EU leaders find it difficult to click in efforts to save euro

PARIS - Rival visions and poor personal chemistry have emerged as major problems as leaders strive to end Europe's political paralysis and save the euro.

Talks last week among finance chiefs and the European Union's "Big Three" - Britain, France and Germany - exposed divergences that suggest the quest for a cure will be long and messy.

Most decision-makers agree, privately or publicly, that the rules of prudence and scrutiny governing the euro lie in ruins, and repairing them is an existential challenge.

The single European Union currency has been driven to near-collapse by Greece, whose debt ballooned over nearly a decade, defying the limits set for currency union.

As Athens teetered on bankruptcy, fears grew of a contagion that would overwhelm Portugal, Spain, Ireland and Italy. The EU assembled a financial gun worth €750 billion ($1.39 trillion) to scare off the speculators.

Initially shocked and awed by the big bazooka, the markets became jittery once more last week as they pondered the EU's chances of making a long-term fix of the euro's machinery.

A task force of finance ministers meeting in Brussels last Friday kicked around several plans but found no consensus among widely diverse schemes.

"Some difficult discussions" lie ahead, admitted the Commissioner for Economic Affairs, Olli Rehn.

The most federalist tack is being taken by the European Commission itself. The powerful EU executive wants all countries to submit their budgets to peer review, even before approval by the national parliament. The idea is a non-starter among countries such as Britain and Poland, which are outside the euro and oppose a loss of sovereignty.

Germany is proposing ruthless policing of the euro rulebook. National spending would be placed under surveillance by the European Central Bank. Persistent offenders would be stripped of EU voting rights for up to a year and their European subsidies could be suspended. Economies that are chronically over-indebted would be declared bankrupt.

France - itself a bad over-spender - is acknowledging the need for greater discipline. But it is arguing for a softer line, saying that to penalise budget laggards will only boost the risk of default.

But many countries are also terrified at the prospect of constitutional change.

Germany's scheme would require amendments to the Lisbon Treaty, a pact that was ratified only last year after nightmarish delays and haggling.

"The Greek crisis presented an opportunity to take the inevitable steps towards economic governance that were not possible when the euro was created," Romano Prodi, the former Commission President, wrote in the Financial Times.

"Many countries, however, are still not willing to entertain such a radical change to economic sovereignty."

Low charisma and frosty relationships at the top table are adding to the EU's woes.

The EU's first president, Herman van Rompuy, its new Foreign Minister, Catherine Ashton, and commission president Jose Manuel Barroso have been almost phantom figures during this crisis.

"It's the ectoplasms' ball," quipped the French satirical weekly Le Canard Enchaine.

Pondering the EU's political void, some analysts note that for the first time in 13 years, the leaders of the four biggest countries are all conservatives.

But the tensions between the four are sometimes palpable, which crimps prospects that they could become a political dynamo.

Britain's new Prime Minister, David Cameron, was given a guarded welcome in Paris and Berlin last week on his first foreign trip. His Euro-scepticism and defence of London's financial markets rouse many suspicions.

Italian Premier Silvio Berlusconi is widely regarded as little more than a buffoon. And France and Germany, the godfathers of the euro, are notoriously at odds.

At an emergency summit on May 7, French President Nicolas Sarkozy frantically pounded the table to press Angela Merkel, Germany's cautious Chancellor, into backing the big bailout, according to press reports.

Facing fury at home for being railroaded, Merkel lost a key regional election and with it her majority in the upper house of Parliament.

Merkel has now exacted her revenge. Germany suddenly declared last week it would ban "naked short selling", a tactic used by speculators against the euro.

France was stunned: it had not been consulted on this move, or even informed, by its closest ally.

And so the EU is struggling in the morass, and time is against it. The union is a ponderous beast that can move forward only by 27-nation consensus. It is ill-placed to act swiftly and nimbly, as it must do now to restore market confidence.

Said Daniel Gros, director of the Centre for European Policy Studies in Brussels: "The EU will have to cobble something together by the end of this year, but it is an open question whether it will be meaningful or not."