Debt Crisis: Merkel and Sarkozy agree to treaty changes to improve EU governance
FRANCE has moved to back treaty changes proposed by Germany in a bid to improve governance in the eurozone and as a means to help solve the debt crisis.
However, German Chancellor Angela Merkel is sticking to her guns that the European Central Bank will not be used as a lender of last resort for indebted countries despite growing market speculation that such a move is necessary.
Mr Sarkozy said proposals for changes to EU treaties, including stricter rules on budget deficits, would be made over the coming days in what he called “propositions for the modification of treaties”.
France had previously resisted such moves.
Earlier French Foreign Minister Alain Juppe argued for more intervention from the ECB.
"There is urgency (for ECB intervention),” he said in an interview with French radio.
"I think and hope that the thinking will evolve and that the ECB should play an essential role to re-establish confidence," Mr Juppe said.
Today was a turbulent day on bond markets as contagion spreads from one eurozone member to the next.
And Greek riot police clashed with workers protesting against a new property tax while Portuguese workers staged a general strike.
Earlier, Britain’s borrowing costs fell to a lower level than Germany for the first time in three years today amid fears over the impact the euro crisis will have on the region's powerhouse economy.
The yield on UK Government 10-year bonds fell to 2.16pc, while the equivalent German costs rose to 2.21pc, in a sign that investors have more faith in Britain's ability to cope with its debts.
The rising borrowing costs in Germany followed the country's worst-received bond auction since the euro's launch as global investors appear to be turning their backs on Europe's biggest economy amid fears of a possible break-up of the eurozone.
Anita Paluch, senior German liaison sales trader at Gekko Global Markets, said the rising costs in Germany emphasise "the seriousness of the state Europe is in" and without "severe and far reaching" reforms, there will be no breakthrough.
The UK and Germany's implied borrowing costs are still far below those reached in Spain and Italy, where 10-year bond yields are 6.5pc and 7pc respectively, in unsustainable territory.
Howard Wheeldon, senior strategist at BGC Partners, said Germany was still in a secure position.
He said: "The bottom line is that Germany isn't about to fall off a cliff and that this is not a contagion spread.
"While there may well be a message in this for Angela Merkel from markets, the main failure to get these bonds away is purely down to safety, risk and common sense."