EU Leaders Focusing on Eurozone Crisis at Summit

Posted May 23rd, 2012 at 2:30 pm (UTC-5)
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Leaders of the 27 nations that comprise the European Union have opened a summit aimed at solving the bloc's debt crisis.

The dinner summit in Brussels Wednesday will be dominated by increasing calls for growth measures, the creation of jobs and stimulating the troubled eurozone economy, which has been hit with grim news.

The EU focus has shifted from austerity to pro-growth policies since the election of Socialist Francois Hollande as president of France and the political stalemate in Greece, where voters rejected the political parties that agreed to severe budget cuts in exchange for a financial bailout package. Mr. Hollande's influence is at odds with German Chancellor Angela Merkel, who has led the austerity drive since the debt crisis began.

An economist with the U.S.-based Carnegie Endowment for International Peace, Uri Dadush, told VOA the austerity measures will prevail in the end because the markets will not finance current or increased levels of deficit.

“I think in the end, the austerity measures will prevail because that is the logic of the market. So my view is that the austerity policies for virtually every country in Europe mandated, because of the fact that the markets will not finance increased deficits and indeed they will not finance current levels of deficit. They want to see reductions. The markets have lost confidence.”

On the eve of the summit, the European Parliament agreed to a pilot program that would use nearly $300 million of so-called project bonds in 2012 and 2013 to finance about $5.8 billion of investment projects.

European Council President Herman Van Rompuy says no idea is unacceptable for Wednesday's summit, and that long-term solutions should be explored. Among the ideas expected to be raised are issuing so-called eurobonds, under which wealthier European nations would guarantee the borrowing costs of financially struggling nations. Ms. Merkel is adamantly opposed to eurobonds, a stance shared by Finland, The Netherlands and Austria.

Leaders at the summit may also consider assisting large and troubled European banks like those in Spain that are struggling during the economic crisis.

But no major decisions are expected to be made until another summit in late June, shortly after Greece holds a new round of elections.