Business World

Sunday 22 April 2018

Sarkozy and Merkel hammer out deal ahead of crisis talks

European Commission President Jose Manuel Barroso. Photo: Reuters
European Commission President Jose Manuel Barroso. Photo: Reuters

Diana Pilkington and Geoff Meade

France and Germany have agreed on a joint position hours before emergency talks in Brussels today, where eurozone leaders have been urged to "do what it takes" to ensure the stability of the single currency.

French president Nicolas Sarkozy and German chancellor Angela Merkel held talks for seven hours in Berlin before today's summit, Mr Sarkozy's office said.

In a statement, his office said the two leaders "reached agreement on a common Franco-German position", without saying what the position was.

Earlier, European Commission president Jose Manuel Barroso urged eurozone leaders to take decisive action.

His plea for leaders to "do what it takes" reflects fears that speculators will pounce if the latest in a series of economic summits fails to restore euro credibility and halt "contagion" to other struggling member states, including Ireland, Portugal and Italy.

"Nobody should be under any illusion: the situation is very serious. It requires a response - otherwise the negative consequences will be felt in all corners of Europe and beyond", warned Mr Barroso.

The latest summit had been demanded by France but opposed by Germany and other countries, concerned that more inconclusive talks would only worsen the market response.

Mrs Merkel had said she would only attend if a positive result was assured.

But as the leaders of the eurozone countries prepared to meet, there had been little sign of full agreement on a second bail-out package for Greece - this time to include a financial burden on private bondholders as well as taxpayers in the event of default.

Taoiseach Enda Kenny, attending the talks, called for tough decisions to be taken to stop the Greek debt crisis spreading to Spain and Italy - both in the queue for possible bail-out help following massive cash injections to Ireland and Portugal.

Mr Kenny, keen to negotiate a lower interest rate on Ireland's crippling repayments, said yesterday he hoped the meetings "will be the start of a series of decisions taken by the eurozone leaders which will restore confidence, restore certainty, deal with the issue of the legitimate anxiety and concern about contagion spreading from the Greek situation, which simply has to be dealt with".

French finance minister Francois Baroin said the summit had to take decisions on a second bail-out for Greece to makes its debt "more bearable".

The problem was German insistence that private investors should extend deadlines for loan repayments as part of any new 120 billion euro bail-out to be triggered next year.

The European Central Bank says that extending credit lines would amount to a Greek default, prompting more market jitters about the single currency's long-term prospects.

Mr Barroso said the minimum result from the summit had to be measures to ensure the sustainability of Greek finances, including private sector involvement, plus moves to step up European banking liquidity and a possible top-up of current eurozone bail-out funds.

He said it was now up to EU governments who had insisted on retaining the necessary powers for themselves.

"They have said they will do what it takes to ensure the stability of the euro area. Well, now is the time to make good on that promise.

"Leaders need to come to the table saying what they can do and what they want to do and what they will do. Not what they can't do and won't do. This is what I ask from them. I urge all the leaders to show the ethics of European responsibility."

Mr Barroso talked up the single currency, saying: "The euro is one of our greatest assets. Its benefits far outweigh the effort that is required by the member states on the different sides of the negotiation.

"All of our efforts are based on a strong single market and a strong euro. That is what is at stake. That is why we must provide a solution."

Meanwhile, British Chancelor George Osborne has warned a failure of eurozone leaders to "get a grip" on the sovereign debt crisis could lead to an economic crisis as serious as the recession following 2008's banking crash.

In an interview with the Financial Times, the chancellor said he was "very worried".

He told the newspaper: "We see the potential for a set of economic events that could be as damaging as 2008."

But Mr Osborne said he was optimistic eurozone leaders would make progress today.

Business Newsletter

Read the leading stories from the world of Business.

Also in Business