MercoPress. South Atlantic News Agency

EU summit to address how to save Greece from default

Greek surprise for the EU first full-time President Herman Van Rompuy

The European Union (EU) first full-time President Herman Van Rompuy will chair an informal summit on Thursday to draw an economic blueprint for the bloc for 2020. The meeting is also devoted to addressing some immediate challenges, such as record high unemployment and the possible-default crisis in Greece potentially extending to other members.

In an invitation letter to the heads of state and government of the 27 member states, Van Rompuy said that the purpose of the meeting is “primarily to discuss the direction of our economic policies for the years to come, in the form of a renewed strategy for jobs and growth.”

“All European economies are facing major challenges,” the president said in the invitation letter, adding that “our structural growth rate is not high enough to create jobs and sustain our social model.”

“We need to act together to address these challenges to help preserve our European way of life and keep up with the other major economies in the world,” he stressed.

The economic blueprint, named the EU 2020 Strategy, is supposed to replace the current Lisbon Strategy which is due to expire in 2010 and proved to be a failure if judged from the targets originally set.

The Lisbon Strategy had been designed with an aim to make the EU “the most competitive knowledge-based economy in the world” by 2010, which seems impossible, since its two headline targets of 70% employment and research and development spending equivalent to 3% of GDP are both set to be missed.

Another focus of the summit is to address the immediate challenges faced by the EU, notably the record high unemployment rate of the Euro-zone and the EU, and the Greek crisis which has rattled markets globally.

According to the latest figures published by the EU statistics unemployment in 16-member Euro-zone reached 10% in December 2009, a 1.8-percentage-point increase compared with the same period last year. This represents something like 23 million people jobless.

The serous job market situation has prompted Spain to declare curbing the rising jobless rate as the top priority while it holds the rotating presidency of the EU in the first half of 2010. Spain saw its own unemployment rate reach 19.5% in December 2009.

Finally the immediate challenge is the Greek crisis which is threatening the economic and institutional stability of the Euro-zone and the EU as a whole. Greece's public deficit is estimated to reach 12.7% of GDP in 2009, far above the accepted ceiling of 3%.

The Greek government submitted to the EU a stability program last month pledging to reduce its budget deficit by 4 percentage points to 8.7% of GDP in 2010 and thereafter to 5.6% in 2011, and 2.8% in 2012 and 2% in 2013. The Commission has endorsed Greece's plan, but investors are yet to be convinced by the plan. There is growing speculation of a bailout plan by the EU.

The EU source said on Wednesday that the 27 heads of state and government will issue a statement concerning the Greek crisis, but refused to disclose whether there will be any bailout plan for the country.