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EU leaders at Brussels summit say they are committed to tackling tax evasion and will push for global action to curb banking secrecy.

The president of the European Council, Herman Van Rompuy, said there was a “strong political will” in Europe to make tax systems fairer.

He said the EU would draft tougher rules this year on banking transparency. Herman Van Rompuy was speaking after summit talks in Brussels.

A key goal is to prevent multinational firms exploiting legal loopholes.

There is widespread public anger that some big corporations have minimized their tax payments at a time of economic hardship.


Tax evasion and avoidance cost EU states 1 trillion euros ($1.3 trillion) a year – more than was spent on healthcare in 2008.

The EU is now promising action against “aggressive tax planning” – that is, the complex yet legal accounting tricks used by some companies to minimize their tax payments.

EU leaders also want global standards on exchanging bank account data. The issue will be high on the agenda of a summit of the G8 industrialized nations in Northern Ireland next month.

Herman Van Rompuy said the economic crisis had injected new momentum into the debate on fair taxation. But he insisted that the EU was not seeking tax harmonization across Europe.

“It’s a real breakthrough… I am really convinced there is a strong political will by leaders not just on the European level, but on the global level, to tackle tax fraud,” he told a news conference.

Germany’s Chancellor Angela Merkel said that EU members Austria and Luxembourg – famous for their banking secrecy – agreed on the need for tax authorities to exchange information on private income. But “they attach great importance to also holding negotiations with third countries”, she added.

EU leaders at Brussels summit say they are committed to tackling tax evasion and will push for global action to curb banking secrecy

EU leaders at Brussels summit say they are committed to tackling tax evasion and will push for global action to curb banking secrecy

Switzerland, outside the EU, is a major competitor in the market for rich bank clients. Austria and Luxembourg want to ensure that Switzerland and other low-tax jurisdictions in Europe, such as Monaco and Liechtenstein, do not have an unfair advantage.

Austrian Chancellor Werner Faymann on Wednesday joined the call for a crackdown on tax evasion.

A European Parliament resolution on tax evasion on Tuesday urged the EU to halve the 1tn-euro annual losses by 2020, by curbing tax loopholes and havens.

The MEPs also called for a joint EU blacklist of tax havens.

The European Commission is pressing for automatic exchanges of people’s earnings data between tax authorities.

Some experts argue that business tax planning also reduces the revenue that developing country governments can collect, for example by shifting declared profits to countries where they are lightly taxed.

Politicians are keen to show voters that tax systems are fair, after a wave of unpopular budget cuts aimed at reducing deficits.

Starbucks and Amazon are among the companies that have faced tough questioning over their tax affairs recently.

And this week Apple came under fire in the US Congress over its low tax payments.

The other main theme at the Brussels talks was energy policy – especially the need to improve Europe’s energy infrastructure, develop renewables such as solar and wind power and remove barriers to competition. Much of Eastern Europe relies on Russia for gas – and in the past pricing disputes have led to supply shortages in mid-winter.

The Commission is urging EU governments to enact energy legislation that was agreed in 2011, warning that on current trends imports of gas will rise to 80% of the gas consumed in the EU by 2035.

The EU already imports 406 billion euros’ worth of oil, gas and coal annually – 3.2% of total EU economic output (GDP).

The fragmentation of Europe’s energy market makes it difficult to woo long-term investors willing to commit to multi-billion-euro infrastructure projects. The energy mix varies greatly across Europe, from nuclear-dominated France to coal-dependent Poland.

But a key goal is to connect Europe’s isolated “energy islands” – former Soviet bloc countries like Estonia and Bulgaria – to European grids and storage facilities.

The distortions in Europe’s energy market mean that Bulgarians – the EU’s poorest citizens – pay more for their electricity than consumers in the UK or Germany.

In the global economy the energy blockages threaten to put Europe at a serious disadvantage. The gas price index for EU households rose by 45% in 2005-12, compared with 3% in the US, while the figures for electricity were 22% and 8% respectively, the Commission says.

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EU leaders have reached agreement on the 7-year budget for 2014-2020 after marathon talks in Brussels.

The deal was announced by European Council President Herman Van Rompuy, who said it was “worth waiting for”.

The new budget amounts to 908 billion euros ($1.2 trillion) in forecast payments. It is the first-ever reduction in the EU’s multi-annual budget.

UK PM David Cameron – who had been pressing for cuts – hailed it as a “good deal for Britain”.

“I think the British public can be proud that we have cut the seven-year credit card limit for the EU for the first time ever,” David Cameron said.

French President Francois Hollande – who had argued against big spending cuts – said it was a “good compromise”.

The agreement came after almost 24 hours of negotiations, as countries such as France and Italy sought to protect spending.

