The Germans, who have argued for a long slog toward austerity and more European economic integration to address the crisis, appeared to open the door to a short-term plan that could tap Europe’s bailout fund to bring down soaring borrowing costs for Spain and Italy and bolster market confidence. As of early Friday, several proposals on how to do that were being weighed.
Leaders were also debating more radical steps toward European integration, including the establishment of a banking union and a European Treasury that could hold sway over national budgets. But the officials were not set to endorse timetables for rolling out the majority of these grand plans. They were working on an outline for more negotiations, given that many euro-zone nations — particularly Germany and France — have very different notions of how integration should take shape. Early Friday, French President Francois Hollande told reporters in Brussels that discussions on the longer-term fixes were postponed until October.
The leaders were, however, trying to flesh out at least one proposal — putting in place a regional supervisor for European banks, as well as a joint-deposit insurance program, by next year.
With the 21
2-year-old debt crisis escalating, euro-zone leaders are under pressure to come up with shorter-term solutions, and they endorsed in principle a program to pump about $150 billion worth of stimulus into the regional economy. While generally welcomed by analysts, the move is widely seen as unlikely to have a major effect on the crisis. Less than 10 percent of the $150 billion would be newly committed cash, with the majority coming from an existing pool of European Union structural funds that would be redirected to fostering youth employment and other job-creation programs.
The talks, however, appeared hard-going, with even the agreement on modest growth measures — largely mapped out days ago — dragging on for hours. Spain and Italy reportedly balked at approving the package unless it was paired with emergency relief for their economies. Herman Van Rompuy, president of the European Council, made up of the region’s heads of government, seemed optimistic that a broader deal would be reached by Friday. But, he said, “we haven’t yet finished our work.”
More importantly, the leaders were negotiating ways to tamp down Spanish and Italian borrowing costs. Under one option, Europe’s rescue fund would periodically buy up to 50 percent of the nations’ newly issued government debt. Under another, the fund would provide insurance to bond investors against possible losses.