He does, however, provide concrete action by earmarking some €700/800m to be channelled to Spain and Portugal through KfW.

In Germany, Frankfurter Allgemeine led the paper with the news that the EU has not made progress in the fight against tax evasion. Specifically, there was no agreement to unlock the lingering dispute over the EU’s savings directive, as Luxembourg continues to delay. While there is a broad consensus that the fight against tax evasion should enjoy priority, Jean-Claude Juncker blocked a concrete agreement on the grounds that he would first require separate agreements with third countries, specifically, Switzerland and Liechtenstein. The paper noted that Austria is no longer blocking an agreement, in a significant shift of position. The summit, however, agreed a timetable to pass the directive by the end of the year, at which point third-country negotiations should be at an advanced stage. Angela Merkel said everybody knows that the complete and open exchange of information over all sorts of income will become the norm in the future.

On other summit issues, Il Corriere della Sera reports that Enrico Letta pushed for a Eurozone summit on youth unemployment. Herman Van Rompuy has agreed to Italy’ proposal given the gravity of the problem and the lack of a European response. The Eurozone must allow fiscal room for manoeuvre to enable member states to invest adequate resources into active labour policies, reducing taxes on labour and creating jobs for young people, Letta said.

The Greek government got what it wanted from the meeting – backing for its plans for gas and oil exploration in the Aegean, Kathimerini reports. The government believes it gets the green light to declare an exclusive economic zone in the Aegean and to search for oil and gas reserves.

Leaders also voted unanimously to continue with ‘one Commissioner per country' in the European Commission until 2019, European Voice reports. The Lisbon treaty stipulates that the number should be reduced to 19 starting in 2014, but a provision introduced after the Irish No-referendum gave the Council discretion to change the time frame if voted unanimously.

Separately, Silvio Berlusconi is hitting back at the PD for attempts to ban him for holding office. He is still supporting the government, but his tones of attack have become increasingly hostile.

In the Irish Times Arthur Beesley comments that the revelations put Ireland on a defensive posture in times when it needs to build up is reputation on financial markets and continues to lobby Germany and other reluctant partners to help paying some of the costs for rescuing Bank of Ireland and Allied Irish Banks.   

“Notice that German savings rate did not rise because German households decided that they should prepare for a difficult future in the eurozone by saving more. German household preferences had almost nothing to do with it. The German savings rate rose because policies aimed at restraining wage growth and generating employment at home reduced household consumption as a share of GDP. As national saving soared, the German economy shifted from not having enough savings to cover domestic investment needs to having, after 2001, such high savings that not only could it finance all of its domestic investment needs but it had to invest abroad by exporting large and growing amounts of savings. As it did so its current account surplus soared, to 7.5 percent of GDP in 2007.” 

This appears to be in addition to the already existing MobiPro-EU programme, which according to ABC will allow 400 Spanish and Portuguese youth to train in Germany next academic year.

In an editorial (!) on its business page, Frankfurter Allgemeine applauds Weidmann’s defence of the pennies, and notes that Weidmann and Wolfgang Schauble are united in this hugely important endeavour. 

Matteo Renzi said the PD was in a state of shock after the change of party leadership from Pier Luigi Bersani to Guglielmo Epifani, according to La Repubblica. He said the party needed to determine whether it was capable of making new proposals or where it is just grinding along. Renzi said he has confidence Enrico Letta’s government, but added that the efforts needed to stabilize Italy could be huge. In addition to austerity Italy needs of public spending cuts and new measures for competitiveness, Renzi said. He also described Letta’s concessions on IMU property tax as a political compromise the PD must shoulder to keep the current government coalition together. According to Renzi, acting on the IMU is the price paid for the alliance with Silvio Berlusconi.

La Stampa reports that Epifani rebutted Renzi’s comments, saying it was no gift to anyone but common sense in order to tackle the current situation. According to Epifani the IMU is quite unfair and needs to be more progressive. Epifani also said that reforming IMU was a part of the PD campaign programme. 

Hollande took pains to say that the dispute with Merkel was political, not personal. "We have to find a balance between budgetary rigor and support for growth," Hollande said, adding that the debate with Germany "is a respectful dialogue." "We don't have the same convictions but we have the same responsibilities," he said.

Angela Merkel, meanwhile, said that governments must first work on getting their finances in order and making their economies more competitive through reforms. "What we need above all is a common understanding in Europe — and there unfortunately isn't one yet — of what actually makes us strong and where growth comes from," Merkel said at a European policy forum in Berlin according to AP.

