BRUSSELS — European leaders were wrestling Thursday over how much of their sovereignty they are willing to give up in a desperate attempt to save the ambitious project of continental unity that grew from the ashes of World War II.
At stake at the summit in Brussels is not only the future of the euro, but also the stability of the global financial system and the balance of power in Europe.
To convince financial markets that Europe’s economy-crushing debt crisis is a one-time event, countries will have to give up significant powers, such as some decisions on borrowing and spending, to a central authority.
President Nicolas Sarkozy and Chancellor Angela Merkel want to persuade the other 15 eurozone leaders to agree to a plan that would require their governments to balance their budgets and accept automatic sanctions if they don’t.
The overall plan must be good enough to persuade the European Central Bank to intervene in the government bond markets in a manner large enough to stop the panic there, said Paul De Grauwe, an economics professor and European Union analyst at the Catholic University of Leuven in Belgium.
The president of the European Central Bank said it has no plan to increase the scale of its bond interventions, which could keep down the borrowing costs of weak countries such as Italy and Spain, as markets had been hoping. Stocks and the euro fell, while the borrowing rates for Italy and Spain skyrocketed.
European Central Bank chief Mario Draghi hinted last week that if governments agree to tighter budget controls, the bank might step up support. Analysts said his comments Thursday served to keep pressure on politicians to reach a deal.
Mrs. Merkel and Mr. Sarkozy want to enshrine the tougher budget oversight in a treaty, either by changing the existing EU treaty or creating a new one for the 17 eurozone nations that others could join.
An EU official said that in the first hours of the summit, leaders agreed that national debt brakes should limit deficits before debt and interest payments to 0.5 percent of annual economic output. The official was speaking on the condition of anonymity because the talks were ongoing.
The 0.5 percent limit, which could be exceeded only in exceptional situations or to counteract a recession, is stricter than the 3 percent cap under current EU law, although the 3 percent also includes interest and debt payments.
But divisions remain. Some countries resist the idea of giving up some of their control over national budgets. Furthermore, the 10 EU countries that don’t use the euro are worried about being left out of important decision-making if eurozone countries adopt a new treaty of their own.
• AP writers Jamey Keaten, Greg Keller and Martin Crutsinger contributed to this report.
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