European leaders attending a two-day summit in Brussels have approved a 120 billion-euro, or $149 billion, package to promote growth in the debt-stricken eurozone as well as across the broader 27-nation European Union, it was announced Thursday.
"What we already agreed is...to boost the financing of the economy by around 120 billion euro for immediate growth measures," European Council president Herman Van Rompuy told reporters in Brussels on the first day of the two-day summit.
The growth package includes a 10 billion euro capital boost for the European Investment Bank. It also redirects 60 billion euros of unused structural funds to help small enterprises and create youth employment in most needy countries.
The package also calls for launching EU project bonds worth 4.5 billion euros for infrastructure improvements focusing on energy, transport and broadband. The growth plan approved also includes tax-policy pledges and more focused use of EU funding.
"The growth agenda is a sign of our unrelenting commitment. It brings together all concrete measures that we will swiftly take," Rompuy said at the press conference. He stressed that more work needed to be done to finalize the details of the pact, including those dealing with financial stability and the future of the euro.
He said the leaders would continue to discuss short-term immediate measures aimed at easing the eurozone debt crisis during their Thursday-night dinner and when they reconvene on Friday. He said two nations in particular were eager to discuss short-term measures that address borrowing costs of eurozone states, apparently referring to Spain and Italy.
Spain's borrowing costs for its 10-year bonds surged Wednesday to almost 7 percent, which is seen as unsustainable by analysts. Spanish Prime Minister Mariano Rajoy warned that his country will not be able to finance itself for long at the high rates it currently pays for raising funds.
Incidentally, Italy's borrowing costs have also jumped amidst growing concerns whether the country would be next in line to seek a bailout. Analysts believe the economies of Spain and Italy are too big to be bailed out.
In the course of the summit, European leaders are expected to discus whether eurozone's temporary EFSF rescue fund and a future permanent ESM bailout fund could be used to buy Spanish and Italian government bonds to bring down the steep borrowing costs.
The meeting would also discuss ways to tackle the ongoing debt crisis in the eurozone, including the issuance of collective Eurobonds, demands by Greece to renegotiate terms of its bailout, and eurozone banking union.
France, Italy and Spain, the three large eurozone economies after Germany, support the idea of issuing collective eurobonds for keeping the borrowing costs of debt-stricken eurozone states. Nonetheless, German Chancellor Angela Merkel remains fiercely opposed to the idea.
Merkel believes sharing of debt liabilities among eurozone members would be possible only after the establishment of a truly fiscal and political union that allows the EU to control and monitor budget plans of member nations.
Earlier in the day, French President Francois Hollande told reporters in Brussels that he hoped to get "very rapid solutions to support countries in greatest difficulty on the markets even though they have made considerable efforts to restore their public finances."
Earlier this week, the EU unveiled a report containing proposals for securing the stability of the Union, which recommends enforcing tighter fiscal integration with budget controls across the eurozone and establishing a European banking union. The proposed measures enhance the existing power of European Union in Brussels over the fiscal policies of the member-states. Critics, however, have raised concerns the report does not contain any suggestion to address the current debt problems faced by eurozone members.
by RTT Staff Writer
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