Giorgio Napolitano also defends his choice to appoint Enrico Letta as PM, despite the continuous fights between PdL and PD. In an interview with Il Messaggero, Napolitano said Letta was the only figure able to lead the country. The frictions between the parties over justice, after Silvio Berlusconi’s rally in which he attacked the magistrates, can be solved easily, Napolitano said. The president also attacks the parties on current priorities, saying some people don’t realise that the country lives on a razor’s edge. 

“So there’s the final rub. Mr Cameron could lose the election and bequeath, as a deferred legacy, Britain’s flight from Europe.”

An OECD report (press release) on Wednesday showed income inequality as measured by the Gini coefficient grew more in the first three years of the crisis to 2010 than in the previous 12 years. El Diario highlights that the largest increase in the Gini was registered in Spain, with an increase of 2.9%, followed by Slovakia, France and Sweden. Before taxes and social transfers, the largest increase In income inequality were registered in Ireland (10% increase in Gini) and again Spain (7%). The report also indicates that poverty rates for youth and children grew in 2007-10 from 12-13% to 14% while the poverty rate for the elderly dropped from 15% to 12%, confirming a previously identified trend for young people to replace the elderly at the group most at risk of poverty in the OECD. The largest increases in child poverty (above 2%) were in Turkey, Spain, Belgium, Slovenia and Hungary.

In a related story by El Pais, a report by the Economic Research Institute of the Valencian region shows not only rising poverty in Spain, but also a divergence in poverty rates among Spanish regions, with increases in the poverty rate as high as 21% in the Canary Islands, 18% in Valencia or 16% in Andalusia. Poverty rates decreases in the Basque Country (-2%), Rioja (-5%) and Navarra (-7%).

La Repubblica reports that the Italian Banking Association (ABI) said the bad loans in banks’ portfolios have reached €64.3bn in March, rising by 4.3% against the March 2012 and by 33% against the previous month. According to ABI the bank loans in Italy to households and non-financial companies dropped 3.1% in March versus the same month in 2012, falling to €1.46bn. The overall bank loans, including lending to financial companies and the public sector, decreased by 2.12% to €1.907bn in the same month. The credit crunch is far from over, with estimates saying the low point is going to be in the second half of the year.

As La Stampa reports, Italian industrial production fell 5.2% in March compared to the same month in 2012, Eurostat said, which shows that there will be no exit from the recession this year. According to Eurostat this was the worst figure of the Eurozone’ big economies. By comparison, industrial production, on a year-on-year basis, was down 1.5% in Germany in March and 1.6% in France.

The Italian housing market, meanwhile, slumped to its lowest level since 1985 last year, according to a common report released by the inland revenue agency and ABI. As reported by L’Unità, during last year 448,364 properties were sold, or 27.5% fewer than in 2011. According to ABI this is the worst annual performance since 1985, when 430,000 homes were sold. The expectations for the current year is for another drop to  400,000 properties. The weak property market could represent a problem also the construction sector, one of the cornerstones of the Italian economy, ABI said. 

“I want to suggest a fifth possibility. I conjecture that "austerians" are concerned that anti-recessionary macro policy will allow a country to "muddle through" a crisis without improving its institutions. In other words, they fear that a successful stimulus would be wasting a good crisis.”

For its part, the European Commission is advising Spain that a single employment contract to end the segmentation of the Spanish labout market "might be a possibility", El Pais reports. Speaking in Madrid at the opening of a seminar on the "youth guarantee" (see press release), Employment Commissioner László Ándor said that the difference between temporary and permanent employment is widest in Spain, among all EU countries.

Speaking to the press in Madrid as he hosted Portuguese PM Pedro Passos Coelho, Spain's Mariano Rajoy praised his labour minister and said he has no intention of reforming Spain's labour laws further as suggested by the European Commission and demanded by Germany, writes ABC. Rajoy and Passos Coelho agreed on the need for banking union, and Europe-level policies for youth employment. Rajoy also supported "any measures" towards improving liquidity for SMEs and families.

In a separate story, El Pais reports that PP regional leaders are seeking to distance themselves from Rajoy, as they fear for their comfortable absolute majorities in the regional parliaments at the next elections, due early in 2015. Contestation of Rajoy remains mostly muted in public, except notably for Madrid PP leader and former regional Premier Esperanza Aguirre, and the Catalan PP leader Alicia Sanchez Camacho who, while in the opposition in Catalonia, supported a higher deficit target for the region, in line with the regional government's demands.