Sarkozy and Merkel to thrash out euro crisis solution

5th December 2011, Comments 0 comments

French President Nicolas Sarkozy hosts German Chancellor Angela Merkel in Paris on Monday to thrash out details of a plan to save the euro at the start of a crucial week for the single currency.

The two leaders are to meet for a working lunch, having vowed to propose European Union treaty changes to create what Merkel has dubbed a "European fiscal union with strict rules" and Sarkozy calls "true economic government."

Whatever proposals emerge from the talks must be seen as a credible guarantee that eurozone governments will at last bring their deficits under control and thereby satisfy restive markets.

European Central Bank chief Mario Draghi has said he could then take action, and many hope the ECB will intervene to protect European banks from a credit crunch and buy bonds to rein in soaring rates on government borrowing.

Sarkozy and Merkel have sought to take charge of the debt crisis, working so closely together that the media have dubbed them "Merkozy" and running the risk of alienating smaller EU states wary of Franco-German domination.

But Sarkozy is smarting from becoming the junior partner, obliged to trail in Merkel's imperial wake when she rejected French entreaties to make the ECB a lender of last resort, like the US Federal Reserve or the Bank of England.

Merkel has also dismissed the idea of pooling eurozone debts by issuing joint eurobonds, declaring: "Whoever has not understood that they cannot be the solution to the crisis has not understood the nature of the crisis."

Opposition leaders have accused Sarkozy of capitulating, comparing Merkel to 19th century German leader Otto von Bismarck and the French president to Edouard Daladier, who signed the Munich Accords to appease Hitler in 1938.

After Monday's Franco-German mini-summit, EU leaders will have three days to digest France and Germany's proposals before Thursday, when the EU summit begins in Brussels and the ECB board meets in Frankfurt.

Some countries may be obliged by national law to put any new treaty proposed by Sarkozy and Merkel to a referendum, which might delay or even derail its implementation.

US Treasury Secretary Timothy Geithner has been dispatched to Europe, where he arrives on Tuesday to pressure leaders to take effective action on the debt crisis amid growing US frustration over the slow pace of action.

Geithner is due to arrive in Frankfurt for talks with Draghi and other officials before travelling to Berlin, Paris and Marseille for talks with eurozone leaders, returning to the US on Thursday as the crunch EU summit begins.

© 2011 AFP

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