 

EU leaders have reached agreement on the 7-year budget for 2014-2020 after marathon talks in Brussels

EU leaders have reached agreement on the 7-year budget for 2014-2020 after marathon talks in Brussels

 

The budget amounts to about 1% of the EU’s overall GDP – it is dwarfed by the combined national budgets.

It must still be approved by the European Parliament, and MEPs had previously said they were prepared to block anything that amounted to an “austerity” budget.

Herman Van Rompuy said the deal amounted to a cut of roughly 34 billion euro in both commitments and payments.

He said EU leaders had met their responsibilities by overcoming sharp differences, and he hoped the European Parliament would meet its responsibilities by passing the budget.

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European Union leaders have agreed on a roadmap for eurozone integration beyond the deal on centralized banking supervision, German Chancellor Angela Merkel said.

Specific dates have not yet been agreed for the phases of integration.

But the EU summit chairman, Herman Van Rompuy, said a deal should be reached next year on a joint resolution scheme for winding up failed banks.

Herman Van Rompuy’s far-reaching roadmap was the main topic of the two-day Brussels summit.

Speaking after the summit talks, French President Francois Hollande said: “There is no doubt today about the integrity of the eurozone – Europe cannot now be taken by surprise.”

But beyond the banking reforms, he said, Europe must address the problems of unemployment and feeble growth.

The deal to make the European Central Bank (ECB) the chief regulator should pave the way for direct recapitalization of struggling eurozone banks by the main bailout fund, the 500 billion-euro ($654 billion) European Stability Mechanism (ESM).

Spain is especially anxious to get that help for its debt-laden banks.

Direct recapitalization would help break the “vicious circle” in which bank debts have put a crippling burden on national budgets and led to massive taxpayer-funded bailouts.

However, Germany insists that the ESM should not be used to write off the existing “legacy” debts that have burdened Spain, Greece and the Republic of Ireland. Any ESM loans will be accompanied by tough rules on budget discipline.

At a late-night news conference, Angela Merkel said “we agreed a roadmap for the future development of the currency union and talked about different aspects of this that are important.

“Above all, it was important to define when we do what.”

Herman Van Rompuy aims to present detailed plans for deeper economic integration in time for the June 2013 EU summit. They would include “mutually agreed contracts for competitiveness and growth between governments and EU institutions”.

Much closer EU scrutiny of national budgets is envisaged, including penalties if governments rack up unsustainable debts.

Contractual agreements on things such as taxation and labor market policy are likely to require changes to the EU treaties – so these are likely to be put off until after the European elections in mid-2014.

The UK, along with Denmark, has a formal opt-out from joining the euro, and will not be part of the new banking union. But the UK’s banking pre-eminence in Europe means it is taking an intense interest in the negotiations.

New rules on prudent banking are seen as vital to bolster the euro, as bank failures triggered the financial crash.

Under the deal expected to take effect in March 2014, banks with more than 30 billion euros ($39 billion) in assets will be placed under ECB oversight.

The ECB would also be able to intervene with smaller lenders and borrowers at the first sign of trouble.

Speaking after the summit, Francois Hollande said Europe had been unprepared for the financial crisis but now had a “crisis management authority” which allowed for the “return of confidence and growth”.

The agreement on a financial transactions tax was, he told reporters, a good example of how countries could be brought into eurozone integration through closer co-operation, signing up to agreements at a later stage.

A non-eurozone country, Lithuania, joined the group adopting a financial transaction tax.

Eurozone integration – next steps

  • ECB      takes charge of bank supervision no later than March 2014
  • Joint scheme to wind down broken      banks, planned for launch in mid-2014
  • Joint deposit guarantee scheme,      to prevent bank runs
  • Main bailout fund – ESM – gets      power to recapitalize banks, under strict conditions
  • More centralized economic      governance, including enforceable “contracts” between      governments and EU Commission
  • Tighter co-ordination of national      budget targets

Eurozone banking deal

  • ECB      to act as chief supervisor of eurozone banks and lenders
  • ECB to co-operate closely with      national supervisory authorities
  • Direct oversight of banks with      assets greater than 30 billion euros ($39 billion) or with 20% of national      GDP
  • National supervisors to remain in      charge of other tasks
  • Non-eurozone countries that wish      to take part can make close co-operation arrangements

The presidents of the EU’s three main institutions have collected the Nobel Peace Prize in Oslo, Norway.

The EU was awarded the prize for its role in uniting the continent after two world wars.

At the ceremony there was applause when the leaders of France and Germany stood up, holding hands.

Critics say the award is inappropriate. They point out that the eurozone crisis has exposed deep divisions in the 27-nation bloc.

Most of Europe’s national leaders were at the event, but not the UK’s David Cameron.

The British prime minister’s deputy, Nick Clegg – a longstanding advocate of the European project – represented the UK at the ceremony.

