European Commission president Jose Manuel Barroso said he expected all leaders to agree a "comprehensive package" of economic growth measures, including an increase in the lending capacity of the European Investment Bank to target job-creating infrastructure projects in member states, and a better-focused use of existing EU regional aid funds.

But deeper changes were also needed: "We can break this negative cycle now if we are bold enough to establish a strong and integrated financial framework."

Mr Van Rompuy will use the talks to set out long-term plans, including an effective eurozone "Treasury" to oversee the euro. He says he expected to have a timetable ready by the end of the year of the steps towards full integration, involving treaty changes if necessary.

What he has told leaders he wants, more immediately from this summit is "a common understanding amongst us on the way forward" for full economic and monetary union.

Asked if that would settle jittery speculators, an official said: "We are a bit off-piste, and what we do depends on what the markets expect."

PA

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Web Developer - Junior / Mid Weight

£15000 - £25000 per annum: Recruitment Genius: To support their continued grow...

Recruitment Genius: Marketing Data Specialist

£22000 - £25000 per annum: Recruitment Genius: They are the go-to company for ...

Recruitment Genius: Search Marketing Specialist - PPC / SEO

Negotiable: Recruitment Genius: This is an opportunity to join the UK's leadin...

Recruitment Genius: Sales Administrator

Negotiable: Recruitment Genius: This caravan dealership are currently recruiti...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test