The European Union grappled Wednesday with the biggest challenge of its history as Greece readied a last-gasp pitch to secure vital bailout funds.
Nearly four weeks after international auditors abruptly quit Athens, placing eight billion euros of promised loans in doubt, the key negotiators announced a return to crunch talks in Greece from Thursday.
“We are today faced with the greatest challenge our Union has known in all its history,” European Commission president Jose Manuel Barroso warned in his annual “state of the union” address to the European Parliament in Strasbourg.
European stock markets were mostly cautious as optimism faded over whether European leaders can resolve the debt crisis, with German Angela Merkel suggesting a second Greek bailout may need to be renegotiated while Berlin, Paris and the European Central Bank split over how much banks should lose in the event of a default.
“This sort of in-fighting amongst Europe’s leaders will only serve to undermine the recent rally in shares and the euro, underlining the importance of the audit’s findings,” said Moneycorp in a note to investors.
In Brussels, EU economic affairs spokesman Amadeu Altafaj said crunch negotiations over blocked money the Greek government says it needs to avoid an early default will resume on Thursday. Once auditors decide the government in Athens is doing enough to merit more financial aid, eurozone partners and the International Monetary Fund will still have to sign off the money.
While Greece is left waiting for the funds from a first 110-billion-euro bailout approved last year, a few eurozone states have yet to sign off on a second 159-billion-euro Greek rescue package that was agreed in July.
German lawmakers are due to vote on Thursday on expanding the scope and size of the EU’s current rescue fund – the European Financial Stability Facility (EFSF) – which has already helped bail out Ireland and Portugal.
Parliament in Finland, another country where there is deep-rooted reluctance to bailing out eurozone strugglers, approved changes to the fund on Wednesday.
Greek Prime Minister George Papandreou, who held talks in Berlin on Tuesday with Merkel, said his country was making a “superhuman effort” to bring down its massive debt of more than 350 billion euros ($475 billion).
