European leaders are gathering in Brussels for a critical end-of-year summit, another attempt to resolve a sovereign debt and banking crisis threatening the very future of the euro currency union. Pressure is on for them to come out with a definitive deal this time around, after what critics claim are months of half-measures.
This is not the first time a European Union summit has been described as the last chance to save the struggling euro currency union. But the 27 EU leaders gathering Thursday and Friday in Brussels face extraordinary pressure, at home and abroad,to deliver a lasting solution to the two-year-old eurozone crisis.
The plan on the table is authored by Europe's two biggest economies, France and Germany. They want to overhaul EU treaties to forge a more binding and fiscally responsible eurozone. The two leaders outlined the details of their vision on Wednesday, in a letter to EU President Herman van Rompuy.
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At a joint press conference with his German counterpart Angela Merkel earlier this week, French President Nicolas Sarkozy said the crisis has given the two countries an extra reason for unity. He said both countries envision the same kind of Europe.
But their plan must still be accepted by the other 25 EU members or at very least, the 17 members of the eurozone. And that, says analyst Philippe Moreau Defarges, of the French Institute of International Relations, is not at all certain.
"There will be a very strong pressure to accept this deal. Not only from the eurozone members, but also outside the eurozone," he said. "I think the British should back this agreement. But it will be difficult. "
British Prime Minister David Cameron, whose country is not part of the euro currency union, has already expressed reservations. He told British TV his first priority at the summit will be to defend British interests.
"Eurozone countries do need to come together, do need to do more things together. If they choose to use the European treaty to do that, Britain will be insisting on some safeguards too. And as long as we get those, then that treaty can go ahead," said Cameron. "If we cannot get those, it will not."
BNP Parisbas bank economist Shahin Vallee, a visiting fellow at Brussels economic think-tank Bruegel, does not think any deal reached will be enough.
"I think not, unfortunately. I think this proposal rests on the idea that with stronger fiscal rules and more automaticity of those rules the euro area will be stronger and financial markets will be comforted and have more belief in the long term sustainability of the euro area, and I think this is an illusion," said Vallee.
French analyst Moreau Defarges also has his doubts about the French-German plan.
"It is a very partial, a very institutional, a very budgetary and fiscal answer to the euro crisis. The euro crisis is a growth crisis, a problem of growth," said Defarges. "Will the European Union find a new path toward growth? That is the key question."
Even if the other EU countries accept the French-German plan, it will take months, if not years, to fully implement it, because it may require amending EU treaties. Analysts like Vallee say Europe's crisis needs immediate action.
"I think the right solution would be to have a more ambitious treaty change, take the necessary time to negotiate the provisions of this new treaty, while at the same time doing something that is immediately operational to respond to the crisis and the urgency of the crisis," noted Vallee.
Adding to the pressure, ratings agency Standard & Poor's has threatened to downgrade the credit rating of 15 eurozone members, including heavyweights France and Germany. There are fears the crisis could spread overseas, slowing growth in Africa and Asia and threatening America's fragile recovery.
U.S. Treasury Secretary Timothy Geithner has been meeting with top officials and heads of state in Europe this week, underscoring Washington's concern.
"I am here in Europe, of course, to emphasize how important it is to the United States, and to the world economy as a whole, that Germany and France succeed alongside the other nations of Europe in building a stronger Europe," said Geithner.
The eurozone crisis has rekindled longstanding debates on whether the European Union should head toward more unity, economically and politically or does the crisis underscore the failure of European integration? Vallee believes resolving these and other EU visions is also critical to resolving the eurozone crisis.