PRESSURE continued to mount on Angela Merkel last night to back plans to use Europe's bailout funds to help Spain and Italy cope with their mounting debts as Francois Hollande insisted he wanted "very rapid solutions".
While the two-day EU summit looks set to agree a £104 billion growth compact, it might agree little else; the German Chancellor and French President are at odds over how to help Spain and Italy in the short term and over the 17 members pooling their debts in the long term.
In the first round of talks in Brussels yesterday on the EU budget, David Cameron was adamant Britain's £3bn annual rebate was not up for grabs. "That is not an issue we are willing to negotiate on," said one UK Government official.
"As we go into this process it is important people have absolute clarity about our position."
Herman Van Rompuy, the European Council President, and Jose Manuel Barroso, the European Commission President, have set out a plan for creating a eurozone treasury to issue joint bonds and a banking union with central supervision.
Yet Mrs Merkel has made clear that fundamental reforms to give EU authorities power to override national budgets must come before any further sharing of debt.
Over dinner last night, the 27 EU heads engaged on the long-term issue of greater fiscal integration for the eurozone.
However, Europe's leaders know they have to sort out the immediate problems facing Madrid and Rome.
Sources made clear talks were now focused on using the eurozone's bailout funds to buy new Spanish and Italian bonds to bring down borrowing costs.
"We've got to look at existing instruments. That's the area that makes sense to operate on," said one official.
Under such a scenario Spain and Italy will have to meet fiscal policy conditions but not necessarily more austerity measures. Yet Mrs Merkel is being urged at home to reject efforts to make Germany underwrite borrowing.
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