Major disagreements on Franco-German proposals mar summit to save euro

EUROPEAN leaders appeared to be at loggerheads last night as the summit “to save the euro” seemed to be descending into chaos with serious disagreement over the Franco-German plan to tie the eurozone into a closer union.

As heads of the European Union’s 27 governments gathered for the summit dinner, German chancellor Angela Merkel and French president Nicolas Sarkozy were meeting resistance for their plans.

The Irish government made it clear it will probably have to hold a referendum, and other member states raised fears over the loss of economic powers.

Swedish prime minister Fredrik Reinfeldt also warned that changing the treaty would take time and trigger the need for a referendum. An advisory committee to the Finnish parliament said the proposal was “unconstitutional”.

European Council president Herman Van Rompuy has put forward an alternative plan, a fast-track “fiscal compact” that does not need lengthy ratification by parliaments or national referendums.

Concerns were heightened when it was revealed that new stress tests carried out by the EU on its banks showed the country in the most danger of a collapse of its financial institutions is Germany.

Currently the German economy is underpinning the eurozone, but its banks are heavily exposed to southern European debt and it was suggested that several may need to be nationalised.

Ahead of the summit, Mr Sarkozy warned “Europe is as close to exploding as it every has been”. And Mrs Merkel said the euro had “lost credibility”.