EC chief warns of ‘negative consequences’ if summit fails

Europe cannot afford the ?negative consequences? of a failure at a coming eurozone summit, the president of the European Commission warned on Wednesday.

?Nobody should be under any illusion; the situation is very serious. It requires a response. Otherwise, the negative consequences will be felt in all corners of Europe and beyond,? Jose Barroso told reporters ahead of a crucial meeting of the 17 eurozone leaders in Brussels on Thursday.

European leaders are hoping to hammer out a plan to restore confidence in the euro area’s creditworthiness — seriously damaged by Greece’s fiscal crisis. However, there is little agreement on how to prod investors into financing a new bailout loan and whether the euro area should issue eurobonds to help debt-ridden states across the bloc tap markets.

Jointly issuing bonds with the most creditworthy EU states may help debt-choked countries like Greece tap markets at lower interest rates; but it would mean higher borrowing costs for Europe?s biggest economy.

Chancellor Angela Merkel of Germany, the eurozone’s economic powerhouse and unwilling paymaster, on Tuesday sought to dampen expectations of a full-fledged solution, saying the gathering would not produce anything as ?spectacular? as a restructuring of Greek debt.

?The situation requires full engagement by everyone at the summit and I believe we?ll have it,? Barroso said.

The Portuguese official said European leaders must agree on measures to ensure the sustainability of Greece’s public finances as well as clarify the possibility and extend of private-sector involvement in the country’s bailout.

He also urged them to take all the necessary steps to fix the banking sector and to ensure the provision of liquidity to European banks.

Barroso called on European governments to assume their responsibilities.

?They have said they will do what it takes to ensure the stability of the euro area,? he said.

?Well, now is the time to make good on that promise.?