June 22, 2012
(Reuters) - The leaders of Germany, France, Italy and Spain will try to find common ground in Rome on Friday to restore confidence in the euro zone ahead of a full EU summit next week, with German Chancellor Angela Merkel likely to be outnumbered.
Dangerously high borrowing costs for Spain and Italy have eased a little on market hopes for policy initiatives at the Brussels summit on June 28/29. If it falls short, both countries may be pushed closer to eventually needing sovereign bailouts.
Friday's meeting will search for ways to achieve fiscal and banking union in the euro zone and, more urgently, it may also be the occasion for Spain to formally request assistance of up to 100 billion euros for its struggling banks.
An audit released on Thursday found Spanish banks would need up to 62 billion euros in extra capital to weather adverse circumstances.
Merkel is expected to resist any pressure from Monti, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy for less stringent euro zone fiscal policies or the issuance of common euro zone bonds.
While Spain's needs are most pressing - its medium term borrowing costs hit a euro era high at auction on Thursday - the political stakes may be higher for Italy's unelected technocrat prime minister, Mario Monti.
With his popularity sinking, the parties that back Monti in parliament are increasingly reluctant to support his reform proposals at home, but demand he get results in the European arena to ease the pressure on Italy's recession-bound economy.