Clash rules out defining euro deal
French president Francois Hollande and German chancellor Angela Merkel have failed to agree on a balance between austerity and growth (AP)
A Franco-German clash over eurozone recovery tactics has ruled out a defining deal to solve the growing economic crisis at the latest EU summit in Brussels on Thursday.
Eve-of-summit talks in Paris between the eurozone "big two" failed to bridge the gulf between German chancellor Angela Merkel and French president Francois Hollande over the balance between austerity and growth.
The pair agreed on the need for a 130 billion euro (£104 billion) "compact for growth" expected to be adopted by all 27 leaders at the summit.
But Germany is resisting the idea of "mutualisation" of eurozone debt - pooling the debt burden to lower the risk. Mrs Merkel wants bail-out nations to meet tough new budget controls first and even then is reported to have ruled out anything more than taking a partial debt burden, saying: "I don't see total debt liability as long as I live."
The stand-off spotlights the key summit question: what strategy now will keep markets calm and give the EU a breathing space to get growth and jobs back on track?
EU officials said one crisis meeting among so many could not solve the problem, but summit chairman Herman Van Rompuy said in a letter to EU leaders: "The challenge for this European council (summit) is, more than ever before, to signal in a clear and concrete manner that we are doing everything required in response to the crisis."
UK Foreign Secretary William Hague said: "This is just one of a whole string of European meetings that have taken place this year. I think it is wrong to put too great an expectation on any one of those meetings. We do want the eurozone to sort out its problems and be able to stand together. Clearly they have a lot of issues to resolve."
Long term plans on the table call for a banking union, a fiscal union and - ultimately - a political union to shore up EU integration. But there are no proposed short-term fixes.
One EU official said: "Various overlapping initiatives are coming together at this summit. There is now clearly a systemic problem of confidence in the euro. Markets want to see a move to fiscal integration and we need to send a credible signal that the eurozone will go for integration, because that commitment, at this stage, would probably do as much to calm markets as throwing more money at the problem."
Prime Minister David Cameron, who has irritated some eurozone leaders by repeated calls on them to take the necessary action to solve the crisis, will again be urging the others on, particularly towards a banking union to reinforce the eurozone. But he will emphasise that the UK will not be taking part.