EU leaders talk fiscal union as Greeks protest austerity cuts

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Story highlights

  • EU leaders hold two-day summit in Brussels to discuss greater fiscal unity
  • Sharp divisions between France and Germany on speed of banking union implementation
  • Merkel calls for creation of "super commissioner" to veto countries' national budgets
  • Greeks hit streets in nationwide protest over latest austerity measures

European Union leaders are gathering at yet another summit in Brussels to discuss greater banking and fiscal cooperation in an effort to preserve the euro currency in the face of the debt crisis.

Meeting for the fourth time this year, leaders are expected to discuss proposals for eurozone-wide oversight of countries' banks and budgets.

At the same time, protesters in debt-strapped Greece hit the streets for a general strike to protest the tough austerity measures imposed on the country by its international creditors.

While plans for a eurozone banking union could take some shape by the turn of the year, there is some contention between French President Francois Hollande and German Chancellor Angela Merkel on the speed of the implementation of banking supervision.

While Hollande wants the reforms as soon as possible, Merkel has said the quality of the banking union should trump the desire to hammer out a deal sooner rather than later.

There is also sharp disagreement over precisely how much influence and oversight EU leaders should have in other member states' national budgets.

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German Chancellor Angela Merkel believes a central authority should have greater say in what countries spend and borrow -- and that a "super commissioner" should be created to veto countries' budgets if they don't follow some agreed upon rules.

"The EU needs a real power over national governments. I know some states are not ready for that, but ... we will fight for this, and then of course we will need someone in commission who will be strong enough to enforce this principle," Merkel said in a speech to the German Bundestag on Wednesday.

Merkel also called for a fund to invest in projects in struggling member states, and reiterated her hope that Greece would remain in the single currency.

Despite a deadline of today, the troika of the European Central Bank, International Monetary Fund and the European Commission left Athens for the summit without an agreement in place over the $17 billion Greece must cut from its budget in order to receive the next $41 billon tranche of bailout money it needs to keep from defaulting.

Most of the measures have been agreed on, reports CNN's Diana Magnay, but labor relations remain a sticking point for the Greek government's junior coalition partner.

The sense is that the deal will be ironed out and completed by next week. Greece has not received any bailout money from its eurozone partners since April, and has said it will run out of cash by the end of November.

Once a deal between Greek leaders and the troika is agreed, it will then need to be ratified by Greek parliament -- no small feat given the massive public opposition to the budget cuts required by international lenders.

The strike is Greece's second in three weeks, as fury continues to grow over cuts that have helped push the country into its fifth straight year of recession.

Greek unemployment remains at around 25 percent -- with 55% percent youth unemployment -- and the country's economy has contracted by 18% since 2008.

Despite Greece's continuing woes and the unresolved issues surrounding fiscal and budget oversight, there is an air of modest optimism surrounding the summit.

"Compared to where we were 3 months ago, a lot of progress has been made. In terms of design, Europe has agreed on the four legs to the stool to make MU sustainable," said Mohamed El Erian, CEO of investment firm PIMCO.

"The ECB has reduced the chance of a very disorderly outcome ... but now, we need to move in Europe from design to implementation."

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