The member states of the eurozone are pinning their hopes of saving the European single currency on the emergence of a clear plan for fiscal integration in the run up to a European Union summit at the end of this month (28-29 June).
The leaders of France, Germany, Italy and Spain will meet in Rome a week earlier (22 June) to outline their plan of action, which could amount to the most dramatic step forward for eurozone countries since they united their national currencies more than a decade ago.
Mario Draghi, the president of the European Central Bank (ECB), ratcheted up the pressure yesterday (6 June), saying that when they meet the leaders need to “clarify the vision” for the euro for the next ten years.
However, in raising expectations that they can make significant progress at the summit, leaders and officials are gambling with the financial markets which have been disappointed by successive EU meetings since the start of the eurozone crisis more than two years ago.
The eurozone's leadership is also gambling that the eurozone can survive the three weeks to the summit, withstanding the twin threats from Greece and Spain.
Spain's imploding banking sector might yet deteriorate before the summit to an extent that overshadows attempts to look to the future.
Luis de Guindos, Spain's economy minister, said yesterday that the country would not decide on any action to re-capitalise banks until the results are known of independent audits of the sector. He said that these were due “in ten to 15 days” – which would be just before or just after Greece's general election on 17 June, the outcome of which could raise eurozone instability still further.
Herman Van Rompuy, the president of the European Council, who is overseeing the ‘roadmap' for fiscal integration, appeared to play down suggestions that a comprehensive plan would be ready in time for the summit.
“It is only the beginning of the work,” he said on Monday (4 June). “Hopefully we can present results of that work by the end of this year.”
His reticence is at least partly down to major differences of opinion between member states, particularly between France and Germany. Leaders will try to overcome their divisions between now and the European Council during a series of meetings. On 18-19 June, François Hollande, the president of France, and Angela Merkel, the chancellor of Germany, will join other leaders of the G20 group of industrialised and emerging economies in Los Cabos, Mexico, for a summit that will be dominated by the eurozone's woes.
World leaders have added their voices to the push for a clear plan towards fiscal integration, claiming that the eurozone's difficulties are hampering the global economy's recovery.
The UK said yesterday that the British prime minister David Cameron and US president Barack Obama held a telephone call on Tuesday night (5 June) during which they agreed on the need for “an immediate plan” to bring an end to the eurozone crisis.
They were echoing the sentiments of finance ministers from the G7 group of industrialised economies, who held a conference call on Tuesday (5 June). In a statement they said that they also were monitoring progress towards “financial and fiscal union” within the eurozone.
However, speaking after a meeting of the governing council of the ECB yesterday, Draghi said that problems were not solely of the eurozone's making.
“We have some responsibility, but other countries have their own problems,” he said. “First and foremost, countries must address their own problems and then worry about the spill-overs to the rest of the world.”
Yesterday, the ECB kept its main interest rate on hold at 1%, but Draghi admitted that some members of the governing council wanted a cut. Draghi hinted that a change could come next month, taking the main rate below 1% for the first time.