• France's news in English
 
app_header_v3

France and Germany drift over eurozone crisis

AFP · 21 Sep 2012, 17:34

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.

Story continues below…

"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
French fears realized after 'terror attack' on church
Notre Dame is one place of worship that soldiers are asked to protect. Photo: AFP

With the French president describing the brutal killing of a priest during a hostage taking as a "vile terror attack" it appears France's long-standing fears that its churches would be targeted have been realized.

BREAKING
Priest slain in 'terror attack' on church in northern France
Photo: AFP

UPDATED: Two men armed with knives killed a priest after taking several people hostage at a French church, before they were shot dead by police.

One dead after violent clashes in Calais migrant camp
The "Jungle" migrant camp in Calais. Photo: AFP

An Ethiopian has died after he was stabbed in the chest during clashes at the Calais migrant camp.

Nice attack: Two more suspected accomplices held
Photo: AFP

One of the arrested men was reportedly in a photo with the killer beside the truck used in the attack.

Nice security row rumbles on as minister files lawsuit
Photo: AFP

Despite the efforts of the French president the controversy over the security arrangements on the night of the Nice attack won't go away.

Air France strike to see 30 percent of flights grounded
Photo: AFP

Here's what to do if you are affected by the one-week Air France strike that begins on Wednesday.

Pokémon Go sparks chaos and concern in France
Teenagers sprint through a park in Bordeaux, not in panic, but in search of a rare Pokemon. Photo: MonsieurBright/YouTube

Videos of hundreds of people sprinting through a park would normally be cause for panic in France at the moment.

The ten places where you really need to speak French
Photo: Lily A./Flickr

There are some places and situations in France where you just have to speak French.

Isis can be a conduit for psychopaths' violent desires
A pilce of rubbish marks the spot where Nice truck attacker Mohamed Lahouaiej Bouhlel was shot by police.

Isis did not create these attackers, they were well on their way.

Angry Marseille Muslim ends up in war of words with Isis
Photo: Facebook Henni Mohamed/AFP

"Who do you think you are, the Power Rangers?" Marseille man's foul-mouthed fighting talk provokes Isis to respond.

Sponsored Article
5 reasons to try dating in Paris with The Inner Circle
Culture
Thirteen free and easy ways to learn French
Sponsored Article
Why you should attend an international job fair
Culture
32 mistakes foreigners make when they arrive in France
National
Here are the worst scams to avoid whilst driving in France
Analysis & Opinion
Isis can simply be a conduit for the violent desires of psychopaths
Features
Six outdoor bars in Paris you simply must visit
Culture
The open-air Villette cinema has been cancelled over security fears
Culture
Henri Rousseau exhibition proves huge hit in Paris
National
Frenchman caught trying to sell Nice massacre souvenirs online
Sponsored Article
Why Swiss hospitality graduates are in demand
Society
OPEN NOW: Here's why you should head to the Paris Plages
Culture
What's on in France: Still plenty to see and do in July
Lifestyle
Treasures of Versailles to go on display in Australia
Sponsored Article
Why expats choose international health insurance
National
How to keep cool during France's heatwave
National
Nice attack: What we know so far
National
Nice attacker: Body-building, drug-taking, violent flirt
Sponsored Article
Why you should attend an international job fair
National
IN IMAGES: Drawings in tribute to Nice attack victims
Society
Promenade des Anglais: The iconic heart of the French Riviera
France faces more questions after latest deadly attack
Sponsored Article
Why Swiss hospitality graduates are in demand
National
Why is France the target of choice for jihadist attacks?
National
Nice truck attack: 'Bodies went flying like bowling pins'
Sponsored Article
Why expats choose international health insurance
Nice attack: Families of missing make pleas on Twitter
Politics
Boris Johnson cheered and booed at Bastille Day party
National
Ten reasons not to leave Paris this summer
Ten ways other expats in France drive you mad
2,766
jobs available