Merkel stands firm on eurobonds

The meeting continued into the early hours, with representatives of all 27 member states making statements.

French President Francois Hollande told a press conference it had been possible to gain some agreement on pooling debt into eurobonds as a long term strategy for integration. However, he said there was no agreement on the idea as a tool for shorter term growth.

"Germany remains convinced that eurobonds can only be the end of a process, while we believe it’s the start of a process. That's it, in a nutshell," he said.

Hollande added that he hoped to make progress at a summit late next month. "This was a necessary first stage ......we still have some work to carry out convincing our partners."

German Chancellor Angela Merkel had earlier given a clear signal that she was determined to fight her corner, reaffirming her strong opposition to eurobonds as she arrived at the summit.

"I believe that they are not a contribution to stimulating growth in the eurozone," Merkel told reporters before the summit, adding that eurobonds were also explicitly banned by the EU treaties.

But Hollande said discussion of eurobonds would remain firmly on the agenda for the meeting.

"I say that we have to act straightaway for growth ... otherwise there will still be doubt on the markets."

Inviting controversy

European leaders were meeting at the summit to discuss ways to keep European debt under control while at the same time boosting growth. But countries are divided over which of these two to prioritize.

EU President Herman van Rompuy had encouraged "innovative, or even controversial, ideas" at the event. German EU Commissioner Günther Oettinger also said ahead of the summit that he would advise EU leaders "not to rule out eurobonds fundamentally" in an interview with the daily Handelsblatt.

Eurobonds would be jointly issued and could protect debt-ridden countries like Spain and Italy by shielding them from high borrowing rates.

However, Merkel has warned that the bonds could detract from the incentive for debt-laden countries to rein in their spending. The German chancellor also fears that eurobonds would push up Germany's current rock-bottom interest rates.

The summit began after European stock markets closed in chaos on Wednesday. European shares plummeted and the euro hit a 22-month low against the dollar after the Greek prime minister warned that his country might be poised for a eurozone exit.

sej,rc/tj/jm(AFP, AP)