EU Summit Opens As Growth-Austerity Debate Roils

Newly elected French President Francois Hollande (right) is expected to push German Chancellor Angela Merkel (left) to focus on growth as much as austerity.

European Union leaders have begun meeting in Brussels for a two-day summit amid an intensifying controversy over whether continued austerity measures or steps to promote growth are the best way to escape the current debt crisis.

Danish Prime Minister Helle Thorning-Schmidt told journalists as she arrived at the summit that Europe must not be forced to choose between saving and spending.

"We wish to have growth in Europe and that can only happen if we have fundamentally sound economies. The thing we should seek is to have sound economies, the money should add up and at the same time, we should start investing in growth," she said.

"That is what we have done back home in Denmark and that what should be done in Europe."

Newly elected French President Francois Hollande -- making his first appearance at an EU summit -- and Italian Prime Minister Mario Monti have been leading calls for the EU to make "an agenda for growth" its top priority.

Meanwhile, Germany's Angela Merkel continues to back spending cuts and other austerity measures to rein in debt.

Euro Contingency Plans

Meanwhile, eurozone officials have acknowledged they are studying contingency plans in the event that Greece abandons the euro.

Belgian Finance Minister Steven Vanackere said on May 23 it would not be "responsible" for governments not to prepare for such a scenario.

"We must insist on efforts to avoid an exit scenario [for Greece], but that doesn't mean we are not preparing for eventualities," Vanackere said.

"I believe many countries have their contingency plans for the things they want to avoid at all cost, like terrorist attacks, and to say that we don't have a contingency plan would be irresponsible."

Germany's central bank has said Greece's withdrawal from the euro would be trying but "manageable."

Reaching Out To Greece

France's Hollande said earlier on May 23 that eurozone countries should send a signal to Athens that they support Greece remaining in the common currency.

He said Greece had to make "an important choice on June 17," when it holds new parliamentary elections, "and that choice has to be European. And we have to send signals to Greece. That's to say that France wants the Greeks to stay in the eurozone.

"And the Greeks have to respect the undertakings they've made, but at the same time, the eurozone has to show that it can support Greece."

Former Greek Prime Minister George Papandreou urged the EU to be patient with Greece as the country copes with the political crisis prompted by indecisive parliamentary elections on May 6.

"We also need time and understanding, and we need understanding that this is a wider crisis," Papandreou said. "It is a crisis where we need to go beyond name-calling and scapegoating and we need to collectively pull our strength."

The euro fell to $1.256 in trading on May 23 and stock markets were down across Europe ahead of the summit.

On May 22, the Organization for Economic Cooperation and Development warned the 17 eurozone countries of the risk of falling into a "severe recession."
reporting by AFP and Reuters