'We Need to Find a Solution Quickly': Germany and France Move Closer on Euro Issue
A deal isn't yet in sight for the next Greek rescue package, but Nicolas Sarkozy and Angela Merkel sought to express unity during a Friday meeting at the Chancellery in Berlin. Both, however, now agree that bank participation should be voluntary.
Angela Merkel and Nicolas Sarkozy at a joint press conference in Berlin on Friday: "We wish for the participation of private creditors on a voluntary basis."
Some had predicted the leaders of France and Germany might take off the kid gloves behind closed doors in Berlin on Friday as Nicolas Sarkozy and Angela Merkel met in the Chancellery to try to forge a compromise on the next bailout package for debt-strapped Greece. Instead, the two European leaders have moved closer on the issues dividing them in the bailout. Indeed, the leaders arrived at the meeting with smiles, and left with them still intact.
But Merkel's words of motivation merely served as the prelude to criticism of the recent wrestling over Greek aid currently taking place in Europe. "We need to find a solution now as quickly as possible," the chancellor said. "We discussed the same issue in May and almost all of June without coming to a solution." She said Germany and France want to jointly push for a sustainable plan at the European Union summit in Brussels next Friday.
Still, it remains unclear how quickly EU leaders will be able to reach an agreement and when the next tranche of aid will be paid out to Athens. Even though Germany and France appeared to have eliminated a few sticking points after their meeting on Friday, EU leaders remain deeply entrenched in their political fronts over the appropriate way in which the EU can and ultimately will aid highly indebted Greece.
Among the issues agreed on were that seeking the voluntary participation of private lenders in the next bailout package must only take place with the blessing of the European Central Bank, which has vehemently rejected any calls for a debt restructuring -- even those that are freely agreed to out of fear that ratings agencies will further cut Greece's rating. The French and German leaders also agreed that no time should be lost in the EU's preparations for billions in new aid to Athens.
'We Will Do Everything to Preserve the Euro'
Both Sarkozy and Merkel stated during a joint press conference Friday afternoon that France and Germany are determined to defend the common currency. "We will do everything to preserve the euro and support it," Merkel said. The chancellor also reiterated the German government's position. "We wish for the participation of private creditors on a voluntary basis -- let me underline this. There is no legal basis so far for a mandatory participation," she said. "We are also saying that this participation of private creditors should be worked out together with the ECB."
Sarkozy also sought to express unity between two leaders who have this week been portrayed as very divided over a European rescue package necessary to prevent a Greek default.
France has so far opposed asking private creditors to cover part of the tab from the bailout, a condition that Germany's parliament, the Bundestag, has demanded in exchange for its final approval of the next aid package.
Germany, for its part, wants the most binding possible contribution to the Greece package from banks. On Friday, after her meeting with Sarkozy, Merkel also said that this contribution could be made on a voluntary basis.
The ECB, the European Commission (the EU executive) and several euro-zone countries, including France, are calling for a purely voluntary participation by private investors. Otherwise, they fear, ratings agencies may declare a Greek default. They warn that this could send massive waves through the global financial systems, with unforeseable consequences. A downgrade would also prevent the European Central Bank from buying up more Greek bonds, a strategy it pursued last year to prevent a massive loss of value.
Division's Laid Bare
Friday's demonstrative harmony in the midst of a major EU crisis was urgently needed. Germany and France were long considered the political motor of Europe, but in recent months, relations between Paris and Berlin have often been underscored by tensions over a number of issues -- be it the first aid package to Greece last year or the recent intervention in Libya, the French have tended to act more decisively.
The situation in North Africa laid bare the split that has been occurring within the Paris-Berlin axis. Sarkozy, for example, caught the German side off guard earlier this year on the Libya issue with his push for a military intervention and his early recognition of the rebel council.
France and Germany are also deeply divided over nuclear power. Following the Fukushima disaster, Chancellor Angela Merkel moved to pull the plug on the country's power plants. In France, however, nearly 80 percent of the country's electricity is generated by nuclear power plants and the abrupt move in Berlin was jarring to leaders in Paris, who see the atom as a bridging technology for reducing carbon emissions until reliance on sustainable energies can be increased.
German and French Execs Campaign for Euro
Meanwhile, the German financial daily Handelsblatt reported on Friday that the heads of around 70 major German and French companies are seeking to break the European impasse on a Greek bailout with large newspaper aids across Europe next week promoting greater solidarity in Europe. The list of signatories reads like a Who's Who of the Franco-German business elite. On the German side, it includes Daimler boss Dieter Zetsche, Peter Löscher of Siemens, René Obermann of Deutsche Telekom, electricity utility E.On chief Johannes Teyssen as well as BMW head Norbert Reithofer and Deutsche Post head Frank Appel.
The French executives include the heads of aerospace giant EADS, oil company Total, carmaker Renault and energy utility EdF. The German and French executives who have signed the statement are responsible for more than 5 million employees and revenues of a total of more than 1.5 trillion.
The executives also defend the billions in aid governments are providing to the euro-zone members with crushing debt like Greece, Ireland and Portugal, noting that it is the debt crisis and not the euro that has imperilled the EU's achievements. In the short term, they argue, the countries hit by the debt crisis must be aided so that their people have opportunities for the future. At the same, they are calling for a stricter euro stability pact.
Handelsblatt also reported the Franco-German industry titans stating that demands for some countries to be removed from the euro zone or a division of Europe between the northern and southern states would be a major mistake. Even if rescuing the euro ends up costing billions, they argue, Europe and its currency are worth the effort.
dsl -- with wires
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