Euro: the road towards one-for-all economic governance
French President Nicolas Sarkozy and German Chancellor Angela Merkel meet Tuesday to discuss strengthening eurozone economic governance as its debt crisis threatens to hit major countries.
Sceptical markets have pushed up borrowing costs for Italy and Spain -- forcing the European Central Bank to intervene -- and the prospect of rising bailout costs has even led to concerns about France's credit rating.
Here are the ideas in play:
France and others want EU president Herman Van Rompuy to wield new powers in an institutionalised Eurozone Council. Seen as a wily operator who can coax concessions from the most reluctant prime ministers, he would become the euro's voice in financial and economic matters.
Eurozone countries have committed to helping each other out through emergency rescue funding, first via the temporary 440-billion-euro European Financial Stability Facility (EFSF) then the permanent 750-billion-euro European Stability Mechanism (ESM) from 2013. New capacities to allow governments to tap the facilities in different ways were agreed last month, but must still be ratified by all 17 countries. Whether these rescue mechanism have enough funds is forever being debated.
Eurobonds issued by an eurozone country would be guaranteed by all 17 that share the euro. This would allow to struggling countries such as Greece borrow at significantly lower rates. Some believe this offers the surest way to stabilise the monetary union. Germany, Europe's top economy with the lowest borrowing costs, opposes eurobonds as it says that without strict fiscal controls on eurozone governments eurobonds would allow countries to avoid making tough economic adjustments.
EU states and the European Parliament are still haggling over new laws intended to force governments to keep their fiscal policies in synch, with common parameters covering everything from debt to taxation -- or face financial penalties. This was meant to be completed in the first quarter of the year, but key states stand accused of seeking to dilute the the sanctions. Markets will judge the final statutes on how much teeth these laws actually have.
© 2011 AFP