LONDON, Feb. 7 (UPI) — France and Germany sought to give some much-needed and sensible leadership to their European partners at Friday’s summit but found themselves short of followers.

This is serious, because the euro crisis has been papered over and delayed rather than solved. A fundamental reform is required, rather than a quick fix, since whatever the eurozone countries decide to do about bailing out the weaker partners, two new crises are looming on the horizon.

The first is the amount of debt that the various euro countries must roll over this year. These are formidable sums, totaling more than $2.6 trillion, and those facing the biggest burden are France, which has to roll over $411 billion in debt, and Italy must pay off and raise anew a total of $430 billion.

France and Italy should be able to manage this comfortably. But Portugal, which must raise $35.3 billion and Greece which must raise $51.6 billion and Spain which must raise $178 billion (and Spain’s regions and municipalities will have their own rollover problems) won’t find this easy.

The much greater problem, and one that will last rather longer, is the very heavy program of austerity to which the various European governments are now committed. The total for the nine countries that have made firm commitments to reduce their deficits by the end of next year adds up to promised cuts of some $400 billion in public spending.

They are led by France, cutting some $120 billion, Spain cutting $90 billion, Italy cutting $65 billion and Germany, cutting around $5 billion.

Smaller countries are cutting rather less in total but this still means sharp cuts in relation to their gross domestic product. Portugal, for example, is pledged to cut its deficit from 7.3 percent of GDP to less than 3 percent. Holland and Belgium are each cutting 3 percent of GDP in spending.

Add in the savage cuts being made in Greece and Britain and the European Union as a whole will see more than $500 billion carved out of public spending over the coming two years.

This may well be beneficial in the long run. But in the short run, when governments have to think about voter reactions and election campaigns, this means at best very slow growth and at worst a return to recession. In between, given the ominous rise in food and oil and commodity prices, lies the prospect of stagflation.

The European governments all know this and they also know that the current support scheme organized by the European Central Bank and the International Monetary Fund runs out in 2013. This deadline ought to concentrate their minds wonderfully, which is why the French and Germans have made the proposals which ran into such trouble at Friday’s European summit.

But other countries blocked the ambitious Franco-German plan, which would have taken the eurozone must further down the road of integration of economic policy and planning. It would also have widened the divide between the EU member states using the euro and those like Britain and Sweden that don’t.

The six-point plan put forward by German Chancellor Angela Merkel and French President Nicolas Sarkozy called for greater harmonization of corporate tax rates (which Ireland will try to block) and an overhaul of national pension systems to accord with Europe’s new demographic realities of aging baby boomers.

“France and Germany are working hand-in-glove to defend the euro,” Sarkozy told reporters.

The plan, known as the Pact for Competitiveness, also sought to end the system of indexing salaries and social payments to inflation, which Luxembourg and Belgium threatened to veto. Other features included a “debt alert mechanism,” the mutual recognition of educational diplomas and the establishment of national crisis management regimes for banks.

Most other countries objected to something in the plan, which the Franco-German duo wants to see agreed at another summit next month. Smaller countries bridled at the threat of dominance by the two big powers.

“There must be more economic cooperation but member states must be left the room to carry out their own policies,” said Belgian Prime Minister Yves Leterme said. “Each member state has its own accents, its own traditions. We will not allow our social model to be undone.”….MORE HERE