Shadowy Frankfurt Group said to be pivotal in Europe
Europe has a new informal leadership directorate intent on finding a solution to the eurozone's debt crisis.
Forged in the fire of a bond market inferno, the shadowy so-called Frankfurt Group has grabbed the helm of the 17-nation currency area in a few short weeks.
The inner circle comprises the leaders of Germany and France, the presidents of the European Commission and of the European Council, the heads of the European Central Bank and the International Monetary Fund, the chairman of eurozone finance ministers, and the commissioner for economic and financial affairs.
Europe's new politburo met four times on the sidelines of last week's Group of 20 summit in Cannes, issuing an ultimatum to Greece that it would not get a cent more aid until it met its European commitments, and arm-twisting Italy to carry out long-delayed economic reforms and let the IMF monitor them.
In a tell-tale recognition of the new ad hoc power centre, members wore lapel badges marked "Groupe de Francfort".
US President Barack Obama attended one of the meetings, getting what he joked was a "crash course" in the complexity of Europe's laborious decision-making processes and institutions.
"He proved to be a quick learner," one participant said.
Two people familiar with the discussion said he argued for the eurozone to make its financial backstop more credible by harnessing the resources of the ECB, but German Chancellor Angela Merkel and ECB president Mario Draghi resisted.
Mr Obama also supported a proposal to pool eurozone countries' rights to borrow from the IMF to help bolster a firewall against contagion from the Greek debt crisis, but Germany's central bank opposed this too, the sources said.
Mr Obama referred obliquely to the debate at a news conference the next day, saying: "European leaders understand that ultimately what the markets are looking for is a strong signal from Europe that they're standing behind the euro."
Hours earlier, a television camera in the Cannes summit conference room caught Mr Obama and British Prime Minister David Cameron discussing the issue while waiting for the start of the final session.
Mr Cameron has called publicly for the ECB to act as the lender of last resort for the eurozone, as the Federal Reserve does for the US, and the Bank of England for Britain.
When Ms Merkel entered the room, Mr Obama pulled her aside for a private conversation. An open microphone caught his opening words: "I guess you guys have to be creative here."
The Frankfurt Group came about on the hoof to try to fashion a crisis response in something closer to the short time span of frantic financial markets.
It seems destined to endure, not least because the growing imbalance between a stronger Germany and a weaker France means other players are needed to help broker decisions.
Crucially, it aims to bridge the ideological gulf between northern and southern Europe, and between supporters of the orthodox German focus on fiscal discipline and an independent central bank with the sole task of fighting inflation, and advocates of a more integrated and expansive economic and monetary union.
The presence of IMF managing director Christine Lagarde gives the group greater credibility in the markets, as well as providing a reality check on what international lenders expect and the limits to their willingness to support the eurozone. (Reuters)