The informal Summit of European Leaders that took place in Brussels late on Wednesday concluded with little progress on agreeing concrete measures to tackle the euro zone debt crisis. EU leaders did not reach an agreement on a clear path forward for Greece, nor on shoring up euro zone banks despite growing fears of contagion to the periphery countries. Spain’s banking sector is already under alot of stress. No progress was made on euro zone bonds. All this reflects deep divisions over how to respond to the deepening turmoil caused by the possibility of a Greek exit.
Instead of taking any firm measures or decisions regarding Greece, leaders just voiced repeated assurances that they wanted the country to remain in the euro zone, but emphasised any new government in Athens had to commit to the terms of the IMF/EU bailout plan.
“If I were to talk about the hypothesis of a Greek exit from the euro zone, it would send a signal to Greece and to the markets,” said the French President Francois Hollande. “I would rather say that France and Europe want Greece to stay in the euro zone. We want you to respect your commitments but we want to take steps to show you that we want to restore hope. That is in the interests of Greece, the euro zone and the global economy.”
However, progress was made in discussion on closer fiscal co-ordination , including plans that could include a path towards a Europe-wide deposit guarantee scheme and heads of the EU’s main institutions were given the task of drawing up proposals for another summit next month. No specific proposals were made towards creating a jointly issued euro bond, as Germany remains strongly opposed to that. These deposit guarantees are part of a prevention against bank runs that could follow in the event of Greece exiting the euro.
Most of the summit meeting focused on a “growth compact” which consists of ways to spur investment in large-scale infrastructure projects. But even there, no decisions were made on such proposals as injecting €10bn in new capital into the European Investment Bank.