EU talks of softening stance on weak nations

European Commission President José Manuel Barroso, right, ushers Greek Prime Minister Panagiotis Pikrammenos in Brussels. EU leaders gather at a summit to discuss ways to keep the debt crisis from spiraling out of control. YVES LOGGHE / AP
European Commission President José Manuel Barroso, right, ushers Greek Prime Minister Panagiotis Pikrammenos in Brussels. EU leaders gather at a summit to discuss ways to keep the debt crisis from spiraling out of control. YVES LOGGHE / AP
Posted: May 25, 2012

BRUSSELS — Europe’s leaders gathered in Brussels under pressure to soften their tough-love approach to the weaker economies among them. With Greece locked in political chaos, much bigger Spain warned that it couldn’t stay afloat without help. Stock markets around the world tanked Wednesday over fears that European leaders won’t have the political will to act.

The summit will have to fight multiple fires: political uncertainty in Greece that could see it renege on commitments made to secure rescue loans; rising borrowing costs in Spain and Italy that could force them to seek bailouts; and sluggish growth across the region made worse by budget cuts meant to reassure markets about high debt.

“What we need is a decisive plan for Greece, and we need decisive plans to help get the European economies moving,” British Prime Minister David Cameron said as he headed into the summit of leaders from the 27 countries of the EU, which includes the 17-member eurozone.

“But if we’re not going to keep coming back and back to meetings like this, we also need to deal with some of the longer-term issues at the heart of running successful single currency — having a bank that gets behind that single currency, having coherent long-term plans to make sure that single currency is coherent,” he said.

Leaders have said that everything will be on the table, including a discussion about whether 17 countries that use the euro should spread the risk and borrow money jointly — issuing “Eurobonds.” This would mean every country could borrow funds at the same rate, substantially lowering the costs for the more indebted countries.

But expectations were low for agreement on concrete measures to boost growth and stability in the eurozone. Europe’s main stock indexes plunged more than 2 percent. The euro fell 0.8 percent to $1.2561, its lowest in nearly two years.

Greece is in its fifth year of recession, and many argue it cannot hope for a recovery if it sticks to the deal.

In a recent election, neither of Greece’s two main parties, both of which support the bailout deal, fared well. Instead, minor parties that are threatening to renege on the commitments saw their popularity surge. A new round of elections is set for June 17.

If the Greeks pick an anti-bailout government and renege on the terms of the bailout, Greece could be forced into a messy exit from the euro. That could fracture the common currency and rattle global financial markets.

Slow growth and uncertainty over Greece are making things worse for other struggling eurozone countries, like Spain, whose borrowing rates are high and rising because of fears that its government finances might be overwhelmed by the costs of rescuing its ailing banking sector.

In a meeting early Wednesday with French President Francois Hollande, Spanish Prime Minister Mariano Rajoy warned that his country couldn’t continue much longer with its current high borrowing rates. High borrowing rates are at the heart of Europe’s crisis and are what caused Greece, Ireland, and Portugal to seek bailouts.

|
|
|
|
|