EU enters do-or-die summit to save euro
European Union leaders open a make-or-break summit Thursday aiming to resolve a crippling debt crisis as French President Nicolas Sarkozy warned there would be no "second chance" to save the eurozone.
Sarkozy sounded a shrill warning as leaders began gathering in Brussels, saying that Europe risked an "explosion" if the summit failed.
Amid growing divisions between the eurozone and non-euro states like Britain and Poland, EU leaders have to find hard cash to convince investors they can stand behind weak links Italy and Spain.
The two-day Brussels summit begins at 7:30 pm (1830 GMT), after closed-door talks between a club of top EU powerbrokers, including the leaders of Germany and France, the head of the European Central Bank (ECB) and three top eurozone officials.
At the heart of the drama is a bid to change the EU's treaty to enforce budgetary discipline, but this is causing consternation across the 27-member bloc as the club's demands encounter a rising number of legal and political obstacles.
Among the biggest of those obstacles is Britain's refusal to submit EU-wide treaty changes to a referendum that the government would expect would fall.
Prime Minister David Cameron has stressed that powers cannot pass from London to Brussels without a referendum.
The European Central Bank (ECB) cut interest rates and made access to funding for banks easier again in the run-up to the summit, but its chief Mario Draghi also dampened any hopes his institution would lend assistance on a large scale.
"Governments must do their utmost" in terms of pushing through financial and structural reforms, Draghi said. "The ultimate decisions are in the hands of leaders."
Draghi's apparent reticence to buy up the bonds of distressed countries, along with growing pessimism at the chances of a successful outcome to the summit, pushed down European stocks in late Thursday trading, with the Italian market shedding 4.29%.
"If we don't have an agreement on Friday, we will not have a second chance," French President Nicolas Sarkozy warned at negotiating strategy talks among conservative allies in the French city of Marseille earlier in the day.
"Never has the risk of Europe's explosion been so great," he added.
With backing from Spain's incoming premier Mariano Rajoy, German Chancellor Angela Merkel pleaded for "understanding" from London, Warsaw and others threatening to turn the treaty negotiations into a messy battle over old scores.
"I ask for understanding from those who do not have the euro," she said en route for Brussels.
"We must send a strong signal to the outside. Words alone are not enough, we need more ties, we need treaty changes," she said.
Cameron's government also wants to ring-fence the City of London's financial sector from future EU regulation, including plans for new taxes, a demand that failed to impress eurozone chief and Luxembourg Prime Minister Jean-Claude Juncker.
"If we can't build anything solid within the 27, better to build something solid within the 17," Juncker said before adding his arrival in Brussels that Germany and France were "going in the right direction" with their plans.
Berlin and Paris want to impose stricter fiscal rules including legal or constitutional limits on deficits and automatic penalties for eurozone nations that overspend.
They also propose a "new, common legal framework" to boost financial and labour market regulation, the harmonisation of the corporate tax base and the imposition of a tax on financial transactions.
The summit is facing tough obstacles, officials said, not least Germany's refusal to settle for anything short of full treaty change.
The pressure is on after ratings agency Standard & Poor's on Wednesday put a number of large European banks on review and placed the European Union on watch for a downgrade of its AAA credit rating -- just days after it issued an identical warning to nearly all eurozone countries.
Amid fears the eurozone's woes could trigger a global economic downturn, US President Barack Obama spoke by telephone with Merkel on Wednesday, urging a "lasting and credible solution" to the crisis.
"We do need a plan to rally behind in order to know the way forward," US Secretary of State Hillary Clinton added Thursday at NATO talks in Brussels.
Even Pope Benedict XVI weighed in, saying Italy and Europe as a whole were experiencing a "difficult time."
Swedish Prime Minister Fredrik Reinfeldt said treaty change was not the answer needed at this summit, instead calling on the eurozone to bolster its financial firewall.
Officials are working on a plan to boost rescue funding by funnelling loans from national eurozone central banks to the International Monetary Fund. This could raise 200 billion euros ($266 billion) towards a trillion-euro target set at the last EU summit.
On arrival for pre-summit talks, IMF chief Christine Lagarde pledged that her institution would "participate" in the eurozone's efforts, calling for "decisive" and "coordinated" action.
© 2011 AFP