Nobel committee chairman Thorbjoern Jagland told the audience that in the current economic crisis “the political framework in which the union is rooted is more important than ever”.

“We must stand together, we have collective responsibility,” he said, warning of a risk of new nationalism in Europe.

The prize was received jointly by European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso and European Parliament President Martin Schulz. Herman Van Rompuy and Jose Manuel Barroso then gave a joint acceptance speech, in two parts.

The presidents of the EU's three main institutions have collected the Nobel Peace Prize in Oslo

The presidents of the EU’s three main institutions have collected the Nobel Peace Prize in Oslo

Herman Van Rompuy paid tribute to the post-war leaders of France and Germany who had forged the EU by uniting their economic interests.

He praised “the EU’s secret weapon – an unrivalled way of binding our interests so tightly that war becomes impossible”.

“It is better to fight around the table than on a battlefield,” he said, quoting Jean Monnet, one of the EU’s founders.

German Chancellor Angela Merkel sat next to French President Francois Hollande at the ceremony in Oslo City Hall.

Herman Van Rompuy said the economic crisis was fuelling “the return of long-forgotten faultlines and stereotypes”, but added: “Even such tensions don’t take us back to the darkness of the past.”

He ended by adapting the famous “Ich bin ein Berliner” quote from the late President John F. Kennedy during the Cold War.

He said he hoped future generations would “say with pride <<Ich bin ein Europaer>>, <<Je suis fier d’etre Europeen>>, <<I’m proud to be European>>.”

Four young Europeans, selected through an open EU competition, were in the delegation with equal status alongside the politicians.

The European Commission, which drafts EU laws, says the Nobel Prize money – about 930,000 euros ($1.2 million) – “will be allocated to children that are most in need”.

There has been a barrage of criticism – from Euroskeptics, peace activists and former winners of the prize.

Many of them question whether the EU should be given such an honor at a time when record unemployment and tough austerity policies, supported by European institutions, are causing serious social tensions in several member states.

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EU budget summit held in Brussels has ended without agreement on the 27-strong union’s next seven-year budget.

Another meeting will have to be called to sort out the difficulties but it is unclear how differences will be resolved.

European Council chief Herman Van Rompuy said he was confident a deal would be reached early next year.

Hours of talks failed to bridge big gaps between richer countries and those which rely most on EU funding.

The UK said current EU spending levels must be frozen.

The EU’s divisions are very clear and have become even more stark at a time of economic crisis.

Herman Van Rompuy had reshuffled the allocations in his original proposed budget during the summit, but he kept in place a spending ceiling of 973 billion euros ($1.2 trillion).

With the eurozone’s dominant states, Germany and France, unable to agree on the budget, UK Prime Minister David Cameron had warned against “unaffordable spending”.

The failure to decide on a budget came just days after the finance ministers of the 17 eurozone states failed to agree on conditions for releasing a new tranche of bailout money to Greece, raising questions about the union’s decision-making process.

Herman Van Rompuy’s budget had been unacceptable to a number of other countries, not just Britain, David Cameron told reporters.

“Together, we had a very clear message: <<We are not going to be tough on budgets at home just to come here and sign up to big increases in European spending>>,” he said.

“We haven’t got the deal we wanted but we’ve stopped what would have been an unacceptable deal,” he added.

“And in European terms I think that goes down as progress.”

EU budget summit held in Brussels has ended without agreement on the 27-strong union's next seven-year budget

EU budget summit held in Brussels has ended without agreement on the 27-strong union’s next seven-year budget

German Chancellor Angela Merkel said she was sympathetic towards David Cameron’s view – but no more than she was to all countries involved in the discussion.

“The discussions, both the bilateral discussions and the common discussion, have shown us that there is sufficient potential for an agreement,” she added.

French President Francois Hollande said the summit had made “progress”.

“There were no threats, no ultimatums,” he told reporters.

“Angela Merkel and I both agreed that it would be better to take some time out because we want there to be an agreement.”

Without naming the UK, he also said it was time the system of budget rebates was reconsidered.

“It is a paradox, because some net contributors [EU countries that pay in more than they get back] get some of the money back even though they are in a situation where they are wealthy enough for them not to get this money back,” Francois Hollande said.

Lithuanian President Dalia Grybauskaite remarked that the atmosphere at the summit had been “surprisingly good because the divergence in opinions was so large that there was nothing to argue about”.

European Commission chief Jose Manuel Barroso said the talks had failed owing to “important differences of opinion – especially in overall size of the budget”.

The Commission, which drafts EU laws, had originally called for a budget of 1.025 trillion euros.

Its position was supported by the European Parliament and many countries which are net beneficiaries, including Poland, Hungary and Spain.

While most EU members supported some increase in the budget, several, mostly the big net contributors, argued it was unacceptable at a time of austerity.

Germany, the UK, France and Italy are the biggest net contributors to the budget, which amounts to about 1% of the EU’s overall GDP.

