German Chancellor Angela Merkel faced pressure Wednesday in Brussels to soften her economic austerity stance that threatens to push Greece out of the euro currency zone.
Leaders of 27 European Union countries discussed ideas on how to spur economic growth across the bloc and solve the European currency crisis during a dinner summit in the Belgian capital.
France and Germany, once unified in pushing the tough measures, are at odds since France's new president, Socialist Francois Hollande, took office earlier this month.
Mr. Hollande is urging economic growth as a way out of crisis instead of austerity measures alone. The German leader said she was willing to look into ways of helping Greece, but rejected a call for eurobonds — jointly pooled eurozone debt — saying that they would help stimulate growth in the eurozone.
Ahead of the meeting, former Greek prime minister George Papandreou said this was a “make or break” moment for Greece and for Europe.
“We have made major sacrifices, because we want to see a transparent Greece, a competitive Greece, a dynamic Greece, and a just Greece. And we want to remain in the euro. But we also need time and understanding, and we need understanding that this is a wider crisis. It is a crisis where we need to go beyond name-calling and scapegoating (blaming each other) and we need to collectively pull our strength.”
Greek Socialist leader Evangelos Venizelos said that the situation in Greece is very fragile and expressed hope that with the support of Europe's Socialists, a solution can be found.
Europe's leaders are not expected to come up with any concrete plan of action before new Greek elections in June. If anti-austerity politicians win out, Greece may have to leave the 17-member common currency zone.
Klaus Larres is a professor of international relations at the University of North Carolina at Chapel Hill and an expert on European integration. Larres told VOA that Greece may be forced to leave the eurozone regardless of the election results because international creditors will stop financing the country if it does not commit to harsh debt-reducing measures.
“That will mean an escape from the country by all investors in Europe and all global investors. A lot of Greek people will withdraw all their funds from the Greek banks — their euro savings — before the drachma is introduced, and it will lead to collapse of the Greek banking system and also the Greek economy. It will make imports into Greece extremely expensive because the new drachma will be devalued at a considerable extent thus exports into Greece will become rather expensive, including medicine, oil, all other goods, the Greeks are actually very dependent on and it will lead to a severe crisis in Greece.”
Larres says European leaders are preparing contingency plans for a possible Greek exit from the currency zone, which would affect international banks and hurt the global economy.
Uri Dadush, an economist with the U.S.-based Carnegie Endowment for International Peace, told VOA he believes the austerity measures will prevail.
“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.
Leaders at the summit may also consider assisting large and troubled European banks like those in Spain that are struggling under the economic crisis.
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