LONDON ? The leaders of Germany, France, Italy and Spain were set to meet in Rome later Friday for crucial talks aimed at reaching a compromise on short- and long-term fixes for the region?s worsening financial crisis ahead of a European Union summit in Brussels next week.
The meeting came as the fallout of Europe?s crisis was spreading beyond the borders of the 17-nation euro zone, with the Moody?s rating agency downgrading 15 global banks including Bank of America and Citigroup, as well as four of Britain?s largest financial institutions, citing worries about their exposure to now-volatile world markets.
The Rome talks were hinging on the ability of a trio of leaders ? French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy ? to convince the reluctant German Chancellor Angela Merkel to take a more aggressive stance in fighting the crisis.
Their ?mini-summit? underscored the changing political dynamic in Europe following the ouster by French voters of former president Nicolas Sarkozy, who enjoyed a close relationship with Merkel through which the two leaders largely called the shots for the rest of the euro zone. But Hollande, a Socialist, has instead sought to include his Italian and Spanish counterparts in critical decision making, with the trio increasingly stacking up their collective clout against Merkel, whose conservative approach to handling the crisis has earned her the moniker ?Frau Nein,? or ?Mrs. No.?
Christine Lagarde, head of the Washington-based International Monetary Fund, heightened the pressure on Merkel to accede to more radical solutions to the crisis ? including the use of Europe?s bailout fund to buy up the bonds of troubled countries including Italy and Spain, whose borrowing costs on open markets are reaching unsustainable levels. But Lagarde also echoed a number of European leaders and top economists who said Merkel must additionally agree to a concrete road map of bigger fixes for the euro, including a banking union that could see countries in Europe ceding authority to a central banking supervisor and collectively insuring banking deposits across the euro zone.
?We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area,? Lagarde said after the meeting of European financial leaders in Luxembourg on Thursday.
?A determined and forceful move towards complete European monetary union should be reaffirmed in order to restore faith. At the moment, the viability of the European monetary system is questioned.?
Italy?s Mario Monti ? an unelected technocrat who is facing pressure to hold new elections ? warned ahead of the Rome meeting that the cost of failure would be high. Monti, a respected former university professor and top European Union official, is considered to have substantial clout with Merkel. He has been calling on Europe to use bailout funds to buy up government debt and the issuing of collective debt for euro zone countries, something the German leader has thus far rejected. Along with Hollande, he also has called for limited injections of fiscal stimulus.
In an interview with Britain?s Guardian newspaper published Friday, he predicted a fresh round of ?progressively greater speculative attacks? should leaders fail to agree to significant new action. But he also sought to temper expectations that a fully detailed blueprint for a banking union that would more deeply integrate the economies of the euro zone could be agreed to by next week, saying ?there may not be ? indeed, there will not be ? a fully fledged, detailed blueprint, but there will be some strong elements and a short road, I hope, short, a few months, to get from there to the overall project.?
Source: http://feeds.washingtonpost.com/click.phdo?i=59760ac4158738746159723d55ed144b
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