Herman Van Rompuy’s revised budget would have softened the blow to the two main areas of spending: development in the EU’s poorer regions, and agriculture.

Instead, there would have been greater cuts to energy, transport, broadband and the EU’s foreign service.

His proposal, put to leaders on Thursday evening, would have made no change to the level of administrative costs – something the UK might have found unacceptable.

Speaking after the summit, Herman Van Rompuy said: “My feeling is that we can go further… It has to be balanced and well prepared, not in the mood of improvisation, because we are touching upon jobs, we are touching upon sensitive issues.”

Failure to agree on the budget by the end of next year would mean rolling over the 2013 budget into 2014 on a month-by-month basis, putting some long-term projects at risk.

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German Chancellor Angela Merkel says she doubts an agreement can be reached on the European Union’s 2014-2020 budget at the summit taking place in Brussels.

Angela Merkel spoke after negotiations on the 2014-2020 budget were adjourned until midday on Friday.

The opening of the summit was delayed for three hours because of stark differences over the budget plans.

Most EU members support an increase in the budget but several countries say it is unacceptable at a time of austerity.

Earlier, President of the European Council Herman Van Rompuy circulated a revised proposal for the new budget and said he believed that a compromise was possible.

“I think we’re advancing a bit, but I doubt that we will reach a deal,” Angela Merkel said.

She has previously said that another summit may be necessary early next year if no deal can be reached now.

French President Francois Hollande also cautioned that an agreement might not be possible.

But he added: “We should not consider that if we don’t get there tomorrow or the day after, all would be lost.”

German Chancellor Angela Merkel says she doubts an agreement can be reached on the European Union's 2014-2020 budget at the summit taking place in Brussels

German Chancellor Angela Merkel says she doubts an agreement can be reached on the European Union’s 2014-2020 budget at the summit taking place in Brussels

The 90-minute session late on Thursday followed a grueling day of face-to-face meetings between Herman Van Rompuy and each of the bloc’s leaders, followed by a flurry of backroom discussions.

Before suspending talks, leaders nominated Luxembourg’s Yves Mersch to the executive board of the European Central Bank.

The EU Commission, which drafts EU laws, has called for an increase of 4.8% on the 2007-2013 budget.

The UK is the most vocal of EU member states seeking cuts in the budget to match austerity programmes at home.

“No, I’m not happy at all,” Prime Minister David Cameron said about Herman Van Rompuy’s offer to cap spending at 973 billion euros ($1.2 trillion).

“Clearly, at a time when we’re making difficult decisions at home over public spending, it would be quite wrong – it is quite wrong – for there to be proposals for this increased extra spending in the EU.”

The statement called the rebate “fully justified”. The EU Commission and some EU governments want the rebate scrapped.

David Cameron has warned he may use his veto if other EU countries call for any rise in EU spending. The Netherlands and Sweden back his call for a freeze in spending, allowing for inflation.

Poland and its former-communist neighbors, which rely heavily on EU cash, want current spending maintained or raised.

Francois Hollande has also called for subsidies for farming and development programmes to be sustained for poorer nations.

France has traditionally been a big beneficiary of EU farm support.

Failure to agree on the budget would mean rolling over the 2013 budget into 2014 on a month-by-month basis, putting some long-term projects at risk.

Possible outcomes

  • deal after intense negotiations which may continue into the weekend
  • Failure to agree and a follow-up budget summit
  • If no agreement is reached by the end of 2013, the 2013 budget ceilings will be rolled over into 2014 with a 2% inflation adjustment, amid uncertainty over long-term EU projects

EU leaders are to begin talks on the bloc’s 2014-2020 budget, with many of them calling for cuts in line with the savings they are making nationally.

Countries that rely heavily on EU funding, including Poland and its ex-communist neighbors, want current spending levels maintained or raised.

The UK and some other net contributors say cuts have to be made. At stake are 973 billion euros ($1,245 billion).

The bargaining in Brussels will continue on Friday, or even longer.

The draft budget – officially called the 2014-2020 Multi-Annual Financial Framework (MFF) – was drawn up by European Council President Herman Van Rompuy, who made cuts to the European Commission’s original plan.

France objects to the proposed cuts in agriculture, while countries in Central and Eastern Europe oppose cuts to cohesion spending – that is, EU money that helps to improve infrastructure in poorer regions.

They are the biggest budget items. The Van Rompuy plan envisages 309.5 billion euros for cohesion (32% of total spending) and 364.5 billion euros for agriculture (37.5%).

The EU budget is a small fraction of what the 27 member states’ governments spend in total.

German Chancellor Angela Merkel says another summit may be necessary early next year if no deal can be reached in Brussels now.

In a speech to the European Parliament on Wednesday, the EU Commission President, Jose Manuel Barroso, complained: “No one is discussing the quality of investments, it’s all cut, cut, cut.”

