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Merkel and Sarkozy team up against eurobonds

The Local · 10 Dec 2010, 15:30

Published: 10 Dec 2010 15:30 GMT+01:00

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"Sharing interest rates and risks is not going to help us structurally," Merkel told reporters at a joint news conference after talks with Sarkozy in Freiburg, southwest Germany.

"What is more important is more coherence in economic policy."

Sarkozy agreed, adding that France and Germany had not been properly consulted about the idea, put forward by Luxembourg Prime Minister Jean-Claude Juncker and Italian Finance Minister Giulio Tremonti.

The idea would enable weaker countries in the 16-member currency bloc such as Portugal and Spain that have to pay high interest rates to borrow money to link up with stronger ones such as Germany and France.

In principle, this would reduce the borrowing rates for the weaker countries but increase them for stronger countries.

"Countries should be given responsibilities, not have them taken away," Sarkozy said.

"I don't think we were consulted before this idea was floated. If we had known about it before, perhaps we could have found a compromise," Sarkozy said.

Juncker, also head of the Eurogroup of finance ministers, earlier in the week called Germany's flat refusal "un-European," prompting Berlin to accuse him of unsettling markets and creating a picture of European disunity.

The meeting attended by French and German ministers comes a week ahead of an EU summit at which the bloc's 27 leaders are due to sign off on a new permanent crisis mechanism.

Merkel has said eurobonds would be in breach of the EU's governing treaties and would weaken countries' resolve to fix their public finances, something she sees as vital to overcoming the crisis.

"This meeting comes at an extremely important time," the French European affairs minister, Laurent Wauquiez, told the daily Les Echos ahead of the Freiburg gathering.

"Europe is facing great challenges and foreign observers are looking to us to see to what extent the Franco-German partnership can take action."

Story continues below…

Despite growing criticism by European partners of an exclusive style of leadership, Wauquiez said France and Germany had been effective in the crisis.

"In the last year, on all the major issues that the crisis created, Nicolas Sarkozy and Angela Merkel have shown each time that they can hammer out common positions," he said.

Ireland last month became the second eurozone member after Greece to seek a bailout, tapping a €750-billion temporary mechanism set up by the EU and the International Monetary Fund.

There are fears that rising borrowing costs might force other countries in the 16-nation eurozone, most notably Portugal and Spain, to follow suit.


The Local (news@thelocal.de)

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Your comments about this article

11:56 December 11, 2010 by Fatz Lewinski
An excellent decision. This is a double first for me where I find I can agree with both Merkel and Sarkozy!
15:32 December 12, 2010 by storymann
Temporary at best,, when you have more money going out than you have coming in,,borrowing is only a temporary fix even with low interest rates,borrowing for investment at low interest or "good terms" is super but I doubt given the status of Spain,Portugal and Italy that is the situation.I believe Merkel was pressured to go along with this one,,as her remedy,was for these nations to get there debts with in a reasonable percentage of GDP,by cutting services and budgets,as painful as that seems it is the only real way to get your house in order.Germany has spent the last 15 years doing just that,while others have been enjoying the benefit of easy money and the euro,,, did not. Now euro bonds,,someone is going to have to make good on these when nations can not repay this low interest money.

There is most likely a lot more to this than has been published thus far.I hope some type of austerity plans are part of the Euro bond borrowing package.
04:07 December 13, 2010 by baltog
If you want EU, you have to act like Union! We dont need a 4th reich! We dont need a german Union. If you don;t like go back in your DM and let the rest of Europe free! The memories of your german domination over europe provoke a tremor to every democratic european citizen!
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