The top four eurozone countries were scheduled to meet in Rome yesterday to tackle the relentless debt crisis with France, Italy and Spain expected to put pressure on Germany to accept new measures.
Italian Prime Minister Mario Monti, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy will argue their case that a shift is needed in eurozone policy with German Chancellor Angela Merkel ahead of an EU summit in Brussels on Thursday and Friday.
Topping the agenda will be appeals for the eurozone to mitigate its German-led austerity drive with measures to boost growth and Monti’s call for the bloc’s bailout fund to intervene in bond markets.
The talks were set to begin at 2pm, with a news conference at 4pm.
Monti raised the stakes ahead of the talks, warning that failure to reach a deal at the EU summit would leave the bloc open to attack by speculators.
“There would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries,” he said in an interview with leading European newspapers including Britain’s Guardian and Italy’s La Stampa.
“To emerge in good shape from this crisis of the eurozone and the European economy, ever more integration is needed,” he said.
Both Madrid and Rome have been hit with rocketing borrowing costs, despite a series of structural reform packages in Italy and a -eurozone rescue loan in the works for Spain’s stricken banks.
Spain’s government was set to formally request eurozone financial assistance yesterday after Madrid indicated it could need up to 62 billion euros (US$78 billion) to save its distressed banks.
Yesterday’s talks were also -expected to look at refocusing -eurozone economic policy on growth instead of austerity, with observers hoping Monti might be able to act as a mediator between Paris and Germany.
Hollande has proposed a 120 billion euro “growth pact” for the eurozone including a financial-transactions tax and infrastructure investments to boost job creation.
The idea of eurobonds — mutualising the bloc’s sovereign debts — could also be on the table, but after an initial push Hollande appears to be backing away from the proposal amid fierce opposition from Berlin.
Paris has instead proposed “euro-bills” with short maturities and limited volumes.
While no concrete moves were expected yesterday, the four leaders were scheduled to discuss broader efforts toward closer political integration and the banking or financial union that economists see as essential to getting to the root of the debt crisis.
The US, the IMF and the European Central Bank have all urged greater banking integration in Europe, as the debt crisis boomerangs from financial sectors to sovereign states.
“The euro area crisis has reached a critical stage,” the IMF said on Thursday. “Despite -extraordinary policy actions, bank and sovereign markets in many parts of the euro area remain under acute stress, raising questions about the viability of the monetary union itself.”