European leaders meet in Brussels ahead of economic summit

European leaders from centre-right governments and members of the European People's Party (EPP) met in Brussels on Thursday morning prior to crucial EU economic summit later in the day.                       

They met in an attempt to find a common position on the financial crisis to that they would present at the summit of European leaders.Eurobonds, Greece, Cyprus, Spanish banks and ways to create growth in the EU are among the topics of the day.                  

Yet expectations of a breakthrough on the explosive issue of pooling government debt seem to have fallen by the wayside.German Chancellor Angela Merkel, who has resolutely opposed the issuing of mutual debt, known as eurobonds, is the woman to watch, fear or confront at the two-day summit.                       

Many leaders have backed the idea of eurobonds as a key way of fixing the eurozone's problems as they would spread debt risk, lowering indebted countries' borrowing rates.                  

But Merkel has been reluctant to expose her country to new costs, and is concerned eurobonds may minimise the pressure on countries like Greece and Spain to reform their economies.                   

However, she said she was confident that deals could be made for the good of both Germany and the rest of Europe.

"I think today a package for growth and jobs is at the centre of the debate. On this we have worked at all councils this year - in January, March and today. And I think today it is is ripe so that we can pass it. And I will support it. For that I have received broad and clear support at home from the German parliament."                

While pressure on Merkel has been building, she is not alone in her opposition to have EU countries accrue joint debt.                  

Swedish Prime Minister Fredrik Reinfeldt said on Thursday before the EPP meeting that what was needed was not mutual debt but more financial reforms by Europe's trouble countries, measures he said would make them more competitive.               

"It's still a financial crisis that can only be dealt if you bring forward the actual amount of the potential losses and show the market how you will deal with it. The problem is that that has not fully been done. It's still a competitiveness crisis, yes there has been some reform but it's probably not enough and it take even further reforms," he said.                 

Far more urgent, in the short term, is finding a way to keep the cost of borrowing money sustainable for weaker EU countries.            

The leaders of Italy, France and Spain are pressing Germany to agree to share debts before markets push the 17-nation eurozone any closer to  collapse.               

The EU's top officials and the International Monetary Fund (IMF) have argued the same.Merkel isn't likely to budge.                    

She has argued repeatedly, as recently as Wednesday, that short-term solutions such as pooled debt or a more active European Central Bank are useless unless governments prove they can manage their budgets.She wants a grand, ambitious political union first.         

While they may not be able to change Merkel's mind, other leaders who avoided confronting her in the past may not hold back this time.Even if leaders of all 26 other EU nations line up against Merkel, she cannot bend very far.                   

She needs the German Parliament to approve the eurozone's permanent rescue fund, the European Stability Mechanism, and a European budget-discipline  pact, both expected to happen Friday.              

And many measures floated as possible solutions could require changes to Germany's constitution.

APTN