Tuesday

5th Mar 2024

France and Germany reach deal ahead of crucial summit

  • The lobby of the European Council building where eurozone leaders will meet today (Photo: consilium.europa.eu)

Germany and France were able to overcome their differences and reach an agreement on a second rescue plan for Greece following a seven hour meeting on Wednesday evening.

"Chancellor Angela Merkel and French President Nicolas Sarkozy worked very constructively for seven hours on a common position on the debt situation in Greece," German government spokesperson Steffen Seibert said in a statement.

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European Central Bank chief Jean-Claude Trichet also attended the meeting, while the plan was discussed by telephone with EU council president Herman Van Rompuy.

No details of the agreement have been made available but it would have to square Berlin's demand for private sector involvement with the ECB's insistence that any solution must not be viewed as a credit default.

Increasingly up for discussion in recent days, apparently supported by France and seen as the option least likely to be viewed as default, is issuing a levy on banks - although the idea has been strongly opposed by banks themselves.

News of the Franco-German deal - a meeting was arranged after Merkel and Sarkozy failed to agree by telephone on Tuesday - is likely to ease tensions a little as eurozone leaders today head into what is increasingly being viewed as the most critical meeting since the inception of the