• France's news in English

Germany, France reach pre-euro summit deal

AFP · 21 Jul 2011, 10:22

Published: 21 Jul 2011 11:06 GMT+02:00
Updated: 21 Jul 2011 10:22 GMT+02:00

Facebook Twitter Google+ reddit

Germany and France broke their deadlock over a new bailout for Greece ahead of an emergency eurozone summit on Thursday aimed at saving the euro from the worst crisis in its 12-year history.

German Chancellor Angela Merkel and French President Nicolas Sarkozy, the eurozone's key players, agreed on a "common position" after late-night talks in Berlin just hours before the summit in Brussels, the French president's office said.

European Central Bank president Jean-Claude Trichet took part in the meeting.

Officials refused to provide any details but the Franco-German agreement will lay the groundwork for negotiations between the eurozone's 17 leaders after weeks of debate over how to put a lid on the year-long debt crisis.

On the eve of the summit, the European Commission president Jose Manuel Barroso issued a dire warning that failure to find a solution could have global repercussions.

"Nobody should be under any illusion -- the situation is very serious," Barroso warned on Wednesday. "It requires a response. Otherwise the negative consequences will be felt in all corners of Europe and beyond."

French Foreign Minister Alain Juppe also warned of the stakes involved: "We absolutely must find a solution in order to end international speculation and stabilise the eurozone... If this eurozone collapses it would be a disaster."

Nervous financial markets are keenly awaiting the outcome of the summit following several tumultuous days, with debt crisis contagion threatening to engulf Italy and Spain, the eurozone's third and fourth-largest economies.

Merkel had unsettled markets on Tuesday by downplaying expectations that the Brussels get-together would result in something "spectacular" to end Europe's problems in one fell swoop.

"Today's summit could provide the last chance for eurozone policymakers to get a grip on the region's debt crisis," said the research firm Capital Economics.

"Anything other than a very decisive response could see the situation become irretrievable," it said.

The European Union and the IMF provided last year a 110-billion-euro bailout to Greece that has proved insufficient. Since then, Ireland and Portugal received their own multi-billion-euro rescues.

Berlin has been at odds with the ECB and Paris over Merkel's demands for private investors to shoulder some of the bill for the second Greek rescue, which will be the eurozone's fourth bailout.

There are concerns that any change to the terms of outstanding Greek sovereign bonds could prompt rating agencies to declare Athens in default, with potentially dramatic consequences.

Several options are now on the table, including a Greek bond swap to cut the country's debt by 90 billion euros and a special bank tax to raise another 50 billion euros, said a source familiar with the discussions.

Story continues below…

The swap plan would offer financial incentives to Greece's private creditors, banks, insurers and other investors, in order to encourage them to exchange holdings maturing over the next eight years for new 30-year bonds.

The idea would be to give Athens time to revive its economy and clean up its public finances while reducing a debt mountain, which has reached 350 billion euros.

The new rescue package would also include loans from eurozone nations and the IMF to the tune of 71 billion euros, with longer maturities and more affordable interest rates, the source said.

On Wednesday, a senior panel advising the German government said it supported a bond buy-back, along with a substantial "haircut" on Greek debt. Merkel's spokesman said only she had "taken note."

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
What Paris 'squalor pit' Gare du Nord will look like in future
All photos: Wilmotte et Assoicés

IN PICTURES: The universally accepted 'squalor pit of Europe' is finally getting a facelift.

Halloween: The ten spookiest spots in Paris
Is there really a ghost on the first floor of the Eiffel Tower? Photo: AFP

Read at your own peril.

Halloween holiday in France: Traffic nightmares and sun!
Photo: AFP

But it's great news for the country's beleaguered tourism industry.

French MPs vote to make Airbnb 'professionals' pay tax
Photo: AFP

Do you make a lot of money through Airbnb in France? You'll have to pay a share to the taxman in future.

France and Britain accused of abandoning Calais minors
Photo: AFP

Scores of young migrants are forced to sleep rough for a second night.

France given wake up call as it bids for Brexit business
The business district 'La Defense' in Paris. Photo: AFP

France clearly has some work to do if it really wants to pinch business from the UK post-Brexit.

Mouth fun? French words you just can't translate literally
Do you know the French word for throat-support? Photo: AFP

Word of warning: Don't translate French literally.

How France plans to help its stressed-out police force
Yellow smoke rises around French police officers in Paris holding a banner reading "Solidarity with our colleagues, police angry". All photos: AFP

Could these measures stop the cops from protesting?

'3,000 migrants dispersed' after 'Jungle' clearance
Photo: AFP

While thousands of migrants have been bussed out around France, new ones are arriving all the time and thousands of others have simply been dispersed aid agencies say.

Fifteen of the most bizarre laws in France
Photo: Matthew Powell/Flickr

A must read for anyone who wants to stay on the right side of the law in France.

The annoying questions only a half French, half Brit can answer
Sponsored Article
Last chance to vote absentee in the US elections
Forget Brangelina's chateau - here are nine others you've got to see
The must-see French films of the millennium - Part One
How life for expats in France has changed over the years
Why Toulouse is THE place to be in France right now
Video: New homage to Paris shows the 'real side' of city
The 'most dangerous' animals you can find in France
Swap London fogs for Paris frogs: France woos the Brits
Anger after presenter kisses woman's breasts on live TV
Is France finally set for a cold winter this year?
IN PICS: The story of the 'ghost Metro stations' of Paris
How to make France's 'most-loved' dish: Magret de Canard
Welcome to the flipside: 'I'm not living the dream in France'
Do the French really still eat frogs' legs?
French 'delicacies' foreigners really find hard to stomach
French are the 'world's most pessimistic' about the future
Why the French should not be gloomy about the future
This is the most useful French lesson you will ever have. How to get angry
Why is there a giant clitoris in a field in southern France?
French pastry wars: Pain au chocolat versus chocolatine
Countdown: The ten dishes the French love the most
Expats or immigrants in France: Is there a difference?
How the French reinvented dozens of English words
jobs available