Unemployment casts long shadow over EU summit

BRUSSELS (AFP) - European leaders gather this week for a summit overshadowed by rampant unemployment and the deepening eurozone recession, but with hopes of breaking down resistance to a planned crackdown on tax evasion.

The one-day talks on Wednesday were dedicated weeks ago to the political fight to uncover unpaid taxes hidden away in Swiss or even EU bank vaults.

But days ahead of the talks, as it became clear that Austria and Luxembourg would not surrender precious bank records without a fight, a discussion on the EU's energy ambitions was added to the agenda.

When the leaders gather at the European Union headquarters in Brussels, overshadowing the talks will be the bloc's 26 million jobless and the eurozone's longest recession in history - 18 months and counting.

With regular protests in several European countries at what critics say is the devastating effects of national austerity programmes, governments and EU managers are feeling the heat.

"They need to deliver something that sounds like it can translate into jobs - and soon," one veteran EU official who has been closely involved in summit preparations told AFP.

"Money has been announced in the past few months, but the message doesn't seem to have got through and there is no sign of things picking up overnight.

"The fight against tax evasion and money-laundering is not just bluster, but it's fair to say it won't deliver tomorrow," the official added.

In the past, German Chancellor Angela Merkel and French President Francois Hollande have tried to use those areas where they differ the least as the basis for agreements among the 27 EU member states.

This time however, some diplomats think it will he harder for the two driving forces in the trade bloc to deliver Germany is perched perilously close to recession, France has just slipped back into recession and other EU states are also struggling.

Economists stress that high unemployment lags long after the fundamentals of economic transformation have taken root.

But that is of little comfort to leaders heading into elections, as Merkel is in September. That electoral battle may also act as a brake on significant EU policy efforts this year.

For the moment, the opinion polls suggest that Merkel will return to power, but in any case German domestic politics has paramount importance across the wider eurozone.

And top officials in Berlin are candid enough to admit that Paris and Brussels remain easy targets for blame, as seen in weekend remarks on a TV debate by Finance Minister Wolfgang Schaeuble.

Usually among the most measured of decision-makers, Schaeuble told the audience that the EU institutions were "always the slowest to react" and that, in the fight against unemployment, it would be wise to see first what could be done bilaterally.

France and Germany have struggled to see eye-on-eye on the way forward for the shared currency area since Hollande took office just over a year ago.

The Socialist French leader last week renewed longstanding calls for a eurozone-wide "government" in terms of public finances and economic policymaking.

Berlin reacted coolly however: Ms Merkel's spokesman said that the ideas set out in a series of speeches, although hardly new, were "interesting" but essentially premature.

Complicating matters is British Prime Minister David Cameron's plan to hold a referendum on Britain's EU membership in 2017.

Armed with that prospect, he wants to wring further concessions for London from the bloc.

Italy's high debt, the prospect of close EU surveillance for Spain or a new eurozone bailout for Slovenia are also worrying the EU's leaders.

Leaders have one more, two-day summit late in June before the EU machinery winds down for the summer holidays.