Euro Debt: France Backs German Proposal for Allowing EU Insolvencies
French officials have indicated they support the German government's proposal of a set of insolvency rules for euro zone member states. But Paris is skeptical about German plans to set up a new organization for the purpose called the "Berlin Club." The existing Paris Club of creditor nations would suffice, Paris suggests.
Chancellor Angela Merkel and French President Nicolas Sarkozy (right): Berlin and Paris appear to be nearing an agreement on a German proposal for new insolvency rules for indebted euro member states.
The German government's idea to set up a system for the orderly insolvency of euro zone member states that get into financial trouble has met with support in the French government.
In bilateral talks, French government officials indicated that they agreed with the German government's plan. German Finance Minister Wolfgang Schäuble had proposed a two-step procedure for nations to get their finances back in order.
His plan envisages including private sector creditors in the restructuring of a nation's debt to prevent fellow governments from having to shoulder the enitre burden, as happened with the bailout of Greece this year.
French officials, however, objected to the German proposal to set up a new institution called the "Berlin Club" to manage debt restructuring programs. They suggested that the existing Paris Club could do the job. The Paris Club is an informal group of officials from the world's biggest economies that meet to arrange debt restructuring for indebted countries.
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