EU talks banks in Brussels

It is generally agreed among European politicians that a banking union needs to be implemented across the eurozone and parts of the wider EU. This would include a single European bank regulator. But the devil is in the details, and EU leaders can't agree on the fine points of that and other initiatives ahead of Thursday's two-day summit.

One sticking point is likely to be the question of eurobonds, a system of common liability for borrowing that Germany rejects categorically for the time being.

Berlin's fear is that the introduction of eurobonds would encourage profligate spending, giving financially weaker states access to lower cost borrowing at the expense of Germany and other northern European states.

France is on the other side of the fence on the eurobond issue. On Wednesday, French President Francois Hollande said in Paris that a great sense of urgency was needed in shoring up the continent's finances with the common debt.

"Budgetary union must be completed with a partial mutualization of debt, through euro bonds," he said.

Germany advocates a system of strict austerity to bring debt problems in troubled eurozone member nations under control before issuing more debt.

German Chancellor Angela Merkel on Wednesday praised debt-laden eurozone nations, saying "something has changed in their way of thinking," even if the pace of the change brought on by austerity measures is a bit slow.

Hollande has been opposed to draconian budget slashing since his election in May.

"If we don't breathe some life into Europe's economy, budget discipline measures won't work," he said.

One of the troubled nations is Greece, which faces the threat of defaulting on its loans and possibly exiting the eurozone if it cannot secure international bailout funds by adopting fresh austerity measures in accordance with requirements of its international lenders - the EU, the European Central Bank, and the International Monetary Fund. Unemployment in Greece has reached 25 percent, and the economy has been in a recession for five years.

On Thursday, labor unions in Greece have scheduled a general strike that coincides with the summit in Brussels to show Greeks' frustration with the country's austerity measures. It is the second strike in three weeks.

mz/jm (Reuters, AFP)