Barroso slams Franco-German euro govt proposal

September 30, 2011 - 7:15 AM
APTOPIX France EU Fimancial Crisis

Jose Manuel Barroso, President of the executive European Commission, delivers a speech at the European Parliament in Strasbourg, Wednesday, Sept. 28, 2011. Barroso called for closer political and financial unification in Europe, as fractures emerged Wednesday among leaders on how to solve Greece's debt crisis. (AP Photo)

BERLIN (AP) — The head of the EU's executive on Friday dismissed as unrealistic the French and German proposal to manage the eurozone through meetings of member states, saying decision-making needed to be centralized in European bureaucracies above sovereign nations.

France and Germany — representing about half of the bloc's output — have proposed holding two annual summits where eurozone governments would focus on economic policy.

Believing the 17 eurozone economies, with their 330 million citizens, could be governed "by two annual meetings of the heads of government is an illusion," Jose Manuel Barroso told the Friday edition of German daily Sueddeutsche Zeitung.

Instead, the president of the European Commission wants stronger EU institutions. "It will never work to leave the rules for a stable eurozone to the member states alone," he was further quoted as saying.

The EU leaders' more immediate preoccupation was ensuring the swift passage of expanded powers for the bloc's euro440 billion ($600 billion) bailout fund, European Financial Stability Facility, or EFSF.

Germany, which pays the lion's share of European bailouts, became the 13th member of the eurozone to support the expansion of the rescue fund Thursday. Parliament's upper house, representing Germany's states, gave the final stamp of approval to the law on Friday afternoon.

Austria's parliament was also set to vote on the new powers for the EFSF Friday.

The fund will be able to buy government bonds and lend money to banks and governments before they are in a full-blown crisis, making Europe's response to market jitters more rapid and pre-emptive.

In debt-heavy Greece, the heart of the currency zone's sovereign debt crisis, international debt inspectors were trying to complete a review of the country's austerity reforms, but strikes and protests were delaying meetings.

A morning meeting at the transport ministry in Athens was delayed to the evening. The delegation of EU, ECB and IMF officials drove away after finding the building under occupation and protesting employees in the courtyard.

The debt inspectors' review of Greece's progress is critical for Athens to receive the next installment of bailout loans.

French President Nicolas Sarkozy was set to meet Greek Prime Minister George Papandreou in Paris later Friday to discuss the debt crisis. Papandreou met Germany's Merkel for similar talks Tuesday.

Greece was saved from default by an initial euro110 billion bailout in May last year before the EFSF was established to help any other countries in trouble. A planned second euro109 billion rescue package for Greece this year includes a voluntary participation by private bondholders, who agreed to write off about 20 percent on their Greek debt holdings.

Many experts say those writedowns should be closer to 50 percent. The debate among European leaders now is whether to allow such a move under controlled conditions, providing help to banks that may take heavy losses on Greek bonds they hold.