A summit of European Union leaders endorsed a
package of measures to shore up the euro, in Brussels on Thursday
but the event was overshadowed by the collapse of Portugal's government on
Wednesday night after the parliament in Lisbon rejected a fourth austerity plan.
Meanwhile, also on Thursday, yields on Irish 10-year sovereign debt hit a euro
era record of 10.2% compared with Spain's more modest level of 5.2%.
Banks must do the tests; governments must be ready to deal with the outcome of the tests."
Van Rompuy said in respect of the economy: "Some people fear this work is about dismantling the welfare states and social protection. Not at all -- as I said it during lunch - - It is to save it. What we do is to make sure that our economies are competitive enough to create jobs and to sustain the standard of living for all our citizens -- that's what our work is about."
The president said the governance and competitiveness pact that will be in effect from mid-2013, is to be called the 'Euro Plus Pact' as six EU members that are not among 17 Eurozone countries. have agreed to accept the same level of economic coordination. They are: Denmark, Poland, Latvia, Lithuania, Bulgaria and Romania.
Taoiseach Enda Kenny said in Brussels that he had spoken to Van Rompuy on Wednesday and they decided to defer discussion of the interest rate on Irish bailout funds until the Irish bank stress test results are available.
The stress tests will be published next Thursday and yesterday's national accounts data for the fourth quarter of 2010, which was worse than expected, may result in even higher estimates of bank losses because of a downgrade of forecasted Irish growth.
"Obviously from an Irish point of view,
I’d prefer to deal with substance rather than theory... I’d like to have a much
clearer picture of the outcome of the bank stress tests which are going on,"
Kenny told reporters in advance of the meeting.
It is better to get facts and then discuss a comprehensive solution with Europe rather than demand piecemeal changes.
Aníbal Cavaco Silva, Portugal’s conservative president, is expected to meet political parties Friday, after the government’s defeat on Wednesday.
A general election is expected and a bailout of up €70bn is viewed as inevitable.
The 10-year yield on Portugal's sovereign bonds rose three basis points to 7.66%, giving a spread of 4.42% with equivalent German Bunds.
The Irish 10-year bond yield hit 10.21% on Thursday -- a new record since the launch of the euro in 1999.
If Portugal falls, focus will then turn to Spain - the single currency's fourth biggest economy.
Spain's banks are exposed to their neighbour but in recent times, the markets have taken a more positive view of the Spanish economy as it has a low level of public debt.
The yield on the Spanish 10-year bond closed at 5.17% on Thursday.
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