Arriving in Brussels, UK Prime Minister David Cameron said: “These are very important negotiations.

“Clearly at a time when we are making difficult decisions at home over public spending it would be quite wrong, it is quite wrong, for there to be proposals for this increased extra spending in the EU.”

David Cameron, who was due to meet Jose Manuel Barroso and Herman Van Rompuy, has warned he may use his veto if other EU countries call for any rise in EU spending. The Netherlands and Sweden back his call for a freeze in spending, allowing for inflation.

Any of the 27 countries can veto a deal, and the European Parliament will also have to vote on the MFF even if a deal is reached.

Failure to agree would mean rolling over the 2013 budget into 2014 on a month-by-month basis, putting some long-term projects at risk.

If that were to happen it could leave David Cameron in a worse position, because the 2013 budget is bigger than the preceding years of the 2007-2013 MFF. So the UK government could end up with an EU budget higher than what it will accept now.

The European Commission says that the EU budget accounts for less than 2% of public spending EU-wide and that for every euro spent by the EU the national governments collectively spend 50 euros.

European Union leaders have agreed to set up a single eurozone banking supervisor – a major step towards a banking union.

A legislative framework is to be in place by January 1st 2013, with the body starting work later next year.

The European Central Bank-led mechanism will have the power to intervene in any bank within the eurozone.

The deal appears to be a compromise between France and Germany, who earlier disagreed over the timing and over the number of banks the ECB would oversee.

The timetable remains important, because only when the body is fully operational will the eurozone’s rescue fund inject cash directly into ailing banks – so important for countries like Spain.

The deal was, at best, an uneasy compromise between the French and Germans and much wrangling lies ahead.

France and the EU Commission wanted joint banking supervision, with the ECB in the lead role, to become operational in January 2013.

But German Chancellor Angela Merkel stressed that national budget discipline should be the priority.

Germany had been at odds with the European Commission over the scope of the proposed ECB supervision. Under the draft plan, all 6,000 banks in the 17-nation eurozone would be included – Germany wanted it limited to the biggest, “systemic” banks.

Previously, the German government has expressed a desire to retain supervisory responsibility within Germany over the country’s Landesbanks – state-owned banks that play a key role in the economies and state finances of Germany’s federal regions.

Announcing the result of talks early on Wednesday, European Council President Herman Van Rompuy said the 27 EU member states had agreed to set up – by the end of this year – “a Single Supervisory Mechanism [SSM], to prevent banking risks and cross-border contagion from emerging”.

“Once this is agreed, the SSM could probably be effectively operational in the course of 2013,” he said.

EU Commission President Jose Manuel Barroso said that the ECB “will be able to intervene if needed in any bank in the euro area”.

With new supervisory powers the ECB would be able to act early on to prevent a systemically dangerous accumulation of debt on a bank’s balance sheets.

And once the legal framework is in place the new permanent rescue fund, the European Stability Mechanism (ESM), will be able to recapitalize struggling banks directly, without adding to a country’s sovereign debt pile.

ECB supervision will not extend to the UK – Europe’s main financial centre, but outside the euro.

It is more than a theoretical possibility that the interests of the UK and City of London in shaping financial rules will be systematically ignored or overridden, he says.

Both Germany and France appeared to be claiming victory in the negotiations.

German Chancellor Angela Merkel said that the agreement was that “banks must be supervised in a differentiated way. That means that some will be direct… at the ECB level and others indirectly, via the national authorities.”

She also said that ECB President Mario Draghi had told her it would be a matter of some months before the ECB was ready to take on its new role.

Angela Merkel confirmed that the EU bailout funds would not be used to directly inject risk-absorbing capital into troubled eurozone banks until the new supervisory arrangements were in place.

A decision about how to recapitalize Spain’s banks will be made in the next couple of weeks, according to Jean-Claude Juncker, who chairs the Eurogroup of finance ministers.

French President Francois Hollande said there had been no discussion of a possible request by the Spanish government for a bailout of its own finances.

But he said “the worst is behind us”.

“We are on track to solve the problems that for too long have been paralyzing the eurozone and made it vulnerable,” Francois Hollande told a news conference.

EU leaders agreed that the ECB’s new bank supervisory responsibilities would be strictly separated from its role in setting monetary policy.

The banking union plan is fraught with legal complications, as it would give more powers to the ECB and possibly weaken those of national regulators.

There is speculation that it could lead to treaty changes – something that has caused big headaches for the EU in the past.

The UK wants safeguards to protect the powers of the Bank of England.

Jose Manuel Barroso said the arrangement would be “as inclusive as legally possible for non-euro members to join if they want to”.

Earlier, Angela Merkel called for the EU to be given the power to veto member states’ budgets. She said the EU economics commissioner should be given clear rights to intervene when national budgets violated the bloc’s rules.

