Leaders from Germany, France, Italy and Spain will meet today in Rome for a one day summit to discuss common ways to contain the euro zone crisis and address new solutions in advance of next week’s pivotal EU Summit.
Chancellor Angela Merkel from Germany will be on the hot seat today as French President Francois Hollande, Spanish PM Mariano Rajoy, and Italian PM Mario Monti are seeking to adopt new measures for combating an escalating debt crisis that threatens the stability of the euro zone.
Merkel has spurned calls in the past from French President Francois Hollande and Spanish Prime Minister Mariano Rajoy to loosen euro zone fiscal policies related to austerity and embrace common euro zone bonds.
Merkel said that she is unwilling to consider euro bonds until fiscal unity occurs across the euro zone.
Merkel is also facing a new appeal from the I.M.F. for the euro zone to move towards a fiscal union with the issuance of joint euro zone debt.
IMF President Christine Lagarde encouraged euro zone leaders to consider jointly issuing debt, aiding troubled banks directly, and even loosening strict austerity conditions on countries that have received financial aid.
Italian PM Mario Monti has acted in the past as an intermediary between Germany and France.
Recently, Monti spoke in dramatic apocalyptic terms to journalists with the hope of encouraging decisive action during the EU Summit later next week. Monti gave 6 recent interviews to different European newspapers, including the U.K.’s Guardian.
During the interviews, Monti warned that there is simply no room for failure in the talks between the euro zone’s four largest countries ahead of the crucial EU Summit.
Monti explained that without a successful outcome at the EU Summit, “there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries”.
Monti said the attacks would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules “but which carry with them from the past a high debt”.
He warned his audience, “A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth” he emphasized.
Monti said that key euro zone leaders were working on a plan designed to halt the spread of debt contagion while satisfying Germany’s refusal to sanction financial irresponsibility.
Transaction Tax for Banks
As Europe’s big political leaders meet in Rome, European finance ministers are meeting in Luxembourg to discuss the new concept of a tax on financial transactions to make banks pay for their own bailouts instead of tax payers.
The AP reports that “unanimity on the tax issue was nowhere in sight” among EU member countries but talks are still continuing.