BRUSSELS — European finance ministers failed to deliver the broad outlines of a plan to shore up the euro Wednesday, delaying action until their bosses meet in less than a week and a half.
Though the meetings since Tuesday have not yielded anything concrete about what's likely to come out of the EU leaders meeting on Dec. 9, there's growing speculation that Europe is readying a plan to make the 17 countries that use the euro more unified and ruled by stricter budgetary rules. That, analysts said, could allow the European Central Bank to take a more central role in the crisis — seen as crucial to stabilize the debt crisis that's seen three countries already bailed out.
"The new mantra seems to be 'Build it, and they will lend,' in the sense if they promise the ECB that they will gradually move to a fiscal union, the central bank will buy sufficient amounts of government bonds to stabilise the market," said Gary Jenkins, chief economist at Evolution Securities in London.
Markets appear to be giving Europe the benefit of the doubt for now especially after the world's leading central banks said jointly they would make it easier for banks to get hold of the dollars they may need.
The forbearance in the markets is unlikely to last long though, especially if the summit next week fails to match swelling expectations of a much tighter eurozone.
The EU's leading economic official said as much.
"We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," EU Monetary Affairs Commissioner Olli Rehn said.
Wednesday's meeting in Brussels has brought in the 10 non-euro finance ministers from the 27-nation EU, who have been pressing hard for a swift solution for fear that their economies will suffer.
Sweden's Anders Borg said there was no more time to waste and that the markets don't provide "any honeymoons" for any countries that stray from fiscal austerity. He stressed that Spain and Italy need to "take out all the skeletons" from their financial closets and implement budgetary belt tightening measures.
Many economists say the 17 nations that use the euro have little choice but to back proposals for much closer coordination of their spending and budget policies.
"If the eurozone is to survive, there needs to be more fiscal union," said Eswar Prasad, an economics professor at Cornell University in the state of New York.
For struggling economies, this might be the necessary price of survival. With such discipline in place, the ECB could then agree to make major purchases of government bonds from Europe's troubled countries. Doing so could help lower their borrowing costs and enable them to finance their debts.
Potentially, the ECB has unlimited financial firepower through its ability to print money. However, Germany finds the idea of monetizing debts unappealing, warning that it lets the more profligate countries off the hook for their bad practices. In addition, it conjures up bad memories of hyperinflation in Germany in the 1920s.
So far, the ECB has been reluctant in taking on a bigger firefighting role as it may let profligate countries off the hook. Current rules only allow it to buy up government bonds in the markets on condition that it drains an equivalent amount of assets.
At a meeting Tuesday night, finance ministers for the 17 countries that use the euro handed Greece a promised €8 billion ($10.7 billion) rescue loan to fend off its immediate cash crisis and promised to increase the firepower of a fund to help bail out ailing eurozone countries.
The ministers also called on the International Monetary Fund for more resources to help further protect Europe's embattled currency. The IMF has only about $390 billion available to lend, which wouldn't be anywhere near enough to rescue Italy.
The eurozone ministers agreed to seek new ways to increase the resources of the IMF through bilateral loans that could be used to protect EU nations facing financial trouble.
But they failed to increase the firepower of a European bailout fund to €1 trillion ($1.3 trillion), as they had hoped to do.
"It will be very difficult to reach something in the region of a trillion. Maybe half of that," said Dutch Finance Minister Jan Kees de Jager.
Klaus Regling, head of the bailout fund, tried to be upbeat, saying the ministers had committed to increasing its size from its current €440 billion ($587 billion) but refusing to give a specific size. He assured reporters it was more than big enough to deal with Europe's immediate debt problems.
"To be clear, we do not expect investors to commit large amounts of money during the next few days or weeks," Regling said. "Leverage is a process over time."
The ministers did agree to use the bailout fund to offer financial protection of 20-30 percent to investors who buy new bonds from troubled eurozone nations.
"We made important progress on a number of fronts," eurozone chief Jean-Claude Juncker insisted late Tuesday. "This shows our complete determination to do whatever it takes to safeguard the financial stability of the euro."
Without a plan that the markets believe in, the eurozone faces the prospect of an unappetizing breakup, that could spark chaos around the global economy.Comment on this story
A default by one or more euro countries could also cause lending to seize up worldwide. Some European banks holding large amounts of government debt would likely collapse. As credit dried up, other banks around the world would probably hoard cash. The credit crunch could push European countries into a deep recession.
A European downturn would also slow the flow of exports to Europe from the United States and Asia and weaken their economies. U.S. stock markets would likely fall, reducing household wealth and consumer spending and further choking growth.
Associated Press writers contributing to this report included Angela Charlton in Paris, Melissa Eddy and Juergen Baetz in Berlin, Raf Casert and Don Melvin in Brussels and Christopher S. Rugaber in Washington.