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European Union leaders convene

October 28, 2010 - BRUSSELS

When the leaders of the 27 European Union countries meet in October, the austerity debate is likely to be the sharpest. The bloc has agreed that spending cuts represent the path to economic recovery, but member countries risk social unrest and deep unpopularity with austerity measures. The summit is likely to try to put heart into leaders who cavil at wielding the knife. France can expect a scold for its expulsions of Roma migrants. The summit, the first of Belgium's 6-month rotating presidency of the bloc, meets under the chairmanship of EU President Herman Van Rompuy.

When the leaders of the 27 European Union countries meet in October, the austerity debate is likely to be the sharpest. The bloc has agreed that spending cuts represent the path to economic recovery, but member countries risk social unrest and deep unpopularity with austerity measures. The summit is likely to try to put heart into leaders who cavil at wielding the knife. France can expect a scold for its expulsions of Roma migrants. ; The summit, the first of Belgium's 6-month rotating presidency of the bloc, meets under the chairmanship of EU President Herman Van Rompuy. The implications of the recent stress test on banks, called for by the leaders at an earlier summit, will also be assessed. German Chancellor Angela Merkel, one of the staunchest proponents of austerity, is likely to be rallying the potential backsliders. She insists it is essential for EU members to focus on curbing their deficits and improving their competitiveness.She is pushing for a new 'international financial architecture'; -- described as the widest possible agreement on an international bank levy or tax, and a financial transaction tax. The banking stress tests, the culmination of a four-month long exercise designed to dispel doubts over the region's banking sector, will show how well the 91 banks under examination could withstand further economic shocks. Attention will be fixed equally on how markets assess the thoroughness of the exercise, as well as which banks have been deemed as under-capitalized. The move is an attempt to reassure markets, and by October, EU leaders will be able to see if it has worked. Greece, in dire economic straits, has seen strikes and demonstrations against austerity and labor market reforms. On Jul 8 the protest coincided with a nationwide, 24-hour general strike--the sixth this year-- that has shut down public services across the country. The reform is seen as the toughest test for the ruling Socialist party as it struggles to implement a harsh 3-year austerity and reform program in exchange for an EUR110 billion EU-International Monetary Fund loan. The reforms are reported to be deeply unpopular within the ruling party, which regards it as a betrayal of Socialist ideology. The bill will raise retirement ages, cut pension benefits, make it easier to hire and fire workers and lower basic salaries. Spain, also suffering economically, has seen strikes against a cut in their wages in what could be the first of several union-led protests against the government's latest austerity measures. The Merkel government is also paying a price for the austerity measures, such as raising Germany's retirement age. Recent opinion polls show the three parties in her ruling centre-right coalition at record lows. Germany's decision to help bail out the debt-strapped Greek economy, and for other potential crisis-hit economies in the eurozone, are compounding the government's unpopularity. The European Union regards France's handling of the expulsion of Roma migrants as a disgrace. The bloc could take disciplinary action against Paris, European Union Justice Minister Viviane Reding said on 14 Sep, as reported by Reuters. She said France had been duplicitious in how it had dealt with European authorities over the issue and said she believed proceedings should be brought against the country in the coming weeks. (Last updated Sep 2010)

Greece Paralyzed By Strike Ahead Of Pension Vote (WSJ 8 Jul 2010)

Merkel hails &lsquorobust' German recovery (FT 22 Jul 2010)

European Union web

Date written/update: 2010-10-28