The cancellation of a much-hyped meeting today between European Union finance ministers in Brussels, where it was hoped leaders would finally bang out a clear plan to solve the debt crisis, sent share markets tumbling.

Not that the cancelled meeting is the only issue facing EU leaders struggling to cope with its debt crisis. As The Guardian reports:

“Hopes that summits in Brussels on Wednesday would deliver a “grand bargain” that would finally draw an end to an 18-month sovereign debt crisis were fading fast as talks planned for Wednesday morning were cancelled, rumours surfaced of a collapse in Silvio Berlusconi’s Italian government and the German chancellor, Angela Merkel, adopted a hard line in negotiations with her French counterpart, Nicolas Sarkozy, over the shape of a rescue package.”

The Guardian reported quotes from an unnamed European Union diplomat, who said: “Everybody realises that we are on the brink of such a total catastrophe that anything that prevents it and a huge recession must be grasped. The markets will kill us if they haven’t laughed themselves to death.”

Germany’s Angela Merkel is taking the controversial bailout plan to German parliament to try and gets its support, on the same day she’s to meet with other European leaders. Florian Gathmann and Philipp Wittrock write in Der Spiegel:

“But the notoriously cautious chancellor is running a risk with the vote because a number of parliamentarians from her centre-right coalition will vote against her, just as they did in the initial vote on September 29 to enlarge the EFSF’s lending capacity to €440 billion. She struggled to contain that rebellion and managed to muster the symbolically important absolute majority of all seats in the Bundestag, even though 15 parliamentarians from her governing coalition refused to back her.

The rebellion could be greater this time around, and she faces the same pressure to reach an absolute majority, even though only she technically only needs a simple majority — more “yes” votes than “no” votes.

How united will her ranks be this time? No one knows.”

Britain’s David Cameron is suffering similar issues at home, report Oliver Wright and Nigel Morris in The Independent:

“David Cameron suffered a wounding blow to his authority last night, after he was hit by the biggest rebellion on Europe ever experienced by a Conservative Prime Minister.

More than 80 of his MPs defied a three-line whip to vote against the government over its refusal to allow a referendum on EU withdrawal.

Mr Cameron won a comfortable majority of 372, but it could certainly be described as a pyrrhic victory, as around half of the Tory “non-payroll vote” refused to support the coalition’s official policy position.”

Italian prime minister Silivio Berlusconi is due to face the summit and outline the concrete plan by his government to manage its debt. But his leadership may not even last the week. As Robert O’Daly, economist with The Economist Intelligence Unit, writes in The Guardian:

“At this weekend’s EU summit the pressure on Silvio Berlusconi to stand down as prime minister rose another notch. Italian business leaders have been telling him publicly for months that his government must take swift action tackle Italy’s public debt burden and boost economic growth or he should resign. But Mr Berlusconi is mired in a series of judicial battles and unable to govern his unruly alliance, making passing the necessary legislation almost impossible.”

Meanwhile back in Oz, Prime Minister Julia Gillard warned against a return to protectionist economic policies, at a dinner with Commonwealth leaders. “Australia is willing to play a leading part in the global fight against protectionism,” said Gillard. She said that protectionist policies hurt developing countries but noted that the Doha global free-trade agreement needed new thinking. Instead Gillard suggested breaking up free-trade agreements by sector. “It is time to consider breaking the Doha round into more manageable parts and bringing them to successful conclusion as negotiations are completed,” she said.

Peter Fray

Fetch your first 12 weeks for $12

Here at Crikey, we saw a mighty surge in subscribers throughout 2020. Your support has been nothing short of amazing — we couldn’t have got through this year like no other without you, our readers.

If you haven’t joined us yet, fetch your first 12 weeks for $12 and start 2021 with the journalism you need to navigate whatever lies ahead.

Peter Fray
Editor-in-chief of Crikey

JOIN NOW