What’s being debated is nothing short of a reordering of the European political and financial system. Governments would transfer some of their sovereign power over spending and taxes to a central authority, responsibility for individual government debt would be collectivized across the 17 euro nations, and — potentially — the European Central Bank would take a more aggressive role in shoring up the regional economy.
It is the type of broad and fundamental approach international markets and outside parties such as the Obama administration have urged since the beginning of the crisis. Stung by market turmoil that is threatening economies from the United States to China, European officials acknowledge that the options have narrowed.
“We have arrived at a point in time where serious choices and commitments have to be made,” Olli Rehn, European economic affairs chief, told the European Parliament on Wednesday as he sketched out the broad set of plans leaders will debate in coming days and — if all goes as planned — approve at a summit on Dec. 8 and 9.
“The union will have to be completed through much deeper integration, or we will have to accept a gradual disintegration,” he said. “Our choice is clear.”
In one-on-one lobbying sessions, a series of parliamentary votes and speeches, and a high-level summit — all expected by the end of next week — officials say they hope to reach consensus on their most ambitious proposals yet. Measures being considered would pull the 17 nations that use the euro into a firmer economic union and more fully deploy the resources of Germany and the European Central Bank behind the euro’s survival.
Those sorts of ideas have been part of the European debate since the region’s financial system began unraveling two years ago with the disclosure that the Greek government was almost broke. But until now those ideas have foundered amid the complex politics of a region that has attempted to unite societies and economies as divergent as that of Greece, Mediterranean and statist, with that of hyper-competitive Germany. Neither has been particularly enamored of helping, or accepting help, from the other.
Key leaders such as German Chancellor Angela Merkel and French President Nicolas Sarkozy plan major addresses to their national parliaments this week to spell out some of the sensitive choices they will confront when the 27 members of the European Union gather in Belgium next week.
New political leaders in Italy and Greece are expected to receive approval for their budget and economic growth plans so they can arrive at the summit with fresh mandates for change.
Important bilateral sessions will attempt to lay the groundwork politically. On Friday, Sarkozy will meet with U.K. Prime Minister David Cameron. As head of the largest of the 10 European Union countries that do not use the euro, Cameron has been an increasingly vocal critic of euro-zone leaders and has been concerned that the 17 euro nations may develop policies that put his country at a disadvantage.
The board of the European Central Bank, meanwhile, will meet in Frankfurt on Dec. 8, and the outcome of that monthly session will be watched as a possible turning point. The bank has tried to steady the European economy by providing unlimited loans to banks and buying the government bonds of distressed countries such as Greece and, more recently, Italy and Spain.
The issue now is whether the bank will do more, and many European officials hope that a political commitment at the summit to a closer economic union will make the ECB comfortable taking a bolder stance. Some have urged the bank to deploy a financial “bazooka” in the form of a promise to invest in government bonds at a level that holds down borrowing costs for Italy and Spain; others argue the bank could stop short of that but still prove decisive if, for example, it eased the lending terms for European banks, or began letting them borrow money for up to three years as a way to ensure that the financial system is not facing a near-term collapse. The ECB currently lends to banks for up to one year.
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