Merkel says EU survival at stake as chiefs plot post-Brexit path

[PARIS] German Chancellor Angela Merkel vowed to do everything she can to hold the European Union together in the face of a populist backlash, saying the bloc's survival is becoming a question of war and peace.

The strong language from Europe's pre-eminent leader underscores the stakes as Ms Merkel and 26 other national EU leaders gather for a summit in Bratislava on Friday to chart the union's post-Brexit course.

While the meeting is only an opening move, economists say that a weak response risks holding back growth and plunging the EU into an prolonged malaise.

"Europe is not at all in a good state," Ms Merkel said in a speech late Thursday at Potsdam outside Berlin. "That pains me, and I'm making every effort to allow us to rekindle that for which the community once stood."

As UK Prime Minister Theresa May's government struggles to work out how to manage Britain's departure from the EU after the Brexit referendum in June, the remaining 27 are seeking common approaches in areas such as defense, growth and border security.

French President Francois Hollande, who hosted Ms Merkel for preparatory talks in Paris on the summit's eve, said the EU may well be facing "the crisis threatening its very existence."

Ms Merkel and Hollande, the leaders of the two biggest euro-area economies, urged fellow leaders to agree on a post-Brexit road map. Faced with the loss of the UK, a divisive refugee crisis and the rise of populist parties across Europe, the risk is that the push for practical steps to make the EU more relevant to people's lives bogs down.

Disintegration of the EU was cited as the biggest "tail risk" in a Bank of America Corp survey of global fund managers released this week, beating a Donald Trump victory in the US election or a renewed currency devaluation by China.

Elections in the Netherlands, France and Germany in 2017 could make it difficult to achieve a significant breakthrough that revives confidence in the future of the EU, according to Philippe Gudin, chief European economist at Barclays Bank in Paris.

"We believe that the lack of ambition of the European agenda could feed a decline in confidence by markets and economic agents in the coming months, causing an economic slowdown in the euro area," Mr Gudin said in a note.

European Union President Donald Tusk said "the only thing that makes sense is to have a sober and brutally honest assessment of the situation." What's needed is "an optimistic scenario for the future," he told reporters in Bratislava.

The debate over which lessons to draw from Brexit is baring divisions among the remaining 27 EU members, including eastern European countries and populists in the west that want to reclaim national powers, some EU officials committed to integration, and powers such as Germany somewhere in the middle.

For Ms Merkel and Hollande, the challenge of steering the EU forward is paired with elections in both countries next year. Ms Merkel, who hasn't said whether she'll seek another term in Germany's 2017 election, is standing her ground amid electoral gains by an anti-immigration party and a split in her coalition over her refusal to cap immigration.

In her Potsdam speech, she warned of "nationalism, egoism and tendencies toward radicalisation that are hindering or even torpedoing joint European action."

"It's a matter of war and peace," she said. "I, for one, will never relent in pushing for a common Europe."

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