BRUSSELS -- The head of the European Commission is urging EU leaders to "do everything" they can to save the single eurozone currency, as they prepare to gather for a key summit.
Jose Manuel Barroso said that "the entire world is watching" the two-day summit, which begins on December 8 and which is being seen as a last chance to prevent the collapse of the 17-country eurozone over the crippling debts of some of its members.
French President Nicolas Sarkozy and German Chancellor Angela Merkel are expected to push for closer economic integration, including a new EU treaty that would enforce stricter budgetary discipline.
As she arrived for the summit, Merkel said, "It is important for me that the euro regains its credibility, that the treaties are changed in such a way that we head towards a stability union."
Addressing a gathering of European center-right leaders earlier in the day in Marseilles, France, Sarkozy warned that "never has the risk of disintegration been greater" for Europe. "I would like to say, let's not be afraid of words," Sarkozy said. "We should refound Europe. We should rethink Europe."
But it is far from clear that every country will be able to agree on all the new measures and it is not decided whether new rules will be applicable to the 17 eurozone countries, all 27 EU member states, or a mix of the two groups.
The most pressing issue will be whether Brussels can stave off the immediate crisis threatening the eurozone, with one credit rating agency already threatening to downgrade several top-rated countries.
No Big-Bang Solution
Nicolas Veron, an economist from the Brussels-based Bruegel
think tank, warns that there won't be a big-bang solution this week, which many are craving.
"It is possible that the leaders [will] manage to at least buy some time to have their discussion on institutions, which is the core of the crisis, and to make progress in the next weeks and months so that we could advance towards a solution," he says. "There won't be a final solution this month, there won't be financial solution next month, but there can be progress"
French President Nicolas Sarkozy (right) welcomes German Chancellor Angela Merkel prior to a working lunch at the Elysee Palace in Paris on December 5.
Among the French-German proposals are automatic sanctions for any country that runs up a deficit of more than 3 percent of gross domestic product. They also want a "golden rule" built into eurozone members' budgets against running a deficit.
But it's not clear which institution would supervise and enforce the sanctions. France has so far been reluctant to give up budgetary power to a supranational body like the European Commission and has already been assured by Berlin that the European Court of Justice cannot annul a national budget.
The EU's top court will, however, be able to assess whether national budgets have obeyed the "golden rules."
Both Sarkozy and Merkel have indicated they want all 27 to agree on the changes but that they are willing to accept a deal among the 17 countries that use the single currency. Several Central European countries that don't use the euro, such as Poland, might want to sign up as well, but the United Kingdom and possibly the Czech Republic might opt out.
London will see its hands tied by a large number of Euroskeptic members of parliament from the ruling Conservative Party who would like to have some sort of British referendum over the country's relationship with the EU.
British Prime Minister David Cameron has so far been reluctant to accommodate calls for a referendum and his will is likely to prevail.
EU leaders will look for all possible legal ways to avoid a referendum, but in the long run the move toward fiscal unity will make it hard to avoid a popular vote in Ireland as the country's constitution requires such a plebiscite.
Dublin once rejected the current Lisbon Treaty and a new legal framework would be hard to sell on the austerity-stricken island.
There are also question marks over whether the financial markets will have patience with such a drawn-out political process.
Marco Incerti from the Center for European Policy Studies (CEPS
) believes that a signature can be achieved as early as this week and that a new treaty could be in place 18 months down the line if everything falls into place.
"On average, based on past experiences, it takes in the region of 18 months from signature to ratification in all of the 27 [countries] -- if it's 27 that we are talking about," he says. "That is why also if it was at 17, it could be marginally easier because there are less countries that need to ratify."
In other matters, EU leaders are also expected on December 9 to make a decision on whether to grant Serbia EU candidate status.