French officials promised not to leave Brussels until a “powerful” deal was reached to save the euro. But senior German officials expressed more pessimism, saying that Berlin opposed a “quick fix” agreement. Instead, they insisted on full treaty changes and disagreed with the idea of combining two bailout funds, one temporary and one permanent, to create a larger pot of money to protect Italy and Spain.
Britain said that it would ask for special protections if there were any treaty changes, raising the possibility that changes would be limited to the 17 nations of the euro zone and those who want to join, and not to all 27 members of the European Union.
Still, Wednesday was a day of some posturing and public negotiating by national officials who demanded anonymity, with different nations staking out their positions before the meeting begins in earnest late Thursday afternoon.
“It’s internal politics,” said a senior European official. “This is macho-style, old politics.”
German officials sounded the toughest, seeing this summit meeting as a chance to achieve permanent changes to the way the euro is managed, an important goal for them. The Germans want firmer debt limits and sanctions for violators written into the treaty. They prefer a treaty of all countries in the European Union, even though the changes would apply only to countries in the euro zone.
But treaty changes can take two years and could involve a referendum in Ireland and other nations, so European Union officials, wanting to move quickly, have been exploring other options. In a paper that emerged on Wednesday, the president of the European Council and of the euro zone, Herman Van Rompuy, suggested a fast-track route to a “fiscal compact” that would avoid the problems and delays of a full treaty change.
The idea laid out by Mr. Van Rompuy, who organizes the European summit meetings, would avoid a full treaty change, which could involve a convention, referendums or parliamentary ratification, but it would still achieve much of what Germany wants.
This would mean amending a protocol of the treaty; leaders would simply have to consult with the European Central Bank and the European Parliament. Under this plan, also supported by the president of the European Commission, José Manuel Barroso, leaders could ensure that countries write into their own law an obligation “to reach and maintain a balanced budget over the economic cycle.” This could be complemented with pledges of “automatic reductions in expenditures, increases in taxes or a combination of both” if the rule was broken.
Britain insisted that such an amendment would still require at least parliamentary ratification, and a senior German official, briefing reporters, decried the quick fix as “a typical Brussels bag of tricks” and a “rotten compromise.”
More fundamental changes that would assure fully automatic sanctions against budget sinners, and give European institutions the power to overrule national budgets, would require full treaty change.
The German official said he was “more pessimistic than last week about reaching an overall deal,” adding, “A lot of the protagonists still have not understood how serious the situation is.” Berlin’s idea appeared to be to increase the pressure on partners to come to terms that Germany favored.
The American Treasury secretary, Timothy F. Geithner, was building the pressure in a softer way on Wednesday. He continued his public tour of meetings with German, French and Italian leaders to underscore how important reaching a deal this week was to the Obama administration. The administration says it believes that the euro zone crisis is dragging down the global and the American economy and could cause another full-fledged banking crisis.
But one senior European official said that an answer might be a “two-phase solution,” with a quick change to the protocol followed by work on treaty change.
European officials say that a less ambitious but faster strengthening of euro zone discipline will be more credible with investors and the European Central Bank than the promise to make larger reforms that could take two years to put into place.
As one French official said Wednesday, “The E.C.B. is not going to commit suicide” and oversee the destruction of the euro currency it is charged with keeping stable.
But Austria, like Germany, also tried to play down expectations for a “quick fix” solution to the euro crisis. The summit meeting “will not meet the goal of creating a comprehensive firewall for the euro zone for the next three to five years,” Austria’s chancellor, Werner Faymann, told lawmakers in Vienna, speaking of the effort to create a large “wall of money” in bailout funds to protect vulnerable euro zone states.
What was achievable, however, he said, was a “massive increase in voluntary coordination,” including measures to encourage greater budgetary discipline and to sanction countries running excessively high deficits.
The Americans have regularly counseled using ready bailout money as a firewall in the crisis. But it has not been easy for the Europeans, as they have tried to leverage a temporary, 440-billion-euro European Financial Stability Facility upward. One French-German idea is to move forward, to 2012, the establishment of the larger, permanent 500-billion-euro European Stability Mechanism. But Berlin is rejecting the idea of running the two in parallel.
The Europeans are also talking to the International Monetary Fund, where Washington has the largest voice, about helping to enlarge the firewall with money that the European central banks could loan to the fund.
An announcement is also expected late Thursday on how European banks would comply with the tougher capital requirements.
Steven Erlanger reported from Paris, and Stephen Castle from Brussels.
Article source: http://feeds.nytimes.com/click.phdo?i=afb5f26a57393c694c8b6259a02ab0f7
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