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Europe 'economic government' urged

The leaders of France and Germany have called for greater economic discipline and unity among European nations but declined to take the expensive financial measures seen by many investors as the only way to halt the continent's spiralling debt crisis.

The Dow Jones industrial average fell, the euro slid against the dollar and key European markets edged down in off-hour trading after Chancellor Angela Merkel of Germany and French President Nicolas Sarkozy announced the results of their emergency talks in Paris.

Mr Sarkozy called for a "new economic government" for Europe that would meet at least twice a year with European Union President Herman Van Rompuy as its head, but he offered few other details or indications that the body would have real power.

Mrs Merkel and Mr Sarkozy also called for all eurozone nations to enact constitutional amendments requiring balanced budgets. They said they want the process completed by the summer of 2012, but it would almost certainly run into protracted political difficulties in many countries.

Both leaders said the moment is not right to replace 17 government bonds with a single one allowing weaker economies to borrow in co-operation with the powerhouse economies of France and Germany.

A growing number of experts are calling for the eurobond as a way to prevent the unaffordable interest rates that have driven Greece, Ireland and Portugal to seek bailouts from the eurozone countries and the International Monetary Fund.

New figures show slowing French and German growth, and the German government fears it would face higher borrowing costs and more risks if it had to borrow jointly with financially shaky nations.

"We have exactly the same position on eurobonds," Mr Sarkozy said. "One day we could imagine them, but at the end of a process of European integration, not at the beginning."

Mrs Merkel and Mr Sarkozy also said they did not want to increase the size of the EU's 440 billion euro (£383 billion) rescue fund, which may have to take over a massive, multibillion euro European Central Bank programme to support the prices of Spanish and Italian bonds by buying them up on the open market.

The two leaders also proposed a Europe-wide tax on financial transactions and pledged to harmonise their countries' corporate taxes in a move aimed at showing the eurozone's largest members are "marching in lockstep" to protect the euro.


From Belfast Telegraph