The European has a lot of problems they need to tackle ranging from the Greece debt crisis, convincing investors that this debt crisis won't spiral out of control and fix the holes in banks' balance sheets.
Oct 16 05:25 PM US/Eastern
Nearly two years in, Europe's leaders bid to draw a line under the debt crisis this week and deliver a "lasting" solution to ring-fence their money and prevent EU disintegration.
The stakes are high, in the run-up to marathon Brussels talks amid global pressure to end in-fighting and avert the "scary" future US President Barack Obama fears otherwise awaits us all.
But Europe remains steadfast. "The results of the October 23 summit will be decisive," insisted French Finance Minister Francois Baroin after chairing weekend talks with G20 counterparts in Paris.
In a nutshell, the European Union must:
-- micro-manage how much Greece can default on its massive loans, striking a delicate balance between debt write-downs that reflect actual market values, and perceived bankruptcy;
-- plug the consequent hole in banks' balance sheets, a job the International Monetary Fund reckons could cost 200 billion euros, and that ratings agencies suggest could result in a downgrade for France;
-- and nail down safeguards against any repeat of the present mess, to begin with by enhancing the eurozone's existing financial "firewall" to convince doubtful investors that Italy and Spain won't fall into the same desperate spiral.
Culminating in that 'mother-of-all-summits' on Sunday, one that could run right through the night, finance, foreign and finally prime ministers, presidents and Germany's chancellor will each troop in.
All, even Angela Merkel, are under international orders to cater for every potential side-effect of their decisions, and deliver "comprehensive" defences aimed at turning the gaze of market wolves elsewhere.
These talks were meant to climax on Tuesday, but were put back in the hope the EU can end perennial internal squabbling before its key figures meet the United States, Japan and upstart rivals at a G20 summit on November 3-4.
The preparatory talks in Paris left European participants with burning ears -- and bruised egos.
For instance South Africa, a fast-rising economy two decades after apartheid fell, dismissed Europe as operating "behind the curve."
Pivotal as his eight-year tenure as head of the European Central Bank draws to a close, Jean-Claude Trichet told the Financial Times that Europe would rise to the challenge once governments cede fully to market-economy realities.
But even the most pro-EU among seasoned observers prefer caution.
"The limits will be set by the people," Hans Martens, who heads the leading Brussels think tank, the European Policy Centre, told AFP.
He wants to believe that "whatever it takes," Europe's political elite will do "what has to be done" to retain the hard-won fruits of post-World War II integration.
Yet he admits that the rising weight of populist voices "may in the end scare the politicians -- and this could not only mean the end of euro cooperation, but also of the EU."
So does this week herald the end of the beginning, as the Wall Street Journal has suggested? Or the beginning of the end?
Similarities exist with a May 2010 meeting, one week after Europe agreed a landmark bailout for Greece.
Then, 12 years after the euro's birth, pent-up pressure gave rise to the European Financial Stability Facility (EFSF).
Supposed to cater for all emergencies, it took until last Thursday -- after a second vote in ex-Communist Slovakia -- for its 440-billion-euro ($600 billion) coffers to become reality.
Now officials are engaged in fancy financial footwork to boost its firepower, so it can morph five-fold into an impregnable three trillion dollars.
Such a war-chest is required to combat what economists always warned was a multitude of sins created by monetary, but not economic or political union.
Already three eurozone nations, Greece, Ireland and Portugal have required multi-billion euro EU-IMF bailouts, twice in Greece's case.
European leaders have now identified root solutions, namely an understanding that the eurozone if not all EU economic policy must be delivered top-down, not bottom-up.
Replacing toothless EU deficit and debt thresholds, countries must now meet shared targets on a broad gamut of criteria from public budgets to tax bands or volumes of red tape.
Sanctions should be applicable by Christmas, and EU economic affairs commissioner Olli Rehn has already hinted at financial penalties for Cyprus and Hungary.
But central diktat, however well-intentioned, has stirred a backlash, as Martens recognises.
Greece, Ireland and Portugal each changed government under EU pressure to swallow an aid pill prescribed alongside IMF restrictions.
Slovakia too found that a parliament which says 'no' is expendable in the pursuit of the 'right' answer.
Trends are deceptive, but Finland has lurched to the right, amplifying a mood already visible in the Netherlands and Austria.
Fundamentally given its incontestable clout, Germany's highest court has ordered much greater oversight by all lawmakers of all future bailout participation.
Indeed, Chancellor Angela Merkel's electoral base has progressively receded throughout this process.
Should the drift accelerate, Europe may end up "dominated" by "extreme parties or groups," says Martens.
He concludes despairingly: "If that happens, I will probably move to New Zealand."
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