The European Council met yesterday and is meeting today for one of its regular sessions. However, this is not really a regular session as there is a feeling that the European project, which is mainly economy driven, is getting off track. Economic policy will be the focus of this meeting.

The main themes for discussion shall be the country-specific recommendations on economic and fiscal policy; efforts to boost competitiveness, jobs and growth, with emphasis on initiatives to enhance youth employment; and progress on the completion of the EU’s economic and monetary union, in particular, the banking union.

Whether agreement will be reached about anything remains to be seen. This is because it is very clear that the main EU economies – Germany, the UK, France, Italy and Spain – have very different agendas. The subject of youth unemployment is being given priority because Italy is placing great emphasis on this.

Germany may have little interest in the subject given that its unemployment problem is much more manageable than that of other countries, but it is keen to achieve agreement on the banking union. Germany wants to make sure that the principle adopted in Cyprus of making depositors pay, rather than taxpayers, for any bank failures, is repeated in all future bailouts.

On its part, France wants to be allowed to increase public spending in order to stimulate the economy and so is far more interested in changing the rules of the Stability Pact. Moreover, the country is pushing hard for tax harmonisation within the EU, such that its tax and spend policies may not be viewed so negatively.

The UK is keen to resolve its own problems but is not keen to have to pay for other countries’ problems. The smaller countries seem to want to follow the UK line of action as they seek to tackle their challenges.

Perceptions on the performance of the eurozone economy seem to differ greatly. There are still many who believe that the eurozone is a like a slow-moving wreck. However, French President François Hollande declared during a visit to Japan that it needs to be understood that the crisis in Europe is now over. He repeated the same message at the G8 summit last week.

One wonders what Hollande really meant with his statement when one considers the high rate of unemployment, especially youth unemployment, which is now very close to what it was at the time of the Great Depression in the 1930s.

Something else that militates against Hollande’s assertion is the report of the International Monetary Fund on the way the EU handled the crisis in Greece.

The IMF pointed out that the fiscal austerity imposed on Greece only made things worse as the recession was much deeper than expected. That the recession is not over yet was confirmed this week by the president of the European Central Bank, Mario Draghi.

As the US Federal Reserve is starting to consider a less loose monetary policy, Draghi stated that the ECB has no intention to exit from its strategy of providing liquidity to the market, especially since inflation has remained below the two per cent threshold.

The real point is not whether the eurozone is out of the crisis or not, but whether the EU is still capable of generating economic growth.

What is worrying in all of this is that there is still too much confusion in assessing the root of the eurozone economic problem and even more confusion in identifying the appropriate solutions.

It was reported that chaos also reigned supreme during the discussions among the EU finance ministers on the banking union and what to do in the event of a failure of a bank.

At that meeting there was a German-led group and an opposing group. The agenda of either side is so contrasting that, inspite of all the good intentions, putting an effective banking union in practice may prove to be an elusive project.

It is feared that the lack of certainty emerging from the European leaders may lead to a lack of approval of the so-called Financial Framework (in other words, the EU Budget for 2014-2020) as countries may decide to dig their heels in until their specific issues are resolved. Malta would be affected very negatively if this were to happen, even if probably we cause the least problems to the EU.

It is within this broad scenario that the European Council is meeting and it is in times like these that the need is felt for statesmen to put the European project back on track.

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