Scammer
Banned
EU leaders chat before a summit on December 13.
European leaders last night approved an amendment to European Union treaties to create a new bail-out system for debt-laden countries, but divisions over other measures to halt the eurozone crisis appeared to harden at their year-end summit.
The amendment, which must be ratified by all 27 member states, allows for eurozone countries to create a permanent rescue fund in 2013, the most concrete change in EU institutions since the debt crisis began threatening the single currency early this year.
But in spite of calls by leading officials, including the head of the European Central Bank and International Monetary Fund, for a more immediate Europe-wide response to the crisis, a core group of northern, fiscally prudent countries resisted calls for short-term changes to the EU response system.
Instead, senior officials from these countries -- including Germany, Finland, the Netherlands and Sweden -- have insisted that the EU re-emphasise fiscal austerity in so-called "peripheral" members and quickly pass new budgetary rules that would fine profligate countries.
The German government has taken the lead on this issue but has come under fire for being "un-European" . But heading into a pre-summit caucus of centre-right leaders, Angela Merkel, the German chancellor, did not appear ready to back down.
Moreover, leaders from other northern European countries echoed the German sentiments more loudly than before.
In addition to Germany, leaders from other countries in northern Europe began to echo the sentiments more loudly before a summit debate over near-term measures, which was scheduled to be held Thursday night.
"Instead of publicly philosophising about all kinds of ideas to cure crises, we must actually start preventing them," said Mark Rutte, the Dutch prime minister.
Ideas for near-term solutions have been floated ahead of the summit, including an Italian-Luxembourg plan for Europe-wide bonds; Belgian advocacy for increasing the size of the current €440bn eurozone bail-out fund; and support by Jean-Claude Trichet, the ECB chief, for using the bail-out fund to buy bonds from at-risk countries.
The strong stance taken by the northern countries makes it more likely that the only near-term tool at the EU's disposal, short of full-scale bail-outs, will be the ECB programme of using its own balance sheet to buy sovereign debt.
The ECB appeared to prepare itself for such a change by announcing on Thursday that it would nearly double its capital from €5.8bn to €10.8bn by the end of 2012, a move interpreted as giving the bank greater ability to keep buying distressed bonds of countries such as Greece, Ireland and Portugal.
"Traditionally, the northern countries see the situation similarly and I believe there's no miracle which we should wait for," said Jyrki Katainen, the Finnish finance minister. "If you have more expenditures than income, then you have to adjust it."