Parallel summits highlight EU's north-south division
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European Union (EU) leaders separated into two parallel summits Friday, marking a widened north-south split in the 27-nation bloc in response to the devastating sovereign debt crisis.
Leaders of the center-left Party of European Socialists, including the debt-mired Greece, Portugal and Spain, met in Athens while conservative heads of government, including German Chancellor Angela Merkel, convened in Helsinki to chart out their response to the crisis.
The parallel summits were to prepare for an extraordinary EU meeting on March 11 and a March 25 summit of all EU leaders, when final decisions will be taken on the rescue mechanism for the eurozone.
The European sovereign debt crisis struck Greece in early 2010, later engulfed Ireland and is now threatening Spain and Portugal, amounting to the largest crisis since the single currency came into being in 1999.
While a "grand bargaining" looked inevitable, a north-south divide has begun to emerge over the exact means to contain the crisis and make the euro crisis-proof.
Estonian President Toomas Hendrik Ilves summed up the split last month: "The recent economic crisis has changed the geographical self-identification of the European economy, with the old dividing lines between East and West -- so-called 'new Europe' and 'old Europe' -- fading and being replaced by new lines between north and south Europe."
"The talk is not just of sustainable fiscal policies and responsible economic policy, but more broadly about the competitiveness of economies and also different attitudes towards the transparency of the economy and market economy as such," said Ilves, whose country joined the eurozone this year.
The sovereign debt crisis came as a wake-up call for many southern EU countries such as Greece and Portugal, which have over the years either lost their competitive edge in the global economy or have spent beyond their means. Their northern neighbors, such as Germany, have performed far better after pushing ahead with painful reforms.
Analysts say the competitiveness gap within the eurozone was one reason for the crisis, and the gap is likely to worsen as the southern countries experience economic contraction as a result of the debt crisis and austerity measures, while the north embarked on robust recovery.
In the comprehensive anti-crisis package to be finalized in late March, Germany will seek fundamental changes to the economic governance in the eurozone to prevent southern countries from running excessive deficits and to reduce the competitiveness gap.
Berlin, joined by Paris, proposed a "competitiveness pact" last month, calling for closer economic and fiscal coordination between the 17 EU countries that share the euro.
But the proposed measures, such as tax harmonization and abolition of automatic inflation-linked wage increases, raised hackles in the EU's southern territory and even within northern states.
Meanwhile, the southern countries are pushing for easier terms on the EU's financial loans and more firepower for the eurozone bailout fund, the European Financial Stability Facility (EFSF).
Germany, the EU's main paymaster, has been reluctant to put up more money to help the less disciplined countries. It has so far made no commitment to boost the lending capacity of the EFSF or make the use of the bailout fund more flexible.
Analysts warned the following weeks would be critical for the EU countries to overcome the sovereign debt crisis, but they have to first bridge the north-south division.
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