Taoiseach Enda Kenny travels to Brussels this morning for a two-day summit with EU leaders.
The Government will step up its campaign for a radical new response to Europe’s debt debacle as it intensifies its demand for bank debt relief with other member states.
Mr Kenny is set to align himself with the leaders of France, Italy, Spain, Portugal, Greece and Belgium in the drive to develop an EU "banking union" in which liabilities are shared by member states.
This morning, Minister for Finance Michael Noonan said the summit will focus on Spain's banks and Italian borrowing costs. Speaking to reporters in Dublin, he said the focus is reducing Italian yields to around or slightly under 4 per cent. The yield on Italy's 10-year bond is about 6.27 per cent today.
Last night, a senior European diplomat said moves to create a pan-European deposit guarantee scheme and a common system for the rescue or "resolution"of failing banks were considered to be more practicable immediately than other measures to harmonise budgetary policy between member states.
EU leaders are set to discuss a report on the future of the currency by a quartet of European "wise men": Herman Van Rompuy, José Manuel Barroso, Mario Draghi and Jean-Claude Juncker, respectively the leaders of the European Council, the European Commission, the European Central Bank and the euro zone finance ministers.
Even though their report sets out a 10-year timeframe to secure the foundations of the single currency, many governments want EU leaders to quickly advance the integration of Europe's banking systems.
The push for greater economic, fiscal and banking harmonisation in the euro zone comes as German chancellor Angela Merkel rejects pressure to mutualise debt and dismisses the clamour to share banking liabilities between euro zone countries.
Senior officials say no breakthrough is likely on these questions at the summit as Dr Merkel faces votes in the German parliament tomorrow night to endorse the European Stability Mechanism’s permanent bailout fund and the fiscal treaty.
The push to share debts between member states finds favour in Dublin, where the Government would like to see the bailout fund given the power to rescue banks directly. This is resisted strongly in Berlin, however, where officials say any move to take on other countries’ banking debts would be akin to Germany underwriting their sovereign debt.
"I fear that at the summit we will talk too much about all these ideas for joint liability and too little about improved controls and structural measures," Dr Merkel said in advance of the gathering of heads of state and government, which begins this afternoon in Brussels.
The German leader met French president François Hollande last night in Paris for pre-summit talks. Although Dr Merkel found common ground with Mr Hollande’s predecessor, in her response to the emergency, she and Mr Hollande are divided over the fundamental principles of their response to the crisis.
Mr Hollande is pressing for debt mutualisation between member states and a new mandate for the European Central Bank to intervene in markets, but the chancellor insists there can be no leeway.
"We will talk about the political future of the economic and monetary union,2 the chancellor said last night. "I say we need more Europe and I think we are in agreement there. We need a Europe that functions effectively. Markets are looking for this, and a Europe where countries help each other."
Mr Kenny yesterday insisted that the Government has repeatedly made the case at European level for growth, jobs and an economic stimulus.
He said his meetings at an EU summit today and tomorrow would deal with an increase in funding that was available from the European Investment Bank which, in turn, would leverage further money. "But it has to be made available to countries that are in vulnerable positions or those, such as Ireland, that are in a programme."
He said there was an opportunity for flexibility to be shown by Europe in respect of the approval of project bonds. "That is an issue I will articulate, along with a number of other smaller countries, namely, that as part of the growth and jobs stimulus project bonds should be flexible enough to cater for smaller countries."
Mr Kenny said there were also creative ways of using structural funds that remained unspent in countries. "Greece, for example, was allocated €16 billion which it cannot spend because of the requirement to put up monies from a national perspective."
