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EUROPE

THE battle lines have been drawn between Europe's two central powers as their leaders argue over the interference of the European Central Bank in the debt crisis.

France and Germany have clashed over the ECB's role in the stability of the euro.

French Finance Minister Francois Baroin repeated Paris's view that the eurozone's EFSF bailout fund should have a banking licence, which is something Berlin opposes.

If the ECB were given the go ahead for such a move, the fund could borrow directly from the ECB which would give it extra firepower to fight the spreading crisis.

The bond market turmoil is spreading across Europe as Italian 10-year bond yields have risen above 7pc while yields on bonds issued by France, the Netherlands and Austria have also climbed. France has been urging stronger ECB action, adding to mounting global pressure spelled out by US. President Barack Obama.

But German Chancellor Angela Merkel made clear Berlin would resist pressure for the central bank to take a bigger role in resolving the debt crisis, saying European Union rules prohibited such action.


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