BRUSSELS, Belgium — The Friday night get-together was originally meant to be a rubber-stamping ceremony for the $147 billion loan to Greece from the other 15 members of the eurozone and the International Monetary Fund (IMF).
But like the Greek debt crisis itself has, the dinner meeting turned into something much bigger and far-reaching. A phone call among the G7 finance ministers was held before the meeting started, as was a special strategy session including EU President Herman Van Rompuy, French President Nicolas Sarkozy, German Chancellor Angela Merkel, European Commission President Jose Manuel Barroso and the head of the European Central Bank Jean-Claude Trichet.
After huddling many hours longer than expected, European Union leaders came out swinging.
“What you see tonight is the eurozone united around its currency, the euro,” declared Barroso in a somber tone. “We will defend the euro — whatever it takes. We have several instruments at our disposal and we will use them.”
They would start almost immediately. Throwing aside the usual calmly choreographed and time-consuming process of introducing new proposals, van Rompuy announced that in just over 24 hours the commission would present an outline of a “European stabilization mechanism to preserve financial stability in Europe.” Finance ministers of all 27 EU countries, not just the 16-state eurozone, have been called to Brussels to vote on it Sunday afternoon.
Sarkozy dramatized the rush in his press conference following the summit saying, “When the markets re-open Monday, we will have in place a mechanism to defend the euro.
"If you don’t think that’s significant,” he continued, “you haven’t been to many EU summits.”
No details of the “stabilization mechanism” plan were shared in advance, but the concept has been very controversial as some leaders see it as an opening for other countries to follow Greece into needing a rescue. Nonetheless, leaders hope the quick moves will move markets, which have remained bearish despite past rescue announcements. The creation of the $147 billion bailout, authorization of which was due to be the main subject of the dinner, has done little to boost market sentiment regarding Greek credibility.
Van Rompuy expanded on what he said had been “unanimously agreed” among the leaders of the euro-area countries.
He said the bloc would institute stronger surveillance of eurozone economies — especially regarding debt levels and the “competitiveness gaps” between states, two indicators that are now known to have been harbingers of the current crisis in Greece, overlooked even by the EU’s statistics agency.
To avoid a repeat of that situation, Barroso is due on Wednesday to unveil plans for increased EU surveillance and coordination of member states’ economies.
Greek Prime Minister George Papandreou expressed, perhaps with some relief, what had by now become obvious: that the meeting confirmed that the “need to safeguard the eurozone goes beyond Greece's problems.”
Merkel was the most tight-lipped following the meeting, skipping a full-blown press conference to rush home to Germany ahead of regional elections Sunday.
Germans aren’t in favor of bailing out the Greek government and neither was their chancellor until the risk of the Greek crisis spreading throughout the eurozone threatened to drag down healthier economies with it. She tried to postpone authorizing her share of the loan until after the Sunday balloting, but market pressure — and that of her eurozone counterparts — forced her to act sooner.
So Merkel reluctantly trudged off to Brussels after both houses of the German parliament approved the loan Friday and German President Horst Koehler signed it.
If Merkel’s coalition loses its majority in parliament, Germany's $37 billion portion of the loan is going to have been very costly for her.
But there’s another price being paid by people all over Europe, said Constanze Stelzenmuller of the German Marshall Fund. As each measured attempt to calm markets fails, she explained, “people are overwhelmed by the sense that this is an economic crisis where governments and politics have very little leverage on what happens. The markets are essentially buffeting the nation state and buffeting politicians.”
“People are I think genuinely and justifiably, deeply worried about governments no longer being able to make economic and monetary policy,” she added.
But eurozone leaders are going to use every hour between now and Monday morning giving it another try.