The 27 EU member states and
the executive European Commission will also set out plans for boosting economic
growth and creating jobs at a summit on Thursday, three days after the leaders
of Germany and France discuss strategy in Berlin.
A show of EU unity would help
persuade markets the bloc has a common response to the worst crisis to hit the
16-country euro zone since the single currency was created 11 years ago and can
prevent Greece's debt problems spreading to other countries.
"Our priority is putting
order into our public finances. We need fiscal consolidation and a new
financial stability culture in Europe," European Commission President Jose
Manuel Barroso said after meeting German Chancellor Angela Merkel on Friday.
"There is new awareness
in Europe that rules have not been respected and must now be respected.
Circumventing the rules ... is putting at risk our collective economic future.
We need to move in the opposite direction. We need to strengthen our rules and
the way the EU runs its economy."
Failure to show solidarity
could increase the nervousness on markets that has helped drive down the euro
and shares globally, and increased worries that countries such as Spain and
Portugal could follow Greece into debt payment trouble.
Agreement on an aid package
for Greece worth 110 billion euros ($132.4 billion) and a safety net for other
euro zone countries worth 500 billion euros has gone some way to calming
investors' worries, at least in the short-term.
A task force under EU President Herman Van Rompuy has
started work on reforms to reinforce budget rules and changes are planned to
tighten financial regulations after the global economic crisis.
But EU leaders have often
appeared slow to react during the crisis and investors still have medium- and
long-term concerns. They want to see how the rescue mechanisms will work in
practice and whether the bloc is truly making a united stand.
"Policymakers in the EU
have been rumbled. They've regularly fallen behind the curve and their
announcements have often been full of smoke and mirrors," said Philip
Whyte of the Centre for European Reform think tank.
"The markets don't see
how the southern European states are going to get out of the predicament they
are in."
The tone for the summit could
be set by Monday's talks between Merkel and French President Nicolas Sarkozy,
who lead Europe's largest economies. Both want to protect the euro and improve
Europe's economic performance but disagree how to do so.
The German Finance Ministry
has circulated a nine-point plan demanding stiffer sanctions against
governments that flout European fiscal rules, including suspending repeat
offenders' EU voting rights, and an insolvency procedure for states.
Sarkozy has avoided the rigor
sought by Berlin, and wants an "economic government" for the euro
zone, with a dedicated secretariat to coordinate economic policy and focus on
rebalancing the European economy and boosting growth.
Sarkozy and Merkel postponed
a meeting last week at the last minute, a move widely seen as a sign of how far
relations have deteriorated between countries long seen as the EU's engine.
They went some way to
assuaging concerns by issuing a letter to Barroso calling for faster financial
reform and an EU-wide ban on some forms of trading in certain shares and state
bonds, but doubts remain about their relationship.
"It's hard to see that
France and Germany will be singing from the same song sheet," Whyte said.
EU leaders want to address
concerns that the debt crisis will spread to EU states that do not use the euro
but have big deficits or debts such as Hungary and Britain.
They face hostility to
important parts of the drive towards closer budget surveillance from British
Prime Minister David Cameron, who is attending his first EU summit.
Austerity plans announced by
some European governments also face the threat of labor unrest over fears that
such moves will limit growth and cause job losses.
The EU leaders will try to
address these concerns when agreeing on their Europe 2020 strategy for the next
decade to cut unemployment, which was 9.7 percent in the EU in April, and
double annual growth potential to 2 percent.
