Friday, March 4, 2011

Conservative EU leaders struggle for crisis unity

HELSINKI (AP) -- Europe's center-right leaders struggled Friday to show a united front amid stark divisions on how to tackle the debt crisis that has rocked the continent for more than a year.

At a summit of the conservative European People's Party in Helsinki, some of Europe's most powerful decision makers made some progress on lowering the interest rates on Ireland's bailout and reiterated previous commitments to coordinate their economic policies more closely.

But they failed to agree on more pressing issues that have preoccupied financial markets for the past months.

The most crucial of these is a promised overhaul of the euro zone's bailout fund, which could see it get more powers such as buying government bonds on the open market to stabilize struggling countries' funding costs and potentially save them from having to seek multibillion euro rescue loans.

"We don't have an EPP opinion of that," said Finnish Finance Minister Jyrki Katainen, who hosted Friday's meeting.

The Helsinki summit kicked off three weeks that will decide whether the euro zone can finally get a grip on the crisis that has already pushed Greece and Ireland into international bailout.

The debate will culminate on March 25, when heads of state and government hope to seal the "comprehensive solution" to the region's debt and banking troubles.

But with even members of the same party failing to find a common position, analysts are increasingly pessimistic that that solution will turn out to be the promised turning point in the currency union's struggles.

German Chancellor Angela Merkel remained reluctant to put up more money to help less disciplined countries.

Enda Kenny, Ireland's prime minister in waiting found some open ears for his demands for lower interest rates on Ireland's euro67.5 billion ($93.7 billion) rescue loan, which average some 5.8 percent, but fell short off a clear commitment.

"There was no voice against it," EPP President Wilfried Martens said of giving Ireland some more room on its bailout deal.

European Commission President Jose Manuel Barroso, meanwhile, received no clear support for his calls to equip the region's bailout fund with more money and broader powers.

Italian Premier Silvio Berlusconi - whose country's debt stands at 120 percent of economic output - spent some time trying to iron out a years-old gaffe on Finnish food. "Tonight an extraordinary reindeer filet was served and I asked for a second serving," he told reporters.

Friday's talks centered on the so-called "pact for competitiveness" - an attempt at closer economic and fiscal coordination between the 17 states that share the euro but have widely differing economies.

The pact was championed by Germany's Merkel, who amid troubles at home is desperate to have something to show in return for being the region's paymaster.

"It will always have to be a give and take," Merkel said, adding that support for the pact was growing.

However, Friday's statement made no mention of concrete indicators, let alone how they would be enforced.

Originally, Berlin had demanded euro zone countries improve their economic performance through unpopular measures such as getting rid of automatic inflation-linked wage increases and coming up with a common base for corporate taxation.

Such steps, the Germans argued, would make countries like Ireland, Greece and Portugal more solvent and their companies more competitive in international markets.

Katainen said the conservative leaders found common ground on some principles of the competitiveness pact but acknowledged that "there may be some differences and changes" before it can be adopted.

Finland's National Coalition Party heads into elections on April 17, and Katainen, a leading candidate for prime minister, had invited his conservative colleagues to give himself a home-showing on the international stage.

Although he did not get a deal, the outcome of the election was one of the few topics that everyone agreed on.

"I hope he wins," said Ireland's Kenny, whose own Fine Gael party just toppled its opponents amid popular frustration over the country's economic woes.


Jari Tanner contributed to this report. Gabriele Steinhauser reported from Brussels.

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