 

German chancellor Angela Merkel has called for the EU to be given the power to veto member states’ budgets, as leaders meet in Brussels for a summit.

Angela Merkel said the EU economics commissioner should be given clear rights to intervene when national budgets violated the bloc’s rules.

But French President Francois Hollande said the summit must keep focused on plans for a banking union.

Francois Hollande wants action to revive growth, while Germany stresses budget discipline.

“The topic of this summit is not the fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year and especially the banking supervision. The other topic is not on the agenda,” Francois Hollande said.

The banking union plan is fraught with legal complications, as it would give more powers to the European Central Bank (ECB) and possibly weaken those of national regulators. There is speculation that it could lead to treaty changes – something that has caused big headaches for the EU in the past.

The aim is to agree first on joint banking supervision, with the ECB playing the lead role. But the UK – the EU’s main financial centre – wants safeguards to protect the powers of the Bank of England.

The UK and some of the other nine non-euro states are also concerned about voting rights in the proposed banking union.

France and Germany differ over the timetable for such a union, with Berlin advocating caution.

Germany is also at odds with the European Commission over the scope of the proposed ECB supervision. Under the plan, all 6,000 banks in the 17-nation eurozone would be included, but Germany wants it limited to the biggest, “systemic” banks.

As the summit got under way its chairman, European Council President Herman Van Rompuy, invited all 27 leaders to attend the Nobel Peace Prize ceremony in Norway. The EU was awarded the prize last week.

“To mark this joyful occasion I hope all EU Heads of State or Government will be able to join celebrations in Oslo in December,” he said on Twitter.

But Greece, the eurozone state worst hit by the debt crisis, was gripped by another 24-hour general strike on Thursday, with at least 20,000 protesters thronging central Athens, amid clashes between demonstrators and police.

Addressing the German parliament in Berlin on Thursday morning, Angela Merkel said the EU should have “real rights to intervene in national budgets” that breached the limits of the EU’s growth and stability pact.

The EU’s economics commissioner, she suggested, should have the authority to send a budget back to a national parliament.

Unfortunately, Angela Merkel said, some EU member states were not ready for such a step.

“I am astonished that, no sooner does someone make a progressive proposal… the cry immediately comes that this won’t work, Germany is isolated, we can’t do it,” she added.

“This is not how we build a credible Europe.”

On the banking union Angela Merkel has repeatedly stressed that “quality must trump speed”.

Prime Minister Fredrik Reinfeldt of Sweden, one of the 10 EU countries outside the euro, echoed her stance, saying “there are a lot of questions that need to be answered legally” and “it’s better to get things right than to rush things”.

The idea is that the ECB would be able to intervene early on to prevent a systemically dangerous accumulation of debt on a bank’s balance sheets.

Once the legal framework is in place the new permanent rescue fund, the European Stability Mechanism (ESM), will be able to recapitalize struggling banks directly, without adding to a country’s sovereign debt pile.

The prize is a system that avoids huge taxpayer-funded bailouts like those arranged for Greece, the Republic of Ireland and Portugal.

The summit is taking place amid calmer European stock markets than at previous meetings and with less immediate concern over the debt crises in Spain and Greece, analysts say.

UK Prime Minister David Cameron made it clear that improving the EU single market was his priority at the summit.

He said that in the “global race” there was a risk of the EU falling behind.

The EU single market “still isn’t finished, in digital, in services, in energy, and that is the agenda I’ll be pushing very hard at this council”, he said.

Later Finland’s Europe Minister, Alex Stubb, said the UK was looking increasingly isolated and the summit appeared to be “26 plus one”.

“I think Britain is right now, voluntarily, by its own will, putting itself in the margins,” he told Reuters news agency.

“It’s almost as if the boat is pulling away and one of our best friends is somehow saying ‘bye bye’ and there’s not really that much we can do about it.”

Banking union – Brussels’ 3-stage plan

• Single supervisory mechanism (SSM)

• Joint resolution scheme to wind down failing banks

• Joint deposit guarantee scheme

 

EU leaders at Brussels summit have agreed to use the eurozone’s bailout fund to support struggling banks directly, without adding to government debt.

Speaking after 13 hours of talks in Brussels’, EU chief Herman van Rompuy also said a eurozone-wide supervisory body for banks would be created.

Officials said the plans could be finalized during July.

Analysts say Germany appears to have given ground after pressure from Spain and Italy to provide more support.

The two southern European countries had withheld support from an earlier plan to for a growth package worth 120 billion Euros ($149 billion).

They wanted measures to lower their borrowing costs.

Herman van Rompuy said the new proposals would break the “vicious circle” between banks and national governments.

Although Germany appears to have compromised, Chancellor Angela Merkel has managed to ensure that Brussels has more control over the finances of eurozone countries, something she had wanted.

