Eu ropean leaders gather in Brussels today for a two-day summit amid mounting disagreement between member states about the efficacy of the Europe an Union 's economic policy in dealing with the prolonged economic crisis.
Economic affairs are set to dominate the first meeting of EU leaders since the inconclusive Italian election, widely regarded as a public comment on the EU's strict fiscal measures introduced by technocrat prime minister Mario Monti.
Markets will be looking for signs that Europe may be prepared to allow member states greater leeway in meeting their fiscal targets, amid signs that countries are struggling to hit their European Commission targets.
On Tuesday, French president François Hollande said France would not meet its 2013 deficit reduction target for this year. France's deficit would "without a doubt" be 3.7 per cent of its output this year, he said, above the 3 per cent target he pledged to reach during the election last year.
The news received a cool response from Germany which warned that missing the target would be a "bad signal" for the euro zone.
An EU source said it was "possible" that countries like France and Spain could be given more time to reach budget targets at today's summit, pointing out that it could be possible to stretch the timetable if progress is still being made on structural reforms.
However, he noted that some member states, including Germany, were wary of any change that could be perceived as undermining EU “consistency and credibility” as regards Europe’s economic policy. “Market sentiment has improved. One of the reasons is that we have stuck to our targets.”
Delivering promises
Speaking ahead of today's summit, which takes place under the auspices of the Irish presidency, Taoiseach Enda Kenny said the summit was not a "crisis meeting", but stressed the need to implement measures to underpin stability and deliver growth and jobs. "The union is facing a credibility test – we have to show our people that we are capable of standing by what we have agreed, and of delivering what we have promised."
While Europe has succeeded in containing the sovereign debt crisis, thanks in part to the European Central Bank 's commitment last year to do "whatever it takes" to save the euro, Europe's growing unemployment rate and disappointing economic figures have become the key focus of concern.
While EU officials played down expectations of any major decisions emerging from the summit, attention is likely to focus on a meeting of euro zone leaders scheduled to take place tonight, at which the topic of a bailout for Cyprus is expected to be discussed.
