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Over the next two days, European leaders will meet in Brussels. They'll try to come to an agreement on how to boost growth, save Spanish banks and relieve financial market pressure on Spain and Italy.
As NPR's John Ydstie explains, each leader at the meeting will have to face the tradeoff of sacrificing sovereignty in order to gain economic stability.
JOHN YDSTIE, BYLINE: Stephan Richter, publisher and editor of TheGlobalist.com, sums up the leaders' challenge this way.
STEPHAN RICHTER: We are at a true Primo Levi Moment - the famous Italian writer who wrote: If not now, when. If not now, when will we do the right thing?
YDSTIE: Richter says the right thing for those who want to save the euro and steady Europe's wobbly economy is to get on with the task of bringing the nations of Europe closer together, in a sort of United States of Europe.
This week, a group of European heavyweights, including Mario Draghi, president of the European Central Bank, presented the EU leaders with a 10-year plan to achieve that. It calls for taking immediate steps toward a genuine economic and monetary union. At the top of the agenda, creating Europe-wide banking regulation and deposit insurance, and sharing the region's debt burden.
The plan is backed by France, Italy and Spain. But Germany, which would end up holding the bag for Europe's bad debt continues to balk.
Again, Stephan Richter.
RICHTER: We will see Angela Merkel reprising the role of Harry Truman. She says, number one, show me - talk ain't good enough. And number two, the buck stops here.
YDSTIE: The German Chancellor will insist that other countries demonstrate they're making real reforms to improve their economies and show her they're willing to surrender significant control over their national budgets; the power most dear to national parliaments, surrender it to federal institutions in Brussels.
Jacob Kirkegaard, of the Peterson Institute for International Economics, says that amounts to surrendering sovereignty, something nations seldom do willingly.
DR. JACOB KIRKEGAARD: Historically, this has always been associated with, you know, the direct threat of military invasion or, in the case of the euro-area, the direct threat of a financial and political calamity.
YDSTIE: Which is what Europe is facing right now. What the financial markets would like to see most is for all of the euro-area's debt to be mutualized. That is, each country's debt would be backed by its partners. But there won't be a grand bargain like that says Kirkegaard.
KIRKEGAARD: That is simply politically impossible.
YDSTIE: Merkel was quoted yesterday as saying, that that won't happen as long as I live. And she said the pooling of debt could only come with improved oversight and concessions on sovereignty.
KIRKEGAARD: What we will get from the European leaders is a road map for how this could happen.
YDSTIE: A plan for gradually pooling national debts as governments gradually give up sovereignty. The problem is that will take time and the financial markets are looking for tangible moves now.
Nicolas Veron, a senior fellow at Bruegel, a think-tank based in Brussels, says the markets are likely to get a big step toward a banking union, the creation of a sort of FDIC for Europe.
NICOLAS VERON: The number of pronouncements that have been made in the past weeks by most leaders in Europe, signals that the discussion about European banking union is real.
YDSTIE: Veron suggests the leaders immediately announce that the EU's emergency fund, the EFSF, backs the deposits of all eurozone banks.
VERON: It would be a game changing event in terms of market perceptions of whether European leaders are serious or not about banking unions.
YDSTIE: The idea may look too much like pooling debt to Angela Merkel. But in the end, Jacob Kirkegaard thinks Europe will come together because it's reached the point of no return with the euro.
KIRKEGAARD: It is now infinitely more costly for everyone in Europe to abandon the project than it is to complete it.
YDSTIE: And abandoning the euro project would be most costly for the Germans. Its banks are already among Europe's largest creditors. And maybe more importantly, since World War II, the country has seen its future in a united Europe.
John Ydstie, NPR News, Washington.
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