When German Chancellor Angela Merkel agreed to a meeting of European leaders in Rome on Friday, she already had her eye on the exit.
Her specific aim was getting to the Euro 2012 football match that would see Germany triumph over Greece in Gdansk and send a powerful reminder about who is the dominant player in the eurozone these days. Merkel even asked for the Rome summit to be brought forward by a couple of hours so she could get to the game.
As the Italian capital sweltered and public transport was frozen in its umpeenth strike, it would be wrong to suggest that Merkel was giving the cold shoulder to leaders of the other big eurozone nations — Italy, France and Spain — when they met to consider ways to stabilise the euro. But dressed in a mint-green suit, Merkel looked rather cool and occasionally uncomfortable, when she faced the media flanked by Italian Prime Minister Mario Monti, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy.
The leaders announced a proposal for a €130 billion package — 1% of Europe’s gross domestic product — to stimulate growth in Europe ahead of a crucial European Union summit in Brussels next week.
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“Risk cannot be sustainable economically and politically if there are no conditions for growth, ” Monti told a joint media conference at the elegant Villa Madama. “We agree on the fact that what has been done so far is insufficient for economic growth, the stability of the eurozone and the possibility to offer European citizens a long-term vision of euro integration.
“Growth and job creation should be the first objective from national structural reforms to increase competitiveness and a new European agenda.”
Hollande was the main driver of the growth package, but as Merkel well knows, he is not a big fan of austerity. “We agree on a common vision of monetary and economic union — a roadmap with the tools which will create this goal,” said Hollande.
Italian experts welcomed the growth proposal but demanded more details about how it would be funded.
“I think it is important from a political point of view,” said professor Miguel Maduro, head of the global governance program at the European University Institute in Florence. “This is an important amount, equal to the entire budget of the European Union in a year.
“But how will the contributions be made — from the member states or an increase in the budget of the European Union.”
Nicola Borri, an economics professor at Luiss University in Rome, also expressed reservations about the package. “If the funds are to be raised with new eurobonds, the idea would be interesting,” Borri told Crikey. “But there is no statement about who will be the recipient or the use of these funds for current public expenditure or capital expenditure and new investment.”
While Merkel backed the ambitious spending package and called for more action to stabilise the euro, she calmly resisted a push from the other leaders for more flexible use of European funds or a eurobond issue.
Asked by the media whether Germany would endorse an Italian proposal to use two rescue funds to buy Spanish and Italian debt, Merkel was firm.
“Responsibility and control go together,” Merkel said. “If I give funds directly to a Spanish or another bank I cannot tell them how this bank should act. I am a German chancellor not a Spanish chancellor.”
And there lies the chilly divide that separates Merkel from the new French leader who said there should not be lengthy delays in creating jointly underwritten euro bonds.
“I consider euro bonds to be an option … but not in 10 years,” Hollande said in a direct challenge to the German leader. “There can be no transfer of sovereignty if there is not an improvement in solidarity.”
Under the proposal floated by Monti at the G20 summit in Mexico, the European Financial Stability Facility, which has funds of €440 billion, and the European Stability Mechanism, which is yet to come into operation, would have the power to buy bonds.
Speaking of Monti, he has plenty of problems of his own. If it wasn’t bad enough to see former prime minister Silvio Berlusconi speculating about whether Italy should exit the euro this week, his family newspaper Il Giornale used its front page to trumpet the billionaire businessman’s political comeback.
Odd when the 75-year-old mogul is still facing charges of paying for s-x with an under-age prostitute in a lurid Milan trial and facing a separate sentence for corporate fraud and tax evasion in relation to his Mediaset empire.
Yet a new survey released Friday showed Monti’s personal popularity has slumped from 71% when he assumed office last November to 33% as Italians struggle with higher taxes and charges and rising unemployment in a very grim recession while Berlusconi has already hinted that he and his centre right party may push for early elections.