• France's news in English
 

France and Germany drift over eurozone crisis

Published: 21 Sep 2012 17:34 GMT+02:00

German Chancellor Angela Merkel and French President Francois Hollande will have an opportunity to try to narrow those differences when they meet in the southwestern German town of Ludwigsburg on Saturday.

The occasion is to mark the 50th anniversary of a speech by French post-war president Charles De Gaulle to German youth.

Although the meeting is largely ceremonial, officials say that Merkel and Hollande will discuss the possible merger of the British defence group BAE and European aerospace giant EADS, as well as common banking supervision.

With the German-French partnership the engine of European integration, disagreements between Berlin and Paris bode ill for a coherent response to the crisis.

Differences on the key issue of common banking supervision spilled out into the open after a meeting last weekend of finance ministers in Nicosia.

Germany's Wolfgang Schaeuble said it became immediately clear during a feisty debate that the target-date for adoption of January 1st, 2013, was no longer attainable.

"January 1st, that will not be possible," Schaeuble said, adding that it was "not even worth having that discussion."

His French counterpart Pierre Moscovici retorted that "losing time by not moving fast is a mistake."

In order to break a dangerous link between bank and sovereign debt, EU leaders decided in June to allow the EU's new ESM bailout fund to recapitalise banks directly instead of passing the loans through governments and adding to their debt loads.

But EU leaders linked this to shift to a common banking supervisor, with the goal of having this in place by the beginning of 2013.

However Germany and France differ on what common banking supervision should entail, although they both agree on handing the job to the European Central Bank.

Berlin believes the common supervisor should handle, especially to begin with, only big banks whose failure could have an impact across the eurozone, with national regulators to continue to monitor smaller lenders.

Paris however wants to the ECB be responsible for all the roughly 6,000 banks in the eurozone.

Differences on other key issues, such as a bailout for Spain, have also become apparent.

While in public Hollande has recognised that Spain has the right to decide for itself whether and when to ask for help from the EU and European Central Bank, in private French officials do not mince their words.

"It would be better if Spain demands help, everyone knows that it needs it," a senior French official said recently on condition on anonymity.

While not mentioning Spain directly, Moscovici said earlier this month that the ECB's new programme to help struggling eurozone states by buying up their bonds on the secondary market should be used.

At the beginning of September the ECB unveiled its new bond-buying programme, but to unlock help from the central bank eurozone states must first ask for an EU bailout programme, which has conditions attached and entails outside supervision.

But the announcement itself of the ECB programme helped reduce tensions in the government bond markets, reducing Spain's borrowing costs to some degree.

Spanish officials have indicated they would prefer to continue the current course of deficit reduction and structural reforms in the hope that their borrowing costs come down enough to avoid resorting to a bailout.

This is a strategy the German government supports.

"A rescue programme, that's heavy artillery, with conditions and the intervention of the troika" of the bailout lenders the EU, IMF and ECB, said a German official.

"That is not a step to be taken lightly, it is for countries that can no longer finance themselves on the markets," added the official, noting "that is not the case today" for Spain as it successfully placed long-term debt on Thursday.

A bailout for Spain would be politically inconvenient for Merkel's coalition, which is divided on the issue on bankrolling rescues for countries which have failed to manage their finances, and would need to seek parliamentary approval.

Germany faces a similar problem on Greece, struggling through a fifth year of recession and have already slashed spending, wants more time to implement additional cutbacks needed unlock €31.5 billion ($41 billion) in bailout loans.

France was one of the first countries to indicate that it was receptive to a Greek request to spread out the cuts, but the Germans are reluctant to risk a refusal by lawmakers.

Germans want to see that any delay accorded Greece,  doesn't cost any additional money so it won't have to seek parliamentary approval, according to French officials.

However an IMF official said on Friday that any extension of the programme would require more funding and that it would be up the EU to find the cash.

German officials have repeatedly said that a resolution of the eurozone crisis will take time, but Hollande has called for decisions to be taken at an EU summit next month to help restore confidence and the prospects of growth.

Your comments about this article

Today's headlines
France to remain on high terror alert 'for months'
Ile-de-France and Alpes-Maritimes will remain on high alert for terror attacks for several months. Photo: Miguel Medina/AFP

France to remain on high terror alert 'for months'

France will remain on high terror alert for months, it emerged on Wednesday, despite the huge cost of the heightened security. It's not all bad news however, with the increased presence of the police and army prompting a drop in the number of burglaries and thefts. READ  

France to save €4b more to appease Brussels
The French finance ministry which must make further savings. Photo: AFP

France to save €4b more to appease Brussels

France's president has revealed plans to find €4 billion in a new "savings package", to meet demands from Brussels. The move will also please German Chancellor Angela Merkel who noted that France was "on the right track". READ  

Tête-à-tête - France and smacking children
'No one would ever say you can slap your wife'
France is in violation of a treaty because it doesn't fully ban smacking. Photo: Shutterstock

'No one would ever say you can slap your wife'

After human right's watchdog the Council of Europe declared that France should ban smacking completely, The Local talks to the UK charity whose complaint prompted the ruling and a French families organisation who are staunchly against outlawing corporal punishment. READ  

French baker accused of selling 'racist' cakes
Racist cakes or harmless pastries? Photo: CRAN

French baker accused of selling 'racist' cakes

A cake maker in the south of France has been threatened with legal action for inciting racial hatred unless he stops selling cakes deemed “obscene” by an anti-racism group in France. The baker told The Local he's a victim of "intellectual terrorism". READ  

Paris is pricey, but is that good news for Parisians?
Paris is pricey but it's not all bad news. Photo: AFP

Paris is pricey, but is that good news for Parisians?

Paris has once again been named the world’s second most expensive city in a global study this week, meaning it's pricier than the likes of Oslo, Zurich and Sydney. But those behind the report say it's not all bad news for people living in the French capital. READ  

France hunts men behind 1982 Jewish diner attack
The scene after the bombing at the Chez Jo Godenberg restaurant in 1982 that left six people dead. Photo: AFP

France hunts men behind 1982 Jewish diner attack

UPDATED: France has issued international arrest warrants for three men suspected of involvement in a deadly attack on a Jewish restaurant in Paris in 1982, a judicial source told AFP on Wednesday. READ  

France 'violates treaty on smacking children'
France is in violation of a treaty because it doesn't fully ban smacking. Photo: Shutterstock

France 'violates treaty on smacking children'

A top European human rights watchdog gave France a stern telling off on Wednesday ruling that the country was in violation of a European treaty because it did not fully ban the smacking of children. READ  

More drones give Paris police the run around
Drones have been spotted over Paris several times in the last two weeks. Photo: David Rodriguez Martin/Flickr

More drones give Paris police the run around

As many as ten drones were seen flying over Paris on Tuesday, with police chasing one through the streets of the capital before being given the slip by the unmanned aircraft. It’s just the latest in a series of baffling overflights. READ  

Ukraine crisis
France demands reaction if Ukraine truce violated
President François Hollande eyes up Russian leader Vladimir Putin after talks in Minsk earlier this month. Photo: AFP

France demands reaction if Ukraine truce violated

France and other western countries are calling for a "strong reaction" from the international community if a major violation of a truce in Ukraine occurs, the French presidency said after video conference talks. READ  

Hollande plans historic visit to communist Cuba
President François Hollande has done a fair amount of travelling in his time as head of state, including a trip to Kazakhstan. Photo: AFP/press office

Hollande plans historic visit to communist Cuba

President François Hollande will make the first ever visit by a French head of state to Cuba in May in the latest sign of a thaw between the isolated communist nation and Europe and the United States. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
National
Study finds Frenchmen top the tables when it comes to 'manhood'
Culture
Marine Le Pen says yes to having a drink with Madonna
Sponsored Article
Expert US tax preparation for Americans in France
National
'No one would ever say you can slap your wife, so why children?'
Sponsored Article
Free spirit or tourist: what sort of expat are you?
Society
Latest job vacancies in France: Porn stars - 'Beginners welcome'
Society
Who are these two children found by a homeless man in France?
National
From planes to 1,000 cows - France's most controversial building projects
National
Time to move home? Pyrenees hamlet cut off after massive mudslide
National
Over 200 skeletons found in mass grave under Paris supermarket
Culture
Madonna has compared France and Europe to Nazi Germany
Culture
Are you also unimpressed by your French boss?
National
UK councillor blasted for 250km French commute
National
Say it with Nutella: Except the words 'lesbian', 'Muslim' and many more
Culture
Looking for something different to do in France in March? Here's 10 ideas
National
How can France enforce a no-drone zone over Paris?
Gallery
Here's how to be cool in Paris, according to Parisians
Business & Money
France or Germany: Which country really is the best one to work in?
National
Why do so many women in France smoke throughout their pregnancy?
National
VIDEO: Banned but beautiful - Paris seen through the eyes of a drone
National
Would you want this Frenchman to squeal at YOUR wedding?
National
'We're back' - Charlie Hebdo magazine returns with a bite
Society
Handsome men on the Paris Metro are unknowingly going viral
Society
What are the little things that make France so different?
National
Should we be worried about drones being flown over Paris?
Travel
Another deadly avalanche in the French Alps
National
Text offences: Why French workers need to watch out in future
Gallery
Mont-Saint-Michel cut off as 'supertide' season opens in France
Gallery
Ten great moments for France throughout Oscar history
Culture
Anglo-French marriage problems begin long before anyone says 'Oui'
Travel
'The stars are aligned': Why now is the time to buy a house in France
National
IN PICTURES: 'Supertide' brings crowds to the French coast
Gallery
French property Face-off: Two luxury chalets in the French Alps
Travel
French coastal towns are braced for the 'tide of the century'
Politics
Socialist rebel MPs are angry but not ready to topple French government
Society
France to welcome another US fast food giant
Culture
Les Entrepreneurs: How to watch Paris theatre shows in English
Culture
So where are all these swinging sex clubs in Paris?
Sport
VIDEO: 'We're racist' - Chelsea fans push black man off Paris Metro
Culture
Sex clubs touted as latest fashion in Paris
Culture
In pictures: The ever-colourful Dunkirk carnival
National
Do you worry about your French accent? Perhaps you have no need to
National
VIDEO: 'Fear and loathing' - Being a Jew in Paris
National
Why the DSK trial could spell bad news for French prostitutes
Society
The sorry recent history of anti-Semitic attacks in France
Sponsored Article
Are you an American expat? How to face FATCA
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