German Chancellor Angela Merkel and Italian Prime Minister Silvio Berlusconi told reporters ahead of a working dinner that they sought a “coherent” approach to manage the market turmoil. But Merkel again dismissed Berlusconi's proposal to create a common rescue fund to help the 27-member European Union weather the storm.
“We are all of the opinion that we need take coherent approach because we belong to the same currency zone,” she said. “That means close coordination, close consultations.” But she added: “Of course every country must face up to its own responsibility in this context.” She cited the example of the government-coordinated €50-billion bailout package agreed Sunday for Germany's fourth-largest bank, Hypo Real Estate (HRE). “We cannot accept any systemic risks because we would not only harm ourselves but of course other countries in the eurozone,” Merkel said.
Berlusconi renewed his call made at a mini-summit in Paris Saturday for EU nations to pool together to cope with shocks to the financial system. “I proposed and I am still of the opinion that the best thing would be for us to create a common form of protection, a common effort by the 27 European countries,” he said through a translator. “That is of course difficult but I think that because we have a common currency, we could act together to contend with this crisis and support the financial system and guarantee our citizens that no one will suffer losses due to this crisis.”
At the emergency talks in Paris, leaders of Britain, France, Germany and Italy vowed to protect fragile banks but shunned the possibility of a European rescue fund due to the opposition of London and Berlin.
Germany, Europe's biggest economic power, in particular was eager to avoid getting stuck footing the bill for the bailout of other countries' banks. Merkel added that she and Berlusconi would also discuss the agenda for Italy's presidency next year of the Group of Eight most industrialised nations including “the need for longer-term regulations on financial markets”.
The German leader had sought tighter market controls within the G8 during her own presidency of the group last year but was thwarted by resistance from the United States and Britain.
On Italy's stricken national carrier Alitalia, Berlusconi said he would be pleased to work with Germany's Lufthansa in the bid to save the airline. Merkel said Germany “had an interest in closer cooperation if it was advantageous for both sides”.
Under the plan to rescue Alitalia from bankruptcy, a new streamlined airline was set to take off on November 1 with the support of a foreign carrier.
Air France-KLM, which holds a two-percent stake in Alitalia, indicated that it was considering raising that to between 10 and 20 percent, while Lufthansa reportedly wants as much as 49 percent.