France's Sarkozy denies rift with Germany over debt crisis
French President Nicolas Sarkozy Thursday denied a rift with Germany over Europe's debt crisis as eurozone divisions rattled world markets and protestors challenged austerity cuts in Greece and Spain.
The French president insisted he had no "disagreements" with German Chancellor Angela Merkel on overhauling the eurozone after recent financial market doubts about Europe's unity in the face of the crisis.
Sarkozy said he backed Merkel's call to dish out tougher punishment for nations that run public deficits above permitted levels, which include withholding EU funds and withdrawing voting rights.
"In terms of our relations with Angela Merkel, we're doing everything to ensure that they are in harmony, that they are complementary, that they are full and that they show a common ambition," Sarkozy said.
"We have no disagreements together. That's why we talk together," he told reporters.
Despite the efforts of Europe's two biggest economies to get a grip on the crisis, global stock markets suffered a fresh sell-off as a surprise jump in US jobless claims added to concerns about Europe's unity in the face of the debt drama.
With stocks already reeling from a surprise and unilateral move by Germany to curb speculative trading, earlier Merkel pressed the case for a tax on financial markets to help tame excesses blamed for the global economic slump.
"We have now stated that we will campaign for a tax on the financial markets and we will campaign for that at our (G20) summit in Canada," she told a conference on financial regulation.
Merkel already stunned markets on Wednesday when Berlin banned so-called naked short selling -- the sale of bonds or shares by market players who neither hold the security nor have borrowed it to make their trade.
"The German short ban has emphasised that Europe is not unified and this is at a juncture when it really, really needs to be," said Credit Agricole CIB analyst David Keeble.
French Economy Minister Christine Lagarde told RTL radio the German decision "should have been taken in concert" with other European nations and was in itself "open to debate," Lagarde said.
Lagarde distanced herself from Merkel's remark Wednesday that the euro was "in danger", saying she "absolutely" did not believe that to be true, prompting talk of a rift between the close allies.
But hours later, the same minister was scrambling to make amends, telling an international conference in Berlin -- via video from Paris -- that the two countries were "on the same page" when it came to financial regulation.
Addressing her German counterpart, Wolfgang Schaeuble as "Dear Wolfgang", she said she wanted to "celebrate the very strong alliance that ... we have forged over time.
The crisis in Europe is being driven by debt and public deficit levels which have soared way above EU rules as governments increased spending to get their economies through the worst recession in generations.
Now the bill is coming due, with markets demanding ever higher rates of interest to provide money to such governments. That in turn makes the state finances worse and eventually led Greece to call in the EU and IMF to organise a 110-billion-euro bailout earlier this month.
Following the example of existing German curbs on overspending, Sarkozy said France's constitution should be altered to compel new governments to sign up to a timetable to balance their budgets.
International Monetary Fund head Dominique Strauss-Kahn insisted that there no risk of the 16-nation eurozone splintering apart while warning that the crisis was costing Europe confidence in it elsewhere in the world.
"I do not believe that the eurozone is at risk of breaking up, on the other hand, I believe that the risk is that it works badly, that it functions badly," he told the television station France 2.
"The whole world is watching this... and is losing confidence in Europe," he said.
Meanwhile, public outrage in countries already facing swingeing spending cuts flared with demonstrators hitting the streets in Greece and Spain.
As protestors marched across Spain, the government approved late on Thursday a 15-billion-euro austerity drive aimed at reining in the public deficit and easing fears of a Greek-style debt crisis.
More than 20,000 Greeks demonstrated in Athens and other cities in the second general strike this month, demanding the Socialist government to drop controversial pension reform and pay cuts.
More than 1,700 extra police were ordered into central Athens alone as authorities sought to avoid a repeat of violence that saw three bank employees killed when their branch was hit with a petrol bomb on May 5.
© 2010 AFP