The political test facing the euro As with previous EU summits, there could be less than meets the eye in whatever decisions are announced on Friday. Investors around the world are wise to manage down their expectations for a deal finally to stabilise the eurozone. But with Spanish and Italian borrowing spreads at extortionate levels, they are right to worry that now, time really is running out. A flurry of meetings in the past week has crystallised the domestic political demands confronting the three pivotal national leaders. In Italy, Mario Monti is under pressure to show a return on his reforms in the form of action to lower Rome's bond yields. In France, François Hollande faces resistance to giving up sovereignty over budgetary and bank matters - even as the price of common eurozone debt issuance. Angela Merkel has hardened her assurances against Germany shouldering more of other countries" liabilities incurred beyond Berlin's control. Not only must any agreement fit the needs of these three leaders. It will not be worth much unless it also ends the market onslaught on governments and banks. That requires, in the short term, action on Spain's and Italy's borrowing costs, and for the long term, a real commitment to eurozone banking union. Neither may be achievable. A large eurozone country's inability to fund itself would radically raise its incentive to exit the euro. Yet the tools exist to give Spain or Italy a reprieve - though not both. The eurozone's rescue fund has the legal power to buy bonds. It needs more economic power - by concentrating open-market purchases on bonds issued from now on, and by obtaining a banking licence. Above all it needs the political go-ahead. The summit must clarify whether a political price for this can be negotiated - in the form of policy conditions, even a fully fledged rescue programme - that is satisfactory for Ms Merkel yet acceptable to the recipient country. On banking union, the proposals presented by European Council president Herman Van Rompuy stand out as islets of concreteness among the watered-down ambiguities of the agenda paper. They offer the outline of a real political deal: strong eurozone authority to intervene in national banks - which must extend to any bank of concern, however small - and wind them down in ways that protect taxpayers, in return for a common fiscal backstop for bank capital and joined-up deposit insurance. The test of the summit is to find room within leaders" political constraints to strike such a deal. That room has yet to be created.