June 27 (Bloomberg) -- Back in 2000, European Union leaders promised to create a common patent system by the end of 2001 -- a deadline pushed back so often that a summit starting tomorrow is poised to set another one.
Deadlines are such an iffy business in Europe -- it took the EU almost 30 years to define chocolate -- that the bloc is shying away from fixing the calendar for the critical project of turning the crisis-struck euro area into what its leaders call a “genuine” economic union.
Moves toward a fiscal and banking union will play out “over the next decade,” proposals for the Brussels summit say -- enough time for markets to push one or more debt-laden countries out of a 17-nation currency zone once deemed permanent.
“We are confident there will be a compromise: whether it will be sufficient is another thing,” said Anton Brender, chief economist at Dexia Asset Management in Paris, which manages about 80 billion euros ($100 billion). “It has to be sufficient enough for Europe to manage through to the next summit and if not, there could be an explosion in markets.”
European Commission President Jose Barroso yesterday called the petty nationalism of the patent debate “a typical case where member states cannot agree for I do not know how many years.” A similar dynamic is at work on the eve of the 19th summit to tackle the debt crisis, which has spread from Greece - - equal to 2.3 percent of the euro economy -- to put the currency’s survival in its current form in question.
More than ever in the two-plus years of crisis containment, the future-of-Europe question revolves around Germany, with Chancellor Angela Merkel under pressure to provide financial guarantees for weaker economies.
Speaking to lawmakers in her Christian Democratic bloc in Berlin yesterday, Merkel criticized the euro-overhaul proposals for putting too much emphasis on shared liability and not enough on control of wayward budgets, according to a party official who was in the room. The 57-year-old leader told them she expects no shared liability for debt in her lifetime, the official said.
More immediate issues -- designing an emergency credit line of 100 billion euros for banks Spain, bargaining with Cyprus over a loan package of around 10 billion euros, addressing the new Greek government’s plea for relaxed aid terms -- are the domain of finance ministers, who next scheduled to meet on July 9.
‘Developing a Vision’
The summit will grapple with “developing a vision for the economic and monetary union to ensure stability and sustained prosperity,” according to a brainstorming paper released yesterday by four officials led by EU President Herman Van Rompuy.
Van Rompuy co-wrote the blueprint with Barroso, European Central Bank President Mario Draghi and Luxembourg Prime Minister Jean-Claude Juncker, who manages meetings of euro finance ministers.
“We have no reason to reject this debate, but it’s not the core of the subject,” Bernard Cazeneuve, French European affairs minister, told Le Monde yesterday. “The crisis response is needed now. This will make possible the necessary institutional evolution.”
A 10-year road map would echo the path to the euro sketched by the Maastricht Treaty negotiations of 1991, with one exception: that summit set 1999 as the date certain for starting the currency, while talks over fixing it are open-ended.
“We need to organize a more federal Europe,” Didier Reynders, who was Belgium’s finance minister for 12 years before becoming foreign minister, said yesterday. “It will be maybe medium term, I don’t know, except if we have a huge crisis in the coming months.”
Yesterday’s report offered hard-hit southern countries the prospect of debt sharing as long as they submit to German demands for more central control of national budgets in a “criteria-based and phased” move toward joint borrowing.
German officials questioned the report even before it became public. Deputy Foreign Minister Michael Link likened it to a “wish list” that would bind Germany into a common debt-management system without enforcing budgetary discipline.
Euro bonds or shared responsibility for the banking system are “exactly what we don’t want,” Rainer Bruederle, floor leader of the Free Democrats, the junior partner in Merkel’s coalition, said in Berlin.
Banking supervision in the euro area could be entrusted to the ECB, the report said. It mooted a deposit-insurance program involving all 27 EU nations to “strengthen credibility” of national backstops, as well as using a bank tax to finance a system for shutting down failed banks.
The Van Rompuy-led group proposed expanding the role of the 500 billion-euro European Stability Mechanism, set to go into operation next month, to cover deposit insurance and the bank-resolution fund.
One of the report’s faultlines lies in a call for a “stronger democratic basis” for euro management while seeking tighter central control over national budgets and banks.
The summit will be “very difficult,” Italian Prime Minister Mario Monti told lawmakers in Rome yesterday. “I am ready to stay beyond the expected end of the meeting and to work until Sunday night, if needed.”
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