The deal came about after new French President Francois Hollande appeared to throw his weight behind Italy and Spain.

“I’m here to try to find rapid solutions for those countries facing pressure from the market, despite having made huge efforts to balance their budgets,” the socialist French president said.

EU leaders at Brussels summit have agreed to use the eurozone's bailout fund to support struggling banks directly, without adding to government debt

EU leaders at Brussels summit have agreed to use the eurozone's bailout fund to support struggling banks directly, without adding to government debt

The new growth package, announced by Herman van Rompuy, is made up of:

• A 10 billion-euro boost of capital for the European Investment Bank, expected to raise overall lending capacity by 60 billion Euros

• Targeting 60 billion Euros of unused structural funds to help small enterprises and create youth employment

• A pilot launch of EU project bonds worth 4.5 billion Euros for infrastructure improvements, focusing on energy, transport and broadband.

In Brussels, both Italy and Spain were pushing the eurozone bloc to agree steps to reduce the interest rates the two countries have to pay.

Spanish 10-year government bonds were trading at yields above 6.9% on Thursday, coming close to the 7% considered unaffordable.

Spain’s Prime Minister Mariano Rajoy said debt sustainability was a pressing problem.

“We are paying rates that are too high to finance ourselves and there are many Spanish public institutions that cannot finance themselves.”

Spanish and Italian leaders are worried that their countries could soon – in effect – be shut out of international markets and forced to seek assistance.

Angela Merkel has warned there is no “magic formula” to solve the crisis.

Several EU leaders want individual countries’ debts guaranteed by the whole eurozone, for instance in the form of centrally issued eurobonds.

But Angela Merkel told the German parliament on Wednesday that eurobonds were “the wrong way” and “counter-productive”, adding: “We are working to breach the vicious circle of piling up debt and breaking [EU] rules.”

She said to loud applause: “Joint liability can only happen when sufficient controls are in place.”

Stronger competitiveness was the condition for sustained growth, the chancellor said.

Meanwhile, UK Prime Minister David Cameron said on his arrival at the summit that eurozone countries had some “hard decisions” to make.

When asked about plans for transferring more budgetary powers to the EU level, he said he shared “people’s concerns about Brussels getting too much power”.

European authorities have also unveiled proposals such as the creation of a European treasury, which would have powers over national budgets. The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems

 

Russian President Vladimir Putin is expected to be pressed by EU officials to take a stronger line on the crisis in Syria during a summit in St Petersburg.

EU member states want Russia to put pressure on its ally to withdraw heavy weapons from cities and comply fully with UN envoy Kofi Annan’s peace plan.

Russia and China are also resisting US and European calls to condemn President Bashar al-Assad and seek his removal.

On Sunday, Bashar al-Assad denied his forces had any role in the Houla massacre.

In a televised address, President Bashar al-Assad told parliament the killing of more than 108 people in their homes, including 49 children, was an “ugly crime” that even “monsters” would not carry out.

Witnesses have blamed pro-government militiamen for the massacre, which has triggered international condemnation and led to several countries expelling Syrian diplomats in protest.

Bashar al-Assad said the only way to resolve the crisis was through political dialogue, and that “foreign meddling” was to blame for Syria’s divisions.

European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso and EU foreign policy chief Catherine Ashton are among those attending Monday’s summit.

On Sunday, Vladimir Putin invited the EU leaders for dinner ahead of the talks at a lavish estate on the outskirts of the city.

Vladimir Putin will hold talks with Jose Manuel Barroso and Herman Van Rompuy

Vladimir Putin will hold talks with Jose Manuel Barroso and Herman Van Rompuy

European diplomats regard the meeting as a chance to renew ties with Vladimir Putin since his return to the presidency earlier this month.

The leaders are also expected to discuss trade and Iran’s controversial nuclear programme. Russia will also be looking to speed up moves towards visa free travel in Europe.

“We need to make sure that Russia is using fully its leverage in convincing the [Assad] regime to implement [the peace plan],” an EU official quoted by the Reuters news agency said.

“The Russian side has certainly not been very helpful in finding solutions in terms of a political way out.”

Moscow insists it is not protecting Bashar al-Assad but says his removal cannot be a precondition for political dialogue.

Baroness Catherine Ashton, who met Russian Foreign Minister Sergei Lavrov before Sunday’s dinner, said in a statement: “Russia’s role is crucial for the success of Annan’s plan.”

She said the EU wanted to “work closely with Russia to find a way to end the violence”.

The statement added that Baroness Catherine Ashton had spoken to Kofi Annan by telephone on Sunday and they had agreed that the crisis was at “a critical point”.

Analysts say pressure is growing on Moscow to concede that the initiative is stalled and to promote a compromise in which President Bashar al-Assad stands down to allow a transition of power.

US Secretary of State Hillary Clinton said on Sunday that she had “made it very clear” to Sergei Lavrov in a telephone conversation that the focus was shifting to a political transition.

“Assad’s departure does not have to be a precondition, but it should be an outcome so the people of Syria have a chance to express themselves,” she said during a visit to Stockholm.

Although the summit is not expected to produce any major breakthrough in relations between Russia and the EU, it is still important.

EU leaders will be able to reacquaint themselves with Vladimir Putin and it is also a chance to gauge what kind of relationship Moscow and Brussels are likely to have during his six-year presidency.

 

European Council President Herman Van Rompuy has announced that EU leaders want Greece to remain in the eurozone but to “respect its commitments”.

Herman Van Rompuy, speaking at an informal EU summit, said continuing “vital reforms” were essential for Greece to overcome its economic problems.

The eurozone crisis has overshadowed the talks, amid fears that Greece may have to exit the single currency.

The eurozone is said to be preparing for such a scenario.

“We want Greece to remain in the euro area while respecting its commitments,” Herman Van Rompuy told a news conference in Brussels.

“We are fully aware of the significant efforts already made by the Greek citizens.

“The eurozone has shown considerable solidarity having already disbursed, together with the IMF (International Monetary Fund) nearly 150 billion Euros in support of Greece since 2010.”

European Council President Herman Van Rompuy has announced that EU leaders want Greece to remain in the eurozone but to "respect its commitments"

European Council President Herman Van Rompuy has announced that EU leaders want Greece to remain in the eurozone but to "respect its commitments"

He said the EU would take action to return Greece to economic growth and job creation.

But Herman Van Rompuy said “continuing vital reforms” were “the best guarantee for a more prosperous future in the euro area”.

Referring to Greece’s forthcoming elections in June he said: “We expect that after the elections the new Greek government will make that choice.”

On Wednesday, European stock markets fell about 2% amid anxiety that Greece might have to exit the euro.

herman Van Rompuy said talks had been “focused and frank”.

He said there was agreement on the need for economic growth as well as measures to restore financial stability, which he described as “two sides of the same coin”.

UK Prime Minister David Cameron emphasized the agreements that EU leaders had reached on Wednesday.

“It was a good meeting in that there was complete agreement that dealing with deficits and getting growth are not alternatives, they go together. You need to do one in order to get the other,” David Cameron said.

Greece’s caretaker Prime Minister Panagiotis Pikrammenos said he had “had the support from almost every country member”.

EU leaders began the summit with Germany resisting pressure to launch eurobonds as a way to ease the eurozone crisis.

German Chancellor Angela Merkel said the bonds, pooling eurozone debt, would violate EU treaties and would “not contribute to kick-starting growth”.

France’s President Francois Hollande said that he wanted discussion of eurobonds and Irish PM Enda Kenny said the idea would be on the table.

Earlier, Angela Merkel said talks would not result in decisions but would influence formal summit talks in late June.

The leaders would look at ways to deepen the EU internal market, boost mobility in Europe’s labor market and better target European Investment Bank funding for projects. Such measures could help stimulate growth, she said.

The summit has been the first opportunity for President Francois Hollande to shift the emphasis from austerity to growth – a key message he gave to French voters, who elected him on 6 May.

The French Socialist leader’s victory is seen as a challenge to the prevailing austerity drive in the EU, which is favored by Germany.

 

Twenty five out of 27 EU leaders have signed a new treaty to enforce budget discipline within the bloc.

The “fiscal compact” aims to prevent the 17 eurozone countries again running up huge debts.

It must now be ratified by individual parliaments and, in the case of the Irish Republic, a referendum.

UK Prime Minister David Cameron, who with the Czechs refused to sign, said his proposals for cutting red tape and promoting business had been ignored.

But the newly re-appointed President of the European Council, Herman Van Rompuy, said British calls to boost the EU economy were being taken seriously and he had sought to re-draft the summit’s conclusions accordingly.

The fiscal compact is what emerged after David Cameron vetoed plans to change the EU treaties to enforce greater budgetary discipline back in December.

German Chancellor Angela Merkel described it as a “great leap”, a first step towards stability and political union.

These new powers may face an early test as both Spain and the Netherlands have admitted they will miss targets for reducing their deficits.

While there has been a change of emphasis at this summit, “from crisis mode to growth mode” in the words of one senior official, it will be difficult to achieve whilst tough spending cuts are being made.

In a speech at the signing ceremony, Herman van Rompuy said: “This stronger self-constraint by each and every one of you as regards debts and deficits is important in itself.

“It helps prevent a repetition of the sovereign debt crisis. It will thus also reinforce trust among member states, which is politically important as well.

“The restoration of confidence in the future of the eurozone will lead to economic growth and jobs. This is our ultimate objective.”