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EU Summit Approves Iran Sanctions, Debates Debt Crisis


French President Nicolas Sarkozy gestures as he and other EU leaders leave a family photo at the start of the European Council summit in Brussels on June 17.
BRUSSELS -- As expected, the EU today decided to ratchet up its sanctions against Iran.

The EU leaders noted in a joint statement that Tehran’s recent announcement that it has enriched uranium to 20 percent has aggravated concerns that it is seeking to build nuclear weapons.

The president of the European Council, Herman van Rompuy, indicated after the summit that the new EU measures will go beyond those approved by the UN Security Council on June 10.

"The [European] Union remains deeply concerned about Iran's nuclear program. New restrictive measures have become inevitable,” van Rompuy said. “The European Council gives guidance to the Foreign Affairs council to implement UN Security Council resolution 1929 and to adopt additional measures at its next session in July."

The new sanctions will target Iran's trade, financial sector, and banks, as well as transport links. There will be specific measures to ensure that Iran cannot improve its mediocre refining capabilities to better exploit its vast oil and gas resources. New visa bans and asset freezes will be put in place against members of the Islamic Revolutionary Guards Corps (IRGC).

Russia earlier in the day expressed its objections to the latest efforts by Washington and Brussels to punish Tehran. Deputy Foreign Minister Sergei Ryabkov was quoted as saying Russia is "extremely disappointed that neither the United States nor the European Union was heeding [Russia's] calls to refrain from such steps."

The EU today reiterated its preference for a diplomatic solution, as the draft stressed that the EU high representative for foreign policy, Catherine Ashton, was ready to resume dialogue with Tehran.

Financial Anxieties

The summit's overwhelming preoccupation was the economy, however. There was a palpable sense of crisis hanging over the leaders as they went into the meeting at the heart of Brussels' "euro quarter" -- a fact readily acknowledged by van Rompuy today, who said the agenda “is still dominated by the crisis -- the financial crisis, economic crisis [and] monetary crisis.”

"Regarding the financial sector -- our priority is to have a solid and healthy banking system,” he said. “We agreed that the so-called 'stress test' [the Supervisory Capital Assessment Program] of the banks will be published at the latest in the second half of July."

As uncertainties spread in the eurozone, more and more countries are seeing their borrowing costs go up -- and funds squeezed. The contagion has by now reached well beyond Greece, whose initial troubles prompted the EU to approve a 750 billion euro ($930 billion) rescue package last month.

Spain appears to be the eurozone's next big test, with both the country's banks and government facing increasing difficulties in accessing funds on international credit markets.

EU leaders today sought to dampen concerns. Van Rompuy spoke of a "strong will" and "common resolve" among the leaders. However, most of this applies to medium and long-term plans -- the intention to step up economic coordination among EU member states with a focus on fiscal austerity and a new jobs and growth strategy called "Europe 2020."

The summit also gave further evidence of the feeling shared by many capitals that the international money markets are at least partly to blame for the credit squeeze which has now spread from Greece to Spain, Portugal, Italy, and Ireland, and is even beginning to affect core eurozone countries such as Belgium and France.

The leaders today instructed EU authorities to quickly table proposals on restricting the practices known as "naked short selling" of eurozone bonds and credit default swaps, which are seen as encouraging large-scale betting on the failure of potentially vulnerable economies.

The summit also agreed to propose to the G20 the introduction of a "bank levy" intended to ensure, as Van Rompuy said, fairer distribution of the costs of the crisis. The EU will also advocate a financial transaction tax.

"We took a decision on the principle of the bank levy,” van Rompuy said. This will contribute to a fairer burden-sharing of the costs of the financial crisis and to a greater stability of the financial system."

In a show of EU unity -- in accordance with German preferences and contrary to what France has long sought -- the bloc's leaders also decided there will be no separate governance structures created for the 16-member eurozone. Instead, decisions on significant economic issues will continue to be taken by the 27 member states in unison.

The EU leaders today also gave their imprimatur to Estonia's joining the eurozone as of January 1, 2011, and approved launching accession talks with Iceland.