Merkel and Sarkozy team up against eurobonds

Merkel and Sarkozy team up against eurobonds
Photo: DPA
German Chancellor Angela Merkel and French President Nicolas Sarkozy on Friday presented a common front against eurobonds as a way out of the eurozone crisis, a week before an EU summit.

“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.”

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.


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