• Germany's news in English

Merkel resists pressure to relax austerity

The Local · 24 May 2012, 07:47

Published: 24 May 2012 07:47 GMT+02:00

Facebook Twitter Google+ reddit

"We have to act straight away for growth," French President Francois Hollande insisted amid deepening worries over Greece's eurozone future and Spain's troubled banks. "Otherwise there will still be doubt on the markets."

"We have no time to waste," the freshly elected Socialist leader stressed at his first EU summit after a cost-conscious train ride from Paris.

German Chancellor Angela Merkel faced pressure to give ground on her hardline austerity doctrine as the European single currency fell to $1.2564 and London, Frankfurt and Paris stock exchanges each shed well over two percent.

She also rejected a call by Hollande for eurobonds - jointly pooled eurozone debt - on the grounds they are "not a contribution to stimulating growth in the eurozone" and adding that such instruments ran contrary to EU treaties.

Berlin fears eurobonds would leave German taxpayers permanently underwriting the public finances of weaker eurozone economies.

Yet in a German press interview appearing on Thursday, Merkel's finance minister Wolfgang Schäuble maintained that "the differences between ourselves and France are not so great."

Schäuble said Hollande wants more done to kick-start growth, but insisted that the French president "does not want to water down" a treaty obliging balanced budgets the Frenchman initially said he wanted to re-negotiate.

"We're not talking about an easing of budgetary discipline," Schäuble insisted.

A member of Hollande's entourage said he was "floating ideas" but "not coming to Brussels with a Kalashnikov."

Non-euro Britain also flexed its muscles, ruling out in advance other core ideas put forward by European Union officials and backed by Hollande - including a tax on financial transactions.

Home to three quarters of Europe's financial services industry, London vehemently rejects the tax.

Opening the dinner talks, EU president Herman Van Rompuy underlined the need to find "a strong will to compromise" with the risk of knock-on effects from a Greek eurozone exit exercising markets.

After Germany's central bank said the picture in Athens ahead of June 17 elections was "highly alarming," leaders were expected to remind Greek voters that they expect Athens to honour a €237 billion ($300 billion) bailout deal agreed in March.

"I don't believe we can afford to allow this issue to be endlessly fudged or put off," said British Prime Minister David Cameron, urging the European Central Bank (ECB) to do more.

Treasury officials from the other 16 eurozone member states were told this week to "reflect" on what an exit would mean for their economies, a diplomat from one eurozone country told AFP.

The Greek finance ministry in Athens "categorically" denied this was the case.

Contingency planning that diplomats called "commonsense" stems from arguably greater worries about Spain and Italy, after a report by Fitch Rating agency showed foreign investors had fled Spanish and Italian debt in huge numbers.

Story continues below…

Spanish Prime Minister Mariano Rajoy said Spain did not require the support of European rescue funds, saying there were "faster instruments" – an apparent allusion to the ECB which has previously bought government bonds in sell-on markets.

Analysts see this as inevitable, with consultant Sony Kapoor warning that Spain otherwise "is headed towards needing a fully-fledged bailout."

Wednesday's talks were set to endorse a trial for €230 million in seed money from the EU's budget this year and next by way of EU "project bonds."

This is intended to attract €4.5 billion of long-term private investment for Europe's incomplete energy, transport and digital networks.

Other ideas on the table included a €10-billion boost to European Investment Bank (EIB).


The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

09:51 May 24, 2012 by smart2012
eurobond or EU dies
11:06 May 24, 2012 by bluestratus
Can someone tell me why it is every time I log onto The Local I get warned this is an attacked site and is dangerous for my PC???
14:49 May 24, 2012 by McM
Solvency is still the only real issue for the Eurozone. Eurobonds do nothing to address this core issue besides shifting the deck chairs. Sadly the smart money has already drained out of the EU banking fat long ago . The rating agencies are merely thermometers that reflect previous hard data and are not at all drivers but only latent reflectors. I don't see a solution that will let the Eurozone play in the finance world's A league until it sorts out the group solvency issues and growth is based on productivity and not subsidies based on further hastily credit.
Today's headlines
Obama to visit Berlin in last presidential trip to Germany
President Barack Obama and Chancellor Angela Merkel during a Berlin trip in 2013. Photo: DPA.

The White House announced on Tuesday that US President Barack Obama will be paying one last unexpected visit to the German capital - his last before he leaves office.

Hostility towards minorities 'widespread in Bavaria'
A village in southern Bavaria. Photo: DPA.

Hate and hostility towards groups deemed to be different are not just sentiments felt by fringe extremists, a new report on Bavaria shows.

Hated RB Leipzig emerge as shock challengers to Bayern
RB Leipzig. Photo: DPA

RB Leipzig's remarkable unbeaten start to the Bundesliga season has seen them suddenly emerge at the head of the pack chasing reigning champions and league leaders Bayern Munich.

Munich taxi driver in hospital after attack by British tourists
Photo: DPA

A taxi driver had to be hospitalized in Munich on Monday evening after three British tourists refused to pay their fare and then attacked him.

German police carry out nationwide anti-terror raids
Police outside a building in Jena during raids on Tuesday. Photo: DPA

Police forces in five German states carried out raids on Tuesday morning with the aim of tackling the financing of terror groups, police in Thuringia have reported.

The Local List
10 ways German completely messes up your English
Photo: DPA

So you've mastered German, but now it's time to learn English all over again.

Iconic German church being eroded away by human urine
Ulm Minster towering over the rest Ulm surrounding the Danube. Photo: Pixabay

It will now cost you €100 to spend a penny. That’s if you get caught choosing to pee against the world-famous Ulm Minster.

German small arms ammo exports grow ten-fold
Photo: DPA

The government has come in for criticism after new figures revealed that Germany exported ten times the quantity of small arms ammunition in the first half of 2016 as in the same period last year.

14-year-old stabs 'creepy clown' in prank gone wrong
File photo: DPA.

A 16-year-old in Berlin decided he wanted to scare some friends, but his plot backfired in a violent way.

Four Ku Klux Klan groups active in Germany, says govt
An American member of the KKK at a gathering in Georgia. Photo: EPA.

The German government estimates that there are four Ku Klux Klan (KKK) groups currently active in the country, according to a report by the Süddeutsche Zeitung (SZ) on Tuesday.

Germany's 10 most weird and wonderful landmarks
Sponsored Article
Last chance to vote absentee in the US elections
10 things you never knew about socialist East Germany
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd