Another week, another European summit. On Thursday, E.U. leaders will huddle together in Brussels to try and fix the euro zone. And no one has high hopes — financial markets are all tanking Monday because, apparently, they’re already gloomy about the outcome.
Why so much pessimism? One problem is that the leaders of the euro zone’s four biggest economies — Germany’s Angela Merkel, France’s Francois Hollande, Spain’s Mariano Rajoy, and Italy’s Mario Monti — can’t agree on what steps need to be taken to get Europe growing again. This Venn diagram from a new Exane BNP Paribas report (pdf) illustrates.
They all agree that growth is the answer. It’s just tough to see how they get there. In the middle are the handful of consensus items: The euro zone should get a tiny — possibly very tiny — stimulus by giving the European Infrastructure Bank more money. The E.U. will also slap a small tax on all financial transactions. And yet, as BNP Paribas notes, “the growth pact in its current form is likely to have a very limited impact on growth and hence is not a game changer.”
Meanwhile, there are plenty of other ideas to boost European growth, but it’s tough to get all four European leaders to agree. Hollande, Monti and Rajoy all want to carry out austerity measures at a more gradual pace, for instance, but Merkel is resistant. And Hollande has plenty of grand ideas (like “fiscal transfers,” in which richer countries would give poorer countries free money, essentially) that no else seems to like.
The BNP report also offers a broader preview of what to expect from this week’s summit. Many analysts expect that officials will approve the European Stability Mechanism, the new bailout fund (which is too small to save Spain and Italy should those countries get into bond-market trouble). They’ll also likely sign off on the modest growth package list above. But the real mystery is whether they’ll take additional steps — whether it’s giving Greece more flexibility in pursuing its deficit goals or pushing for a banking union. So far, few onlookers are optimistic.