European leaders have been holding crucial talks in Brussels aimed at resolving the region’s debt crisis and keeping another recession at bay. They are pushing banks to accept that the Greek debt will never be repaid in full.
Any talk of Greece exiting the crisis has gone out of the window as record rioting continues to shake the streets of Athens. The EU leaders are putting pressure on banks to cancel losses on the huge loans to Greece – the latest news is the national debt of Greece will reach 181 per cent of GDP next year. The banks however are fiercely resisting these moves.
There have been plans for a European economic government with a single leader, and a new leak suggests that it might be created sooner than later and that EU leaders have agreed to create a European economic government with regular eurozone summits to enforce it.
Italian Prime Minister Silvio Berlusconi has reportedly refused any more national austerity measures, which has caused a row with Germany’s Angela Merkel. She pointed out Spain has taken these spending cuts, which means Italy can be expected to follow suit.
Discussions have also revolved around the amount required to recapitalize those European Banks deemed vulnerable to the crisis. The estimate of what will be required has ranged from €90 to 110 billion.
Meanwhile, France is insisting that the EFSF should be allowed to borrow whatever sums necessary from the European Central Bank to buy state bonds from eurozone countries to rescue any potential failures in the eurozone.
Germany, for its part, describes France’s standpoint as a violation of the Central Bank’s mandate. German officials say the whole eurozone project is starting to look like a single one-way flow of cash from Berlin to southern Europe.
Pierre Guerlain, a professor of political science at Paris West University Nanterre La Defense, says that the austerity programs Europe is trying to implement are not a solution to the crisis.
“Europe seems to be going from one summit to the next and solving nothing, although with a new discussion and debate around this summit, it seems that European leaders are getting closer to becoming realistic on some points, notably that with an austerity program in Greece it’s impossible for Greece to pay back its debt,” he told RT.
Speaking of the plans to establish a pan-European economic government, Pierre Guerlain believes that the chances of individual member states accepting Brussels’ control of their taxation policies and public spending are very low.
“I can’t see [EU] countries… would want to be totally dependent on decisions taken in Brussels,” he said. “There’s a dilemma: on the one hand, unity would be a good thing for a common currency. On the other hand, there are so many other issues, and I don’t think member states that are powerful enough, like France and Germany, would accept orders from Brussels. And even a country like Greece, which is a small country with a small economy, they don’t seem to be ready to accept taking all their orders from Brussels.”