EU summit: The draft conclusions

EU summit: The draft conclusions: "

In this morning’s paper, we have a scoop on the contents of the draft conclusions for today’s European summit, which were circulated to heads of government by Herman Van Rompuy, the European Council president, ahead of the meeting.

As is our practice here at the Brussels Blog, we thought we’d give our readers a deeper dive into the document itself by posting its contents, with some explanatory annotations. We’re just posting the segments on the eurozone economy; there are several pages on energy and innovation, which is the nominal main subject of the summit.

The section on the debt crisis is included as an addendum at the end of the conclusions and entitled “Statement by the Heads of State or Government of the Euro Area and the EU Institutions”. Be forewarned that this could change over lunch, when leaders debate its contents:

Following their December 2010 Statement, the Heads of State or government of the euro area and the EU institutions reviewed progress in the implementation of the comprehensive strategy to preserve financial stability and ensure that the euro area will emerge stronger from the crisis.

This strategy includes the legislative package on economic governance, the stress tests and the financial sector repair, and the implementation of the European semester. In addition, they agreed on the following steps as part of the global package to be finalized in March:

· Implementation of existing programmes with Greece and Ireland.

· Implementation in euro area Member States of measures taken to strengthen fiscal positions and growth prospects in view of market pressures, and assessment by the Commission, in liaison with the ECB, of progress made.

· Concrete proposals by the eurogroup on the strengthening of the EFSF so as to ensure the necessary flexibility and financial capacity to provide adequate support.

· Finalization under the chairmanship of the President of the Eurogroup of the operational features of the European Stability Mechanism in line with the mandate agreed upon in December.

These are the key four items that will have to be decided by March. Most important is point number three: overhauling the EFSF, the €440bn eurozone bail-out fund. The phrase “necessary flexibility” is Euro-speak for giving the fund more powers, such as the authority to buy back sovereign bonds on the open market or provide short-term lines of credit to struggling countries. Currently, the fund can only conduct full-scale bail-outs.

Ensuring the “financial capacity” means making sure the fund can actually use all of its €440bn. Currently, because of rules to ensure it maintains a triple-A rating for the bonds it issues, it can only lend out about €250bn of the €440bn it can raise since it has to keep cash in reserve.

Building on the new economic governance framework, Heads of State or government discussed further steps to achieve a new quality of economic policy coordination in the euro area conducive to a higher degree of convergence in areas that have a direct impact on our competitiveness. Non-euro members will be invited to participate in the coordination. The President of the European Council will undertake consultations with the Heads of State or government of the euro area Member States and report back, identifying concrete ways forward. To this effect, he will closely cooperate with the President of the Commission. He will ensure that the Heads of State or government of the interested non-euro area Member States are duly involved in the process.

This paragraph is all about German chancellor Angela Merkel’s effort to get agreement on a “pact for competitiveness” between members of the eurozone. Merkel and Nicolas Sarkozy, the French president, are expected to issue a joint statement on their own later today, but these conclusions appear to fall far short of what Merkel wanted: a commitment to a list of austerity and reform measures that produce more coordinated national economic policymaking.

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