|Merkel has rejected French demands to use unlimited ECB funds to fight the crisis [Reuters]|
European Union leaders have agreed to change the bloc’s treaty if necessary in the interests of economic convergence and discipline, Herman Van Rompuy, the EU president, has said.
Speaking after EU leaders held crunch talks in Brussels to nail down a solution to the worst economic crisis in its history, Van Rompuy said: “We decided to explore the possibility of limited treaty change.
“The aim is deepening our economic convergence and strengthening economic discipline. Limited means not a general overhaul of the institutional architecture.
“We also said that we would need the agreement of all the 27 [member states] before we can decide on a treaty change.
“The most important thing is not to change the treaty, the most important thing is to strengthen economic convergence.”
On Saturday, Guido Westerwelle, the German foreign minister, had called for an EU treaty change allowing nations that live beyond their means to be hauled before the European Court of Justice, an idea that failed to win wide support.
“We urgently need changes to the treaty so we can have a real stability union,” Westerwelle said during the talks in Brussels.
Jean Asselborn, the foreign minister of Luxembourg, said re-opening the EU’s rule-book, the Lisbon treaty, which was a painful decade in the making, would lift the lid on a “Pandora’s Box,” threatening the bloc’s very future.
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A Greek government official said on Sunday that any solution for further reducing Greece’s debt burden “must be voluntary”.
Private sector holders of Greek government bonds agreed in July to take a 21 per cent writedown in the value of their holdings to reduce Greece’s debt burden.
But it was not sufficient and talks are now focused on a deeper writedown, possibly 50 to 60 per cent, although it is unclear if that would be accepted voluntarily.
“We are moving towards a legally safe, voluntary solution,” the official said, adding that the deepest writedown possible, while still retaining voluntary participation, was the overriding aim.
Despite the discussions, no final decisions are expected until a second summit scheduled in the Belgian capital for Wednesday.
French President Nicolas Sarkozy backed down on Sunday in the face of implacable German opposition to demands to use unlimited European Central Bank (ECB) funds to fight the eurozone’s deepening crisis.
European Union leaders wrangled for hours over procedure and made little apparent progress in forging a strategy to overcome the crisis despite pressure from international partners and financial markets for decisive action.
Sarkozy acknowledged that France’s proposal to multiply the firepower of the European Financial Stability Facilty (EFSF)the eurozone’s rescue fund, by turning it into a bank and letting it borrow from the ECB, was doomed for now because neither Germany nor the central bank would agree to it.
“No solution is viable if it doesn’t have the support of all the European institutions,” the French leader told a joint news conference with German Chancellor Angela Merkel.
Merkel said only two options remained on the table for leveraging the $600bn rescue fund, and neither involved drawing on the central bank.
Eurozone officials said the solution was likely to be a mixture of using the EFSF to provide partial guarantees to buyers of new Italian and Spanish bonds and creating a special purpose vehicle with the IMF to attract funds from major emerging countries such as China.