Wednesday, July 20, 2011

Euro gains before summit, market wary of disappointment

Germany, France reach deal on euro debt crisis

PARIS (AP) — Germany and France have overcome differences over how to combat the continent's spreading debt crises and agreed on a common position ahead of an emergency European summit Thursday, the French president's office said.
  • German Chancellor Angela Merkel, right, welcomes French President Nicolas Sarkozy in Berlin on Wednesday.
    By Ferdinand Ostrop, AP
    German Chancellor Angela Merkel, right, welcomes French President Nicolas Sarkozy in Berlin on Wednesday.
The leaders of the eurozone's biggest economies held last-ditch talks for seven hours in Berlin late Wednesday, amid pressure for a big announcement that could boost market confidence and contain the turmoil.
German Chancellor Angela Merkel and French President Nicolas Sarkozy "reached agreement on a common Franco-German position," Sarkozy's office said in a statement early Thursday, without elaborating on what the position is.
Merkel's spokesman Steffen Seibert confirmed the agreement early Thursday, saying the leaders also extensively discussed the situation with the President of the European Central Bank, Jean-Claude Trichet, and, over the phone, with EU President Herman Van Rompuy. He did not provide details on the agreement either.
Germany had downplayed calls for anything "spectacular" while France had pushed for a strong, long-term aid plan for Greece at Thursday's summit in Brussels.
The stakes are high. Markets have been extremely volatile over the past weeks on fears the crisis might spread to larger countries like Italy. The International Monetary Fund warned that leaders must do more to keep debt troubles from poisoning the entire continent's economy.
Merkel and Sarkozy met with Trichet on Wednesday as they worked toward a plan. Finally, they told van Rompuy about their agreement so that he can take it into account in his consultations ahead of Thursday's meetings, expected to start midday in Brussels, the French statement said.
Earlier Wednesday, Merkel's spokesman Seibert said the leaders would discuss "all the options on the table and agree, if possible, on a joint position."
But he reiterated Merkel's stance that the talks will not yield a "spectacular solution" that fixes Greece's problems quickly, but will be merely a stepping stone in a longer process. Merkel had said there would be no decision to restructure Greece's debt or create eurobonds that link debt across countries.
The French government and the European Commission, however, warned that it was urgent that the EU come up with a significant deal.
French Finance Minister Francois Baroin told France-Info radio that "there should be a strong message tomorrow, from the highest level."
European Commission president Jose Manuel Barroso said "nobody should be under any illusion, the situation is very serious."
He said that at the very least, leaders need to present how they will make Greece's debt sustainable, under what terms private creditors will have to contribute to a new bailout for the country, and what new powers to give to their bailout fund.
European leaders have faced criticism for their slow, piecemeal efforts to stem the debt crisis.More....

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