Analysts: EU summit won't fix euro crisis
Published: March. 24, 2011 at 3:30 AM
BRUSSELS, March 24 (UPI) -- European leaders meeting in Brussels will likely not finalize a eurozone bailout fund, due in part to Portugal's fiscal crisis, analysts said.
Portuguese Prime Minister
Jose Socrates offered his resignation Wednesday night after losing a crucial vote in Parliament on austerity measures, pushing the country toward early elections and an international bailout similar to what Greece and Ireland received last year.
"This crisis will have very serious consequences in terms of the confidence Portugal needs to enjoy with institutions and financial markets," Socrates said in a televised speech. "So from now on, it is those who provoked it who will be responsible for its consequences."
Socrates is to attend the two-day European Union summit beginning Thursday as caretaker prime minister, without the political authority to negotiate a deficit-reduction plan as he had planned, the Financial Times reported.
"In a political void, cutting a deal with the International Monetary Fund and the EU to trigger financial support would be particularly cumbersome," Gilles Moec, head of European economic research at Deutsche Bank, said in report Wednesday.
Other problems facing the bloc include a deadlock over the new Irish government's bid to cut the interest rate it pays on its $120 billion bailout. Ireland refuses to compromise on its relatively low 12.5 percent corporate tax rate to win a reduction in the cost of its EU-IMF loans.
In addition, Finland -- one of the eurozone's most fiscally sound nations -- is holding up a deal to expand the lending capacity of the current rescue fund for the euro. This could hold up a final agreement on shoring up the euro for several weeks, the Financial Times said.
The summit had been billed as the moment when EU leaders finalize "a grand bargain" for solving the debt crisis triggered by Greece, Ireland and the "peripheral" eurozone countries that would include putting together a new $620 billion bailout fund.
German Chancellor Angela Merkel, who this year asserted leadership over efforts to rescue the euro, said Wednesday it was unlikely leaders would put together comprehensive measures to prevent the debt crisis from spreading.
She encouraged European countries to press ahead with their own individual efforts at coordinating economic policies, telling an audience in Frankfurt "It couldn't make the situation any worse and it's worth a try."