Chancellor Merkel (left) wants the EU to nail down a binding eurozone budget pact
The eurozone crisis will dominate an EU summit on Monday, with an emphasis on growth and "smart" budget discipline.
The EU has more than 23 million unemployed people and there are fears that wide-ranging budget cuts will harm enterprise and training.Cuts need to be "smart" - well-targeted - to allow room for future growth, the European Commission says.
Most member states - and not the UK - are expected to sign up to a new budget treaty, or "fiscal compact".
The goal is much closer co-ordination of budget policy in the 17-nation eurozone.
Diplomatic wrangling continues over the influence of non-eurozone countries in the new institutional set-up.
The UK opted out, in a blaze of publicity last month, but did secure observer status in the discussions.
Poland is insisting that it and other countries preparing to join the euro should be fully involved in the eurozone negotiations.
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The official summit agenda is growth and job creation, and it will be discussed in some detail. Unemployment will be perhaps the big issue in the French presidential election, and there are now more than five million people out of work in Spain - without reversing that trend the eurozone crisis isn't going to ease.
Leaders will also try to finalise the text of the new fiscal treaty which all EU countries except Britain say they intend to sign. There are still some issues to be resolved - Poland worries about being shut out of future eurozone summits, and there's political pressure in Germany to make the budget rules and penalties in the treaty a little tougher.
Then there are the off-agenda items which always make an appearance on occasions like this. Cometh the EU summit hour, cometh the Greeks... I'm sure they'd like to sit un-noticed in the corner for once, but Greece has developed an unwelcome habit of hogging summit headlines.
Analysis
Leaders will also try to finalise the text of the new fiscal treaty which all EU countries except Britain say they intend to sign. There are still some issues to be resolved - Poland worries about being shut out of future eurozone summits, and there's political pressure in Germany to make the budget rules and penalties in the treaty a little tougher.
Then there are the off-agenda items which always make an appearance on occasions like this. Cometh the EU summit hour, cometh the Greeks... I'm sure they'd like to sit un-noticed in the corner for once, but Greece has developed an unwelcome habit of hogging summit headlines.
Currently the draft treaty says signatories will hold summits at least twice a year. The attendance of non-euro countries is left to the discretion of the summit president, with the words "will invite when appropriate and at least once a year".
The Czech Republic may delay joining the treaty because of a split in its ruling coalition and the Republic of Ireland may decide it has to put it to a referendum.While France may be content with a eurozone-only membership, Germany is keen to include countries like Denmark, Poland and Sweden, not yet in the euro.
The Brussels summit coincided with a general strike in Belgium in protest at recent austerity measures, which has brought most of the city's transport system to a standstill and disrupted international trains and flights.
Staff were asked to arrive for the 14:00 (13:00 GMT) summit at 05:30 to avoid the disruption.
Firewall bid
The summit comes a day after French President Nicolas Sarkozy announced a 0.1% tax on financial transactions.
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"Start Quote
In 2012, much more attention will be given to growth. Why? Because many countries are heading into recession just as austerity measures start to bite"
The tax is part of a package of measures to promote growth and create jobs, and will be implemented in August regardless of whether other countries do the same.
Greece remains a big question mark hanging over this summit. Complex negotiations with private creditors have not yet produced a deal to prevent Greece defaulting.The European Commission says it is confident a deal will be reached within days. But Greece could run out of money as early as mid-February.
Private investors are being asked to take a 50% "haircut" (loss) on their Greek bonds in a complex bond swap, with the aim of cutting Greece's debt to 120% of gross domestic product by 2020.
A deal is crucial for the EU and International Monetary Fund to grant a long-awaited 130bn-euro (£109bn; $172bn) second bailout for Greece.
In an interview for the Wall Street Journal on Monday, German Finance Minister Wolfgang Schaeuble said only radical reforms in Greece could trigger the release of the funds.
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Fiscal compact: Sticking points
Eurozone- Ireland: Government still to decide whether or not to hold a referendum on the treaty. A "No" vote could cause a serious eurozone crisis.
- Poland: PM Donald Tusk says he will not sign unless non-eurozone countries have full access to inter-governmental summits that cover eurozone policy.
- Sweden: Parliament has backed the draft treaty but on certain conditions including a demand that Stockholm does not have to transfer budget decision-making powers to Brussels.
- Czech Republic: The government has backed the draft treaty but like Poland wants involvement in eurozone meetings.
- UK: Has refused to back treaty but will not apparently block use of EU institutions like the Court of Justice by the fiscal compact members unless it damages UK interests or threatens its rights under the fundamental treaties.
- Denmark: Like the UK, it has a euro opt-out but is now holding the EU presidency and wants to be a bridge between the 17 and the 27 by achieving consensus.
"Unless Greece implements the necessary decisions and doesn't just announce them… there's no amount of money that can solve the problem," he said.
The atmosphere remained tense at the weekend with a row over a leaked German proposal to put an EU budget commissioner with veto powers in charge of Greek taxes and spending.Greece rejected the proposal outright, but its EU partners remain alarmed by its failure to meet tough fiscal targets.
The EU is trying to put in place a bigger, more resistant "firewall" to prevent contagion spreading from Greece.
The eurozone plans to launch a 500bn-euro permanent bailout fund - the European Stability Mechanism (ESM) - in July, a year earlier than first planned. It is expected to get the final go-ahead at the summit. The UK will not contribute to it.
The existing temporary fund - the European Financial Stability Facility (EFSF) - is reckoned to be worth about 300bn euros and it ends next year. Some experts say it should be combined with the ESM, rather than running in parallel.
Italy alone needs to refinance more than 300bn euros of debt this year and there are many voices urging the European Central Bank to boost the firewall to at least 1tn euros.
Recession clouds make it a gloomy start to this year's EU summits. But the European Commission says 82bn euros of EU money is available for countries to spend on projects to boost jobs and growth.
EU leaders will exchange views on how best to tackle youth unemployment and support small and medium-sized enterprises (SMEs), many of which complain of excessive administrative costs imposed by Brussels.
Source: BBC
