Top European leaders focus on growth

German Chancellor Angela Merkel resisted pressure on Friday for common euro zone bonds or a more flexible use of Europe’s rescue funds but agreed with leaders of France, Italy and Spain on a 130 billion euros ($156 billion) package to revive growth.

After four-way talks in Rome’s Renaissance Villa Madama, Italian Prime Minister Mario Monti said the European Union should adopt pro-growth measures worth about one per cent of the region’s gross domestic product at a crucial summit next week.

But the three others made no perceptible progress in pushing Merkel, who leads Europe’s most powerful economy and the main contributor to its rescue funds, towards mutualising Europe’s debts or using existing bailout resources more flexibly. “Growth can only have solid roots if there is fiscal discipline, but fiscal discipline can be maintained only if there is growth and job creation,” Monti said.

The measures, already in the works in Brussels, include increasing the European Investment Bank’s capital, redirecting unspent EU regional aid funds and launching project bonds to co-finance major public investment programmes. No new steps were announced on Friday.

The four leaders did agree to move ahead on creating a tax on financial transactions even though not all EU members will be on board. About a dozen EU states support setting up the so-called “Tobin tax”, more than the nine required to go ahead as a group within the EU, a French presidential source said. Merkel made no mention, however, of any move towards mutualising past euro zone debt or new borrowing.

French President Francois Hollande voiced impatience with Berlin’s reluctance, saying it should not take ten years to create jointly underwritten euro bonds. He said greater solidarity was needed among member states before they abandon more sovereignty to EU institutions. “I consider euro bonds to be an option…but not in ten years,” Hollande said in a direct challenge to Merkel. “There can be no transfer of sovereignty if there is not an improvement in solidarity.”

Reuters