EU facing a summit packed with pitfalls

Wed Oct 3, 2012 8:41am EDT
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By Luke Baker

BRUSSELS (Reuters) - Banking supervision, the single market, a centralized euro zone budget, a single bank resolution fund, direct recapitalization of banks from rescue funds and much stricter fiscal oversight.

If there were any doubts about how complex a task the Europe Union faces to protect the euro and shore up its finances, the agenda for the EU summit on October 18-19 should lay them to rest.

In an 8-page document setting out the issues for discussion, Herman Van Rompuy, the president of the European Council, touches on just about everything controversial facing the bloc.

But rather than offering specifics, the document is more of a wish-list of topics that need to be broached in the months ahead if the EU, and the 17 euro zone countries within it, are to press ahead with the risky and politically challenging task of retooling the economic and monetary union that binds them.

What's more, the European Commission, the EU executive that has the right to propose new legislation, has also pitched in with a series of ideas on banking union, budgets, changes to the EU treaty and how to separate retail and investment banking.

The upshot is that EU leaders and their finance ministers - who will meet in Luxembourg next Monday and Tuesday to prepare the ground for the summit - have a vast array of suggestions and half-sketched proposals to work their way through, any one of which will aggravate tensions among major member states.

"It is hard not to be sympathetic to the various European finance ministries that will have to wade through all these proposals, and integrate them into a coherent whole," Alex White, an economist with JP Morgan in London, wrote in a research note on Wednesday.

"The next major point at which this will all be discussed is the European leaders' summit ... Another 4 a.m. compromise may lead to real confusion."   Continued...

The topping out wreath carrying the flags of the 27 EU member states is lifted up during the topping out ceremony at the construction site of the new headquarters of the European Central Bank (ECB) in Frankfurt, September 20, 2012. REUTERS/Kai Pfaffenbach