Europe's Debt Crisis Tops Agenda at EU Meeting European leaders are gathering in Belgium to look for ways to end the continent's debt crisis. Greece and Ireland both needed bailouts this year, and there are fears that the crisis could spread. Despite frequent calls for coordinated action, officials are divided on how to solve the problem.
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Europe's Debt Crisis Tops Agenda at EU Meeting

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Europe's Debt Crisis Tops Agenda at EU Meeting

Europe's Debt Crisis Tops Agenda at EU Meeting

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In Europe, leaders are looking for a strategy to solve the continent's debt crisis. They meet in Brussels today, just a day after violent protests over austerity measures in Greece. Both Greece and Ireland needed bailouts this year.

And as NPR's Eric Westervelt reports from Berlin, there are fears the crisis could spread.

ERIC WESTERVELT: The financial markets seem convinced that the euro is on an unsustainable path. And critics say so far, European Union leaders have failed to address concerns that deeply indebted countries, among the 16 nations that use the euro, have realistic plans to get out of debt.

The European Central Bank has bought up more bonds of debt-ridden countries. It hasn't calmed the markets.

The EU and IMF bailed out Greece and then Ireland with multibillion-dollar packages. That hasn't worked either. Germany's chancellor Angela Merkel, speaking to parliament yesterday, offered another robust rhetorical defense of the euro, saying, quote, "Europe only succeeds as one." But her call for unity was short on new ideas to address the year-long debt crisis and reiterated her rejection of the idea of eurozone bonds, which would mean sharing the credit risk among the eurozone members.

Chancellor ANGELA MERKEL (Germany): (Through Translator) We must not make the mistake of collectivizing the risks, for example, with euro-bonds, which may appear to be a solution, but are, in fact, not in any way a solution. The solution is more balanced competitiveness among EU members, in particular in the eurozone.

(Soundbite of applause)

WESTERVELT: Many analysts fear the markets will carry on exploiting the continued absence of concrete action. Now many economists believe the EU must come up with a long-term mechanism to transfer money from fiscally stable countries - such as Germany and France - to struggling countries like Greece, Ireland, and maybe others to come.

At the year-end meeting starting today, EU leaders are likely to make permanent the temporary crisis fund and perhaps boost the fund's size. But economist Irwin Collier, with Berlin's JFK Institute, is not optimistic that European leaders will take decisive and bold enough action to calm market speculation.

Mr. IRWIN COLLIER (Economist, JFK Institute): Everything that will come will be of the muddling-through variety. Backs will be up against the wall. Choices will be forced upon countries, simply because there seems to be no alternatives. But a genuine cooperative solution strikes me as being very unlikely in the near future.

WESTERVELT: Germany's finance minister, Wolfgang Schauble, signaled this week that Europe's largest economy is prepared to do more if current measures continue to falter. But he and other cabinet ministers continue to issue largely vague statements about doing what it takes to keep the euro stable while downplaying the need for greater economic integration. That's been a chief criticism of the eurozone for years: that the common currency lacks a strong foundation of common fiscal policy. Others are convinced there is the political will, but perhaps not the means to get out of the debt mess.

Mr. JOHN KORNBLUM (Former U.S. Ambassador to Germany): I wouldn't underestimate what the governments will do when pushed against the wall.

WESTERVELT: Former U.S. Ambassador to Germany, John Kornblum, ran the State department's European Bureau when the euro currency was adopted nearly eleven years ago. The Germans, he notes, have responded to this crisis with the largest budget cuts in the post-World War II era, and have raised the age for full pension retirement to 67.

But he adds that Chancellor Merkel still faces tough battles ahead, including from a source few are even talking about: looming lawsuits in the German high court challenging the constitutionality of taxpayer bailouts.

Mr. KORNBLUM: The German Supreme Court is just as strong as the American Supreme Court and Chancellor Merkel is, in other words, fighting about a four-front war: she's fighting the economy, she's fighting with the other countries, she's fighting with her voters. But in the back of her mind, she's got the German Supreme Court, and if she gets a ruling against her on this kind of thing, it could forbid Germany from participating in any of these things in the future. That's a very big problem.

WESTERVELT: Meantime, despite continued calls for European unity, frustration in some quarters is growing with Germany and France - the largest economies in the eurozone. Luxembourg's foreign minister, this week, warned Berlin and Paris about diva-like power plays that reflect, quote, haughtiness and arrogance which disregards the European spirit of solidarity.

Eric Westervelt, NPR News, Berlin.

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