EU leaders prepare for last chance summit
Angela Merkel says EU leaders have a “duty” to come to an agreement ahead of the EU summit in Brussels, as the European Central Bank drops interest rates to try and rescue EU banks.
At a press conference in Marseilles German Chancellor Angela Merkel and French President Nicolas Sarkozy warned that the stakes were high.
“Everyone can understand that if on Friday we don’t find an agreement, there is no second chance,” said Mr Sarkozy. “I call for the spirit of compromise and speedy decision making.”
EU leaders are meeting for the first round of summit talks to try to finalise a long-term deal for stability in the eurozone.
As the leaders meet, the European Central Bank (ECB) has announced it will cut interest rates for the second time in two months – from 1.25 per cent to 1 per cent – as part of a range of emergency measures aimed at rescuing Europe’s banks and trying to help frozen financial markets.
ECB president Mario Draghi said: “The intensified financial market tensions are continuing to dampen economic activity in the euro area and the outlook remains subject to high uncertainty and substantial downside risks.”
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‘Merkozy’ reform plan
At the Brussels summit, Mrs Merkel and Mr Sarkozy will attempt to push their EU reform treaty that proposes tougher rules and sanctions in the hope of generating confidence in the 17 eurozone countries and securing the single currency.
Their proposals, outlined last night in a letter to the summit chairman Herman Van Rompuy, include automatic sanctions if eurozone states breach debt and deficit criteria, as well as a financial transaction tax, common corporate tax rates and harmonised employment rules.
The UK would not be bound directly by these rules, and David Cameron has said that higher taxes in the eurozone would drive business towards the City of London.
However he has opposed an EU wide tax, which would affect London and the UK, and which he said would make it more difficult to compete in a global market.
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Mr Cameron said that he would fight against the inner core of 17 eurozone countries deciding a treaty that would affect the City of London. An official added: “We’d rather be in the room when there is an issue which directly affects our national interest being discussed.”
The summit is overshadowed by a warning earlier in the week from Standard & Poor’s credit agency, that the EU faces a downgrade of its AAA status because of financial and political turmoil.
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