• France's news in English
 
app_header_v3

Merkel and Hollande talk ahead of crunch summit

AFP · 28 Jun 2012, 09:41

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.

Story continues below…

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
Where property prices have risen most in France
Photo: AFP

You might just have been priced out of the market if you're looking to buy in Bordeaux.

Official Paris refugee camps to open end of September
Photo: AFP

Will this see an end to the squalid makeshift camps that spring up across the city?

Paris Metro takes on 'air hostesses' to promote safety
Photo: RATP/Screenshot

Did you see the "air hostesses" on the Metro this week?

Paris region doubles security budget for schools
Photo: AFP

France is prioritizing the protection of schools amid a heightened terror threat.

All you need to know about changes in French schools
All photos: AFP

School's back tomorrow, with a raft of new changes. Here's what you need to know.

Emmanuel Macron the next French president - Really?
Emmanuel Macron: The next French president? Photo: AFP

Can the 38-year-old maverick and former Rothschild banker really become the president of France in eight months' time?

€50 million of coke found in Coke factory in France
File photos: Owen Blacker/Flickr and Adrian Scottow/Flickr

Employees have sniffed out 370kg of coke in a French Coke factory.

Morocco's king drains water supply from French villages
King Mohamed VI of Morocco. Photo: AFP

King in town + 300-strong entourage = no drinking water for a French village.

Macron vows 'to transform France from next year'
Photo: AFP

Ex-Economy Minister Emmanuel Macron sets his sights on the presidency albeit without saying so.

French PM suggests naked breasts represent France
A statue of Marianne at the Place de la Republique in Paris, with her left breast on show. Photo: AFP

Just as the burqini ban furore was dying down French PM Manuel Valls has stirred things up again for suggesting naked breasts were a stronger symbol of the Republic than a Muslim headscarf.

Culture
16 things you almost certainly didn't know about France
Sponsored Article
Jordan: where history meets adventure
Politics
Emmanuel Macron: The whizzkid who could shake up French politics
Education
French schools to ramp up security with 'mock attacks'
Features
Where to go in France to find the best ice cream
Sponsored Article
Life in Jordan: 'Undiscovered treasure'
National
Majority in France against burqinis on beaches
National
How to keep cool during France's heatwave
Society
Parisians invited to swim in the Bassin de la Villette
Society
Five tips for surviving an internship in France
Sponsored Article
Jordan Pass: your ticket to the experience of a lifetime
Politics
Déja vu? Familiar faces in France's presidential race
National
Meet the man paying off burqini fines in France
Sponsored Article
Why Jordan is the ‘Different’ East
National
Eight tips on buying wine in a French supermarket
Sponsored Article
6 reasons expats use TransferWise to send money
Society
Here's how to enjoy Paris (while avoiding the heat)
Society
Ten mistakes to avoid when dating a Frenchman
Sponsored Article
Life in Jordan: 'Undiscovered treasure'
Society
Twelve 'French' things that aren't actually French at all
'World's priciest home' on sale in French Riviera for €1 billion
Lifestyle
RECIPE: How to make the tastiest ratatouille
National
Paris sees Europe's biggest plunge in 'liveability'
National
Life on the home front in rural France's 'war on terror'
Features
Weird facts you didn't know about the French language
Society
Paris foodie event cancelled over lack of security
How to tackle six of the trickiest French verbs
National
Summer in France - 'the ideal time to find a job'
National
'Burqini bans will only divide France more'
2,751
jobs available