Dec. 7 (Bloomberg) -- The European Union should consider a “staged and criteria-based process” for moving toward jointly issued debt by euro-area countries, according to a planning document for an EU summit that begins in Brussels tomorrow.
Leaders at the two-day meeting should consider pooling some funding instruments as part of “opening up the possibility” of joint debt, according to the document prepared by EU President Herman Van Rompuy. He called for “vigorous” implementation of previously agreed proposals, such as efforts to leverage the euro area’s temporary rescue fund, along with moves toward a more “genuine” fiscal union.
At the summit, EU leaders will try to craft their fifth comprehensive response in 19 months to the debt crisis that has seen bailouts of Greece, Ireland and Portugal and now threatens to engulf Italy and Spain. U.S. Treasury Secretary Timothy F. Geithner said he’s encouraged by the “progress” euro-area governments are making on ending the crisis and that he’s “confident” they’ll succeed.
In the five-page document, Van Rompuy suggested two possible avenues to change the EU’s treaty and fiscal requirements. “Rapid and significant changes” could come via a mechanism that doesn’t require national-level ratification, while further measures -- such as changes in the role of the European Commission and other institutions -- would require a more extensive treaty change process.
The EU chief said euro states should face financial sanctions if they don’t comply with country-specific recommendations for the single-currency region. He called for discussion of other proposals, such as allowing the EU’s permanent rescue fund, the European Stability Mechanism, to have the “necessary features of a credit institution.” A provision that limits the consolidated lending capacity of the ESM and the temporary European Financial Stability Facility to 500 billion euros could also be reviewed.
The report that Van Rompuy sent to EU governments is a “good basis for a comprehensive agreement,” Pia Ahrenkilde- Hansen, a spokeswoman for the European Commission, told reporters in Brussels today.
Germany rejected proposals to combine the EFSF with the ESM as Chancellor Angela Merkel’s government said it was more pessimistic of the outcome of the summit.
It is already decided that the ESM will take over from the EFSF at an appointed time, a German official told reporters in Berlin today on condition of anonymity because the negotiations are private. That is the agreed sequence and Germany will oppose any attempt to change that, the official said.
--With assistance from Tony Czuczka in Berlin. Editors: Patrick G. Henry, James Hertling
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