EU to Hold Second Summit Next Week Due to Differences

Spiegel
October 20, 2011

The European Union is to hold a second summit next week in addition to its meeting this Sunday. The reason is an ongoing dispute between Germany and France over how best to maximize the impact of the euro backstop fund, the EFSF. According to media reports, Sarkozy and Merkel discussed the delay on Wednesday night.

It has been hard to miss in recent weeks the degree to which Germany and France disagree when it comes to combating the debt crisis and propping up the European common currency. On Thursday, press reports indicated that European Union leaders have now called for a second EU summit to be held next week in addition to the meeting currently scheduled for Sunday.

Volker Kauder, head of Chancellor Angela Merkel's conservatives in parliament, told the tabloid Bild on Thursday evening that a second summit has been called for Wednesday. The move is an admission that the European Union -- primarily Germany and France -- has been unable to come to an agreement on how to maximize the impact of the euro backstop fund known as the European Financial Stability Facility (EFSF).

The report from Bild comes after two other papers had reported that Sunday's summit might be delayed. The Financial Times Deutschland reported that Merkel and French President Nicolas Sarkozy had discussed the possibility of a postponement at a Wednesday night meeting in Frankfurt.

The primary sticking point has to do with leveraging the EFSF. The fund was just recently enlarged to provide it with a lending capacity of €440 billion ($603 billion). But with Greece now likely to need even more aid than first thought, European banks in need of recapitalization and the debt contagion possibly spreading to Italy and Spain, leaders have come to the realization that this sum is too small.

Paris and Berlin strongly disagree about how the impact of the fund should be maximized. Paris would like to see the EFSF granted with a banking license, which would allow it to borrow additional money, using its current assets, which include €780 billion in guarantees from euro-zone member states. The fund could then be worth up to €2 trillion.

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