• France edition
 
Merkel and Hollande talk ahead of crunch summit
Council of the European Union

Merkel and Hollande talk ahead of crunch summit

Published: 28 Jun 2012 09:41 GMT+02:00

Germany's Angela Merkel held last-minute talks with French President François Hollande on Wednesday before a crucial EU summit but warned she would not budge in her opposition to pooling eurozone debt.

In brief statements before the talks here in Paris both leaders made conciliatory gestures, with Hollande indicating he was ready to discuss further integration and Merkel hailing measures to promote eurozone growth.

But there was no sign that Paris was ready to immediately accept closer European political integration and Merkel had already dismissed a key French proposal – eurobonds pooling the bloc's debt – before even arriving in Paris.

"We both want to deepen economic, monetary – and in the future political – union, to arrive at integration and solidarity," Hollande said.

He said the eurozone needed "integration as much as necessary, solidarity as much as possible."

Merkel said the two-day EU summit starting in Brussels Thursday will be "of very great importance for the future of Europe."

"Significant progress has already been made regarding the growth pact," she said, referring to a plan to invest up to 130 billion euros ($162 billion) in kickstarting eurozone economic growth.

"We need more Europe, we need a Europe that works, the markets are expecting this, and we need a Europe whose members help each other," she added.

France and others have pushed the idea of issueing debt backed by the entire eurozone as a means of tackling the crisis, but Germany insists closer political and economic integration is needed first.

"Guarantees and controls must go hand-in-hand. There can only be joint liabilities when sufficient controls have been put in place," Merkel told the German parliament.

"Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive."

Merkel's Paris meeting was the latest in a rush of shuttle diplomacy to prepare for the summit in Brussels that will seek to tackle the short-term crisis and thrash out measures to prevent it occurring again.

The centrepiece of the summit is likely to be a repackaging of existing accords into the "growth pact" – hailed as amounting to one percent of European output. 

But leaders will also seek to define the shape of the embattled eurozone for the next decade, seeking closer integration in the form of a banking union and handing powers to the European level for countries' financial sectors and budgets.

European leaders were handed a stark warning by crisis-hit Spain earlier Wednesday, whose prime minister, Mariano Rajoy, said his country cannot continue to finance itself at the high rates it currently pays on the markets.

"The most urgent subject is the subject of financing," Rajoy told parliament.

"We cannot finance ourselves for a long time at prices like those we are now paying," he said, as the yield on Spanish government 10-year bonds traded at more than 6.8 percent.

The warning raised the nightmare scenario that Spain, the eurozone's fourth biggest economy, might need a full-blown sovereign bailout with dire consequences for the rest of the bloc.

And Rajoy warned that the problem of higher borrowing costs, which already forced Portugal, Ireland and Greece to seek multi-billion-euro bailouts, was not limited to Spain.

"There are institutions and also financial entities that cannot access the markets. It is happening in Spain, it is happening in Italy and it is happening in other countries," he said.

As if to prove his point, Italy had to pay investors much higher rates of return at a short-term bond auction later Wednesday.

Spain's central bank also warned that the country's crippling recession was deepening.

After economic output shrank by 0.3 percent in the last quarter of 2011 and again in the first quarter of 2012, the latest data showed further contraction in the second quarter and "at a more intense pace", it said.

In one positive sign ahead of the summit, Italy's parliament approved a controversial labour market reform on Wednesday, in time for Prime Minister Mario Monti to arrive at the meeting with it in hand.

The reform, which Monti's government says is key to restarting growth in the recession-hit economy, should help reassure Monti's EU partners on Italy's commitment to reform.

The International Monetary Fund meanwhile said that Cyprus, which on Monday requested a bailout from the EU to protect its Greek-exposed banking sector, has asked it for financial aid.

"Today, the IMF received an invitation from the Cypriot authorities to participate in the external financial assistance to contain the risks to the Cypriot economy," IMF managing director Christine Lagarde said in a statement.

Eurozone finance ministers said after a conference call Wednesday that they were favourable to Cyprus's request for financial help in coordination with the IMF.

Your comments about this article

Today's headlines
Armed Isis Islamist grew up in small French village
Demonstrators protesting against Isis. Photo: Mandel Ngan/AFP

Armed Isis Islamist grew up in small French village

One of three Kalashnikov-wielding Islamists seen burning their French passports in an Islamic State propaganda video this week grew up in a small village in southern France, the mayor said Saturday. READ  

Tactical Argentina stun France in Paris
Photo: Frank Fife/AFP

Tactical Argentina stun France in Paris

Argentina produced a tactical masterclass to beat France 18-13 at the Stade de France in Paris on Saturday. READ  

French PM Valls arrives in Chad on regional trip
French Prime Minister Manuel Valls with President Francois Hollande. Photo: Philippe Wojazer/AFP

French PM Valls arrives in Chad on regional trip

French Prime Minister Manuel Valls arrived in Chad late Friday at the start of a two-day regional visit, in a show of support for a French-led anti-jihadist force. READ  

Sanofi still has a 'driver' despite shakeup
Photo: Jacques Demarthon/AFP

Sanofi still has a 'driver' despite shakeup

The temporary head of French drugmaker Sanofi insisted the firm still had a bright future Thursday, declaring there was still "a driver in the seat" despite a sudden change in leadership. READ  

EU could give France until 2015 on budget
France's Finance Minister Michel Sapin. File photo: Dominique Faget/AFP

EU could give France until 2015 on budget

The EU could delay a decision on France's budget overshoot until early 2015 instead of making a ruling next week as expected, sources said on Friday. READ  

France's 'first ladies': A look at the other halves
How does the actress Julie Gayet match up against Yvonne de Gaulle, Claude Pompidou, Anne-Aymone Giscard d'Estaing, Danielle Mitterrand, Bernadette Chirac, Cecilia Sarkozy and Carla Bruni-Sarkozy? Pho

France's 'first ladies': A look at the other halves

With François Hollande’s romance with Julie Gayet apparently blossoming, the actress looks set to become France's latest unofficial 'first lady'. Writer Amaryllis Barton takes a look back at her predecessors to see how they matched up. READ  

'Ten reasons the French can be proud of France'
Ten reasons why the French can be proud of France, (according to the government).Photo: AFP

'Ten reasons the French can be proud of France'

France has come in for a harsh criticism recently whether it's from British CEOs or budget chiefs in Brussels and Berlin. But the government has taken it upon itself to hit back by publishing ten reasons to be proud of the country. How many do you agree with though? READ  

Scandal forces another Hollande minister to quit
Kader Arif was a junior minister for veteran affairs. Photo: Alain Jocard/Pool/AFP

Scandal forces another Hollande minister to quit

A junior French minister resigned on Friday as a scandal implicating him in the awarding of lucrative public contracts to members of his family hit President François Hollande's Socialist government with another bruising. READ  

France gets a new map, but what's the point?
France is to get a new map, but what is the point of it all? Photo: Philippe Huguen/AFP

France gets a new map, but what's the point?

After a long and passionate debate about reducing the number of France's regions, the National Assembly finally voted for a new map with 13 regions this week. But after all the fuss, what's the point of the reform and is there any point to France's regions? READ  

North Korean student feared kidnapped in Paris
Paris prosecutors are investigating the disappearance of a North Korean student linked to political rivals of leader Kim Jong-un. Photo: AFP

North Korean student feared kidnapped in Paris

Paris prosecutors are investigating the disappearance of a North Korean student linked to political rivals of dictator Kim Jong-un, a judicial source said Friday. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Sponsored Article
Win your Christmas list: €250 at Marks & Spencer
National
Would background music make the RER in Paris feel safer?
Sponsored Article
Offer: Unlimited airmiles from British Airways
Gallery
IN PICTURES: Winter is coming to the French Alps
National
Trierweiler to break her silence... in the UK
Gallery
Don't confuse France with Paris: Here's ten reasons why
Sponsored Article
Live like a local - anywhere in the world
National
From the homeless to migrants: A portrait of modern France in ten stats
Sponsored Article
Shop Christmas gifts at Debenhams international store
Culture
Are you brainy enough to be Miss France? Take the quiz
Gallery
France's most notorious celebrities. How many do you know?
Society
City of Love? Seven Paris myths debunked
Education
Why is France worst in the EU at English?
National
C'est pas possible! Paris is 'world's cheapest city for young people'
National
Looking to save space? France allows toilets in kitchens for first time
National
Find out how women in France are getting stung for a hidden tax
Culture
Which one is your favourite? The top 10 heartiest French winter dishes
Face Of The Week
Nabilla - 'France's Kim Kardashian' held for attempted murder
National
So who's scaring everyone by flying drones over France’s nuclear plants?
Education
Whoever thinks French was a dying language should read this
Politics
OPINION: 'One day France will be grateful to François Hollande'
Gallery
IN IMAGES: A history of France's most controversial architecture
National
How to make an 8-square-metre Paris apartment perfectly liveable
Gallery
VIDEO: France's raunchiest TV ads, including that infamous Perrier one
National
Five reasons why you should work a ski season in France and five not to
National
10 art exhibitions not to miss this autumn in Paris
Culture
What's on in France: 11 things to do this November
National
How French have you become? Take our quiz to find out
National
10 things to never say to a French person
National
Top 10: When French translations go wrong
National
Parisian bars that serve drinkers free meals
National
France falls to Germans in nude swim tourney
Gallery
IN PICTURES: Nowhere combines sex and art quite like France
National
Why you should never turn down an invitation to a French wedding
Sport
Discover the route of the 2015 Tour de France. There are a few surprises
Gallery
Ten changes that would make learning French so much easier
Culture
IN PICTURES: 'Glass ship' Vuitton ready to set sail in Paris
International
How a giant 'sex toy' earned an American artist a slap in Paris
National
'Unlike in the US the French don't put the blame on the poor'
Gallery
Cover up and don't be too Latin: French travel warnings for the US
Society
Macholand: The online uprising against sexism in France
Gallery
In pictures: The daily life of the 2,000 migrants in Calais
Culture
Erotic promo video earns the Musée d'Orsay our "Only in France" award
National
Seven reasons why everyone should work in a bar in France
National
The cost of expat home comforts: How France compares to Europe
International
Why don't Calais migrants stay in France? The Local went to find out
National
What are the pros and cons of working as an au pair in France?
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

498
jobs available
The Local Spain is hiring!
The Local is seeking a new editor for our site in Spain to join our growing team of internationally-minded, driven, ambitious and clued-up journalists
Click here for the full job description