Nicolas Sarkozy and Angela Merkel are under pressure from opposition parties to approve a 'grand bargain' or a workable plan to gain international support
Europe has five days to find a solution to the sovereign debt crisis or else the EU itself will collapse, political leaders warned on Sunday at the start of a week of high-stakes summitry.
Torn between the need for stability and the desire for solidarity, EU leaders have to find an immediate fix for the broken eurozone and embrace a longer-term plan for fiscal union by Friday night.
Portuguese premier Pedro Passos Coelho set the tone for the week in an interview on Sunday: "We have to find a response, a much stronger response than so far. If we don't, clearly that could represent the end of the European Union."
Senior opposition politicians put severe pressure on French president Nicolas Sarkozy and German chancellor Angela Merkel ahead of their pre-summit talks in Paris on Monday to approve a "grand bargain" or, at least, workable plan that will gain the support of partners such as the US. Timothy Geithner, Treasury secretary, will be in Europe for talks all week.
Sarkozy's main opponent in next spring's presidential election, socialist leader François Hollande, accused him of caving into German demands for a new EU treaty on budgets that was bound to fail, exacerbating French weakness in an unbalanced relationship with Berlin and ignoring the need for immediate solutions.
"We cannot wait," he told Le Journal du Dimanche, setting out his stall for a "pact of governance and growth," greater scope for intervention by the European Central Bank, turning the bailout fund, the EFSF, into a bank "to help out the most vulnerable countries" and huge investment in infrastructure.
At the social democrats' (SPD) congress in Hamburg, ex-chancellor Helmut Schmidt warned Merkel against a "show of strength" or leadership role for Germany that would simply isolate it.
Peer Steinbrück, her likely opponent at the general election in 2013 and her ex-finance minister, said she had to change course if she was to win broad support: "Either the ECB becomes a state treasurer or the rescue fund the EFSF wins a bank licence or Eurobonds arrive or there is some form of transitional solution among these proposals."
Philipp Rössler, economy minister, rejected eurobonds outright but Günter Oettinger, an EU commissioner and member of Merkel's CDU, said they could not be excluded categorically.
Mark Rutte, Dutch premier, said: "It is really important that the markets see that Europe is prepared to help the countries in trouble, so long as those countries commit to very tough reforms and austerity programmes."
Market hopes are that – despite their differences – Merkel and Sarkozy agree on both a short-term solution and longer-term vision that will persuade the ECB not only to cut interest rates by 0.25% to 1% but extend loans of up to three years maturity to struggling banks. The ECB governing council meets hours before the EU summit on Thursday.