Battle lines drawn at EU summit in Brussels

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BRUSSELS — European Union leaders are tussling over how much power they want to cede to central authorities during a summit meeting in Brussels focused on how to ensure their debt crisis never repeats itself.

German Chancellor Angela Merkel is pushing a proposal that the European Union’s monetary affairs commissioner should become an enforcer of the bloc’s budget rules — including the power to refuse member countries’ proposed spending and tax plans and send them back for changes.

Germany hopes that having a “budget czar” — a move that’s been bandied about for months — will help keep Europe from repeating past mistakes by stopping governments from overspending and needing expensive bailouts. But some countries, like France, are wary of handing control over their finances to unelected officials in a foreign capital.

“I am astonished that, no sooner does someone make a progressive proposal ... the cry immediately comes that this won’t work, Germany is isolated, we can’t do it,” Merkel said in Parliament ahead of the summit.

President Francois Hollande of France — increasingly the counterpoint to Germany’s weight in the EU — brushed off the suggestion as simply not on the table at this summit. But Hollande is backing another plan that would also see at least members of the eurozone — the 17 countries that use the euro as their currency — hand over a great deal of sovereignty.

“The only decision that we have to take, to confirm, is putting in place a banking union by the end of the year,” he said. “The first step is a banking supervisor.”

Hollande wants the bank supervisor in place because leaders have agreed that, once there is proper supervision, struggling financial institutions will be able to tap Europe’s bailout fund directly. That would be a huge relief to countries like Spain, which are facing the prospect of taking on enormous debts — and worrying markets in the process — in order to bail out their banks.

After an apparently unanimous agreement on the need for a supervisor at a summit in June, some European governments — including Germany, the Netherlands and Finland — have tried to put the brakes on any decision about a banking union.

That could mean that few concrete decisions will emerge from meetings of the 27 national leaders in Brussels on Thursday and Friday.

Merkel again insisted today that “quality must come before speed” in setting up the bank supervisor.

“There are a lot of very complicated legal questions, and I am not making the issue more difficult than it actually is,” Merkel said.

With unemployment in the region at a record 10.5 percent, and growth grinding to a halt around the continent, the back-and-forth is beginning to frustrate some European officials. Jose Manuel Barroso, who is president of the EU’s executive arm, the European Commission, criticized the heel-dragging ahead of the meeting.

“There is not all over Europe the same sense of urgency,” said Barroso.

With no relief in sight for beleaguered Spain, the question of whether it will ask for a bailout itself will likely be discussed. The government in Madrid said this week that it would decide in the coming weeks — although it is still hoping it can avoid asking for any kind of aid.

But the political pressure on Spain is great because should investors become convinced that Madrid will not request aid, they may once again sell off the country’s bonds, causing its borrowing rates to rise. If Spain were to be locked out of bond markets because of excessively high rates, the 17 countries that make up the eurozone would have to rescue it at huge financial cost.

“It would be helpful ... if Spain asked for ESM (European bailout fund) aid,” said Herman Van Rompuy, who is president of the European Council, the body composed of the leaders of all the EU countries. “But it is up to Spain to make up its mind.”

Leaders could also discuss Greece, where rioters were pelting police with Molotov cocktails and chunks of marble on Thursday to protest the stringent budget cuts the country has had to implement to secure its rescue loans.

Greece’s bailout creditors — the EU, the International Monetary Fund and the European Central Bank — have been engaged in tough negotiations in recent weeks over more budget cuts. The group of creditors, known collectively as the troika, has said it won’t release the next batch of loans until more savings are made. Without those loans, Greece will default and probably be forced to leave the eurozone.

Budget cuts have been blamed for sinking many countries in Europe into recession and have unleashed protests around the continent.

Van Rompuy said countries were starting to see the first positive effects of austerity, with deficit levels down and borrowing costs falling. But countries “are still suffering a lot,” he said. Some 25 million people are without a job in the EU and economic growth prospects are weak.

Long-term proposals for overhauling the EU will likely be key topics of debate in Brussels. They include creating a European budget that could be used to support countries going through deep recessions — as Spain and Greece are now. That idea appeared in a report Van Rompuy put together for the summit, but has met with some stiff opposition.

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