Euro leaders agree to growth plan

ROME -- The three euro zone heavyweights struggling to return to growth came away from a mini-summit with a stimulus plan but apparently nothing that would take the edge off the crisis in the near term.

At a meeting Friday in Rome, the leaders of France, Italy and Spain received support from German Chancellor Angela Merkel to lobby European Union partners for a growth plan worth as much as €130-billion ($167-billion), equivalent to about 1 per cent of the EU's economic output.

What the three apparently did not get from Ms. Merkel was a pledge to unleash a series of unconventional crisis-fighting methods as Greece moves closer to full-blown recession and Italy and Spain see their sovereign funding costs soar. France, Italy and Spain support euro bonds, which would pool the debt of the 17 EU countries that share the euro, and want to use Europe's bailout money to buy the bonds of countries with unsustainably high funding costs.

The four leaders did vow, however, to keep the euro zone intact - a hint that the wider European leaders summit on June 28-29 will have to produce a credible plan to snuff out or slow the crisis for fear that Spain and Italy might find themselves shut out of private debt markets.

"There was an agreement between all of use to use any necessary mechanism to obtain financial stability in the euro zone," said Spanish Prime Minister Mariano Rajoy. He is expected on Monday to make a formal request for EU support for as much as €62-billion for his country's ailing banks.

Italian Prime Minister Mario Monti, host of the Rome gathering, raised the stakes for next week's summit when he said: "We expect the conclusions of the EU summit will be more solid and credible compared with previous summits, as far as growth is concerned."

The Rome meeting occurred shortly after Greece's new Finance Minister, Vassilis Rapanos, was rushed to an Athens hospital after a fainting spell and hours before the symbolically charged Euro Cup soccer match in Poland between Germany and Greece.

No details of the growth proposal were released in Rome and it wasn't immediately known where the €130-billion would come from or whether any of it would be new money. It is likely most of the money would come from unspent EU regional aid funds and from the European Investment Bank, whose capital is to be increased.

French President François Hollande made another pitch for euro bonds in Rome, though Ms. Merkel gave no hint that she would support them. Mr. Hollande implied that the bonds would not be launched any time soon when he said "euro bonds should be a plan ... in 10 years there will be a union, an integration, euro bonds will be a useful instrument for Europe."

Before the Rome meeting, Mr. Monti called for a banking union that would include a European banking supervisor and a joint deposit-insurance scheme (Ms. Merkel has opposed the joint insurance idea, possibly because the German constitutional court might declare it illegal). Mr. Monti also supports euro bonds and using the bailout funds to buy sovereign debt.

The four leaders did agree on the need for a financial transactions tax which could be used to pay for bank rescues. Mr. Hollande's predecessor, Nicolas Sarkozy, had campaigned hard, but unsuccessfully, for such a tax. Some analysts have estimated the tax could raise as much as €50-billion a year, depending on how many EU countries use it.

Financially stressed euro zone countries got some good news Friday, when the European Central Bank agreed to widen the range of securities it would accept as loan collateral from banks. The new acceptable securities include loans to small and medium-sized businesses, car loans, and certain mortgage-backed securities.

The looser collateral restrictions are aimed at providing liquidity to troubled Spanish banks, many of which are loaded with mortgage securities in the aftermath of the country's housing collapse.

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FROM THE SIDELINES

Euro zone vs. Euro 2012

During Friday's Greece-Germany soccer match, sports chirping turned political on the social media site Twitter. Here are some of the best.

If Greece scores it'll be the first German goal it has hit since 2010. - @katie_martin_FX

Due to recent budget cuts, Greece will have to borrow 4 players from Germany at half time. - @Charles_HRH (parody account)

I see how it works: Germany loaned Greece a goal, and then collected 300% interest. - @thornburgh

On a goal-to-GDP basis: Greece wins! - @pdacosta

The irony is Germany knock Greece out of the Euro but will they also knock them out the other € - @Lord_Sugar

From Twitter