BRUSSELS — Germany and France gave their approval Friday to expand the bailout fund that has been propping up the eurozone's weaklings but pressed EU nations to strengthen their economies, kicking off what will likely be weeks of struggle between Europe's rich and poor over measures aimed at escaping the financial morass surrounding the euro.
German Chancellor Angela Merkel and French President Nicolas Sarkozy described a "pact for competitiveness" that would bring the bloc closer together and reinforce confidence in the shared currency, but they held off on concrete economic proposals that could provoke political resistance. Government officials previously indicated such measures might include calls for putting debt limits in national constitutions, raising retirement ages to match increased life expectancy, and getting countries to set up orderly ways to handle bank failures.
The Franco-German proposals "will be about improving competitiveness and at the same time making it clear that we have the political will to grow together," Merkel told journalists Friday as she arrived at the summit of European Union leaders.
The conclusions of Friday's summit are the first written confirmation that the eurozone's bailout fund will grow in size and power, and that economic coordination among eurozone nations will improve. But what Merkel and Sarkozy presented to their European counterparts over lunch created more questions than it answered.
"It would have served the discussion if concrete measures" had been suggested, said Jean Claude Juncker, the prime minister of Luxembourg.
Greece and Ireland have already required multibillion-euro bailouts, and it is feared that Portugal will be next in line for an economic rescue. Support from Germany, the eurozone's strongest member, can help weaker members and keep the euro stable, but Berlin has called on those countries to make financial reforms and cuts in popular but expensive social programs.
EU policymakers have vowed to come up with a comprehensive solution to the debt crisis over the coming weeks. But many economists are skeptical that the final plan will be enough to avoid a debt restructuring or more transfers of money from the region's rich states to the poor ones.
Whether Germany and France will push against resistance to dropping things like Ireland's rock-bottom corporate taxes and automatic wage increases in Belgium and Luxembourg will be decided by the end of March, EU leaders said. So will details about changes to the bailout fund, known as the European Financial Stability Facility.
That leaves EU policymakers with a packed agenda over the next several weeks that also includes new bank stress tests, a final agreement on tougher budget rules, the detailed outline of a permanent crisis mechanism to succeed the bailout fund, and decisions on whether to lower the onerous interest rates paid by Greece and Ireland for their rescue loans.
The result of these debates will determine whether EU leaders finally get one step ahead of the crisis, which has most often seen them cobble together solutions in hastily called overnight meetings.
In theory, the Franco-German demands could help get weak economies in a position to start growing again, said Daniel Gros, director of the Brussels-based Centre for European Policy Studies.
"The problem is, you can only do that if you survive the present crisis," said Gros. "And to that crisis they have not found a solution."
The kind of structural reforms envisaged by Merkel and Sarkozy take years to take effect and even then the debt loads of countries like Greece and Ireland — set to remain above or around 100 percent of annual gross domestic product for some time — will still seem unsustainable.
Although yields, or interest rates, on government bonds from those countries have fallen in recent weeks, they still reflect serious concern among investors that one or more of these countries may eventually default on its debts.
In recent days, finance experts, among them the chief economist of Deutsche Bank, have made several proposals on how to do a "soft" debt restructuring that limits market panic — including extending the maturity of government bonds or voluntary cuts to the total amount creditors are owed.
EU officials have so far ruled out any kind of debt restructuring, but have suggested ways the bloc's existing crisis strategy could be made more effective.
Among the suggestions: letting the facility buy the bonds of vulnerable governments on the open market, thus stabilizing their price and borrowing costs; providing countries with a short-term liquidity line when one-off measures like expensive bank recapitalizations threaten to sink their finances (as with bailed out Ireland); or even lending them the money to buy back their own bonds. Such measures would constitute a fundamental overhaul of Europe's strategy, which so far has revolved around offering expensive bailout loans to countries on the brink of bankruptcy in return for painful budget cuts.Comment on this story
Right now, bonds issued by the eurozone's most cash-strapped states are trading at a discount due to doubts over the governments' ability to pay them back — theoretically making a buyback an easy way of cutting a country's overall debt.
To do that, the bailout fund would likely need more money. Eurozone leaders on Friday reached a "consensus" to lift the fund's effective lending capacity to the €440 billion ($568 billion) initially advertised, Juncker said. At the moment, the facility can only lend about €250 billion ($323 billion) due to various buffers required to make the EFSF's bonds attractive to investors.
How exactly the fund's lending capacity would be reached, however, was left for later.