Germany tried to put an optimistic face on discussions with France over a strategy to deal with Europe’s crippling debt crisis Friday, despite a warning from a French minister that the euro currency itself was under threat.
Markets appear to be giving Europe the benefit of the doubt that they will eventually be able to agree to a comprehensive package of measures in time for a second summit, a German government spokesman said was tentatively scheduled for Wednesday. Europe’s main stock markets are all trading higher Friday, with the Stoxx 50 of top European shares up 1.6 percent. Chancellor Angela Merkel refused to discuss any differences between Germany and France in talks with lawmakers a day after the two countries conceded that a new strategy won’t emerge this weekend. Members of her government repeatedly stressed Europe’s two biggest economies were in agreement on the broad outlines of a deal. But French Agriculture minister Bruno Le Maire, who has been involved in the negotiations, indicated the spat was more critical than the Germans seemed willing to concede.
“It’s the first time Europe has faced a crisis this serious, because it is a crisis that puts in doubt European solidarity, it’s a crisis that risks exploding the main political achievement of recent years, the euro; and it’s also a crisis that has stripped us of our outlook and vision,” Le Maire told French BFM TV. Finance ministers from the 17 countries that use the euro will be looking to thrash out differences of opinion later Friday as they gather in Brussels, ahead of the arrival of the leaders on Saturday. Ahead of their meeting, the chairman of the eurogroup, Jean-Claude Juncker, said the delay to a debt crisis deal created a “disastrous” image of the eurozone to the outside world and that it’s not necessarily just France and Germany that have differences of opinion.
Sunday’s leaders’ summit had been earmarked as the time Europe would finally deliver a comprehensive plan to get a grip on the currency union’s debt troubles, which has seen three countries bailed out and threatened the future of the euro currency itself. Leaders had been expected to detail new financing for debt-ridden Greece, produce plans to make Europe’s banks fit to sustain worsening market turbulence and further empower the eurozone bailout fund. Though Merkel insisted in discussions with lawmakers Friday that there are no major differences of opinion between herself and French President Nicolas Sarkozy, Europe’s two biggest economies appeared to be at loggerheads over how to make best use of the bailout fund, the so-called European Financial Stability Facility, or EFSF. Merkel’s spokesman Steffen Seibert said Merkel and Sarkozy held a telephone conference on Thursday with President Barack Obama and Prime Minister David Cameron to discuss the summit and that leaders agreed the outcome must involve sending “a clear signal of an end to the debt crisis.”
Seibert said the decision to split the summit into a two-step process – with Sunday envisioned as a chance to hammer out the details of how the EFSF is to be used and the overall package to be passed on Wednesday.
A spokesman for Merkel’s conservative Christian Democrats said the chancellor refused to be drawn in talks early Friday with lawmakers from her party on reports of the split between her and Sarkozy. “She would not say anything other than that they were in agreement,” Dominik Geissler told reporters in Berlin. Yet, while France proposes turning the EFSF into a bank that would have access to unlimited credit from the European Central Bank, Germany has refused to sanction such a move, arguing it would compromise the ECB’s impartiality. “Considering the importance of the discussions and there potential impact upon the European economy, global capital markets and the future of the EU itself a delay of a few days is neither here nor there in the overall scheme of things,” said Gary Jenkins, an analyst at Evolution Securities. “However the suggestions that they are still far apart on how to make best use of the EFSF is of some concern.” What to do about the ?440 billion ($607 billion) EFSF doesn’t seem to be the only point of contention. Germany and several other rich countries have been pushing for banks and other private investors to take steeper losses on their Greek bondholdings, before the eurozone can sign off on a second multibillion euro rescue package for the struggling country. France and the European Central Bank had so far opposed forcing banks to write off more Greek debt, fearing that would destabilize the banking sector and worsen market turmoil.
France is thought to be particularly worried about losing its cherished triple A credit rating, a scenario which Standard & Poor’s said was possible if Europe slides back into recession or its borrowing rises even further. In a stress test report, S&P warned that France Spain, Italy, Ireland and Portugal could have their ratings reduced by one or two notches. On the future of Greece, the French and German statements Thursday indicated that the two countries may be edging toward a solution. They have asked Greece to immediately start negotiations with the private sector to reach a deal “that would improve (Greece’s) debt sustainability.”
Meanwhile, the chairman of the eurogroup of finance ministers said Friday in Brussels the delay to a debt crisis creates a “disastrous” image of the eurozone to the outside world. Jean-Claude Juncker, who is also the prime minister of Luxembourg, added that it’s not necessarily just France and Germany that have differences of opinion on how to tackle the crisis. He said decisions had to be taken by all 17 eurozone countries. Juncker made the comments as he arrived for a meeting of eurozone finance ministers in Brussels Friday. The meeting will be followed by talks between EU finance ministers Saturday, a summit of EU leaders on Sunday, and another crisis summit early next week.
21 October 2011, Friday / AP, BERLIN