Monday

20th Sep 2021

Merkel, Sarkozy will do ‘whatever necessary’ to bail-out banks

Financial markets hoping for the outline of some grand strategy for dealing with the ever-worsening eurozone crisis are likely to be disappointed by the vague announcement offered up by the French president and German chancellor after emergency talks in Berlin on Sunday (9 September).

"We are very conscious that France and Germany have a particular responsibility for stabilising the euro," said Nicolas Sarkozy alongside Angela Merkel.

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"We need to deliver a response that is sustainable and comprehensive. We have decided to provide this response by the end of the month because Europe must solve its problems by the G20 summit in Cannes."

“By the end of the month, we will have responded to the crisis issue and to the vision issue,” he said.

Merkel for her part said that they would issue no details on the matter before the end of the month.

The pair did however say that they are committed to a second bail-out of the European banking system, with Merkel stressing that the pair will do “whatever is necessary for the recapitalisation of our banks”.

The International Monetary Fund last week estimated the cost for such a move to come to €200 billion - a high sum for European citizens still angry at multi-billion bail-outs of financial institutions at the start of the crisis that dragged down the balance-sheets of governments across the bloc.

But neither Merkel nor Sarkozy offered any news as to whether the pair had reached agreement on where the funds would come from - the eurozone’s bail-out fund or national governments themselves.

France favours a deployment of the European Financial Stability Facility (EFSF) for bank recapitalisation - in effect sharing the burden of bailing out national banks across the eurozone, while Germany feels that this should only be a final recourse, should national governments not be in a position to do so.

The pair would also not be drawn on whether any resolution had been achieved over their differences on the question of whether Greece should be allowed to default.

“We are working closely together on Greece,” said Merkel.

“On Greece, we are waiting of the troika report,” was all the French president said. “Here, too, we are on the same line: we will take the appropriate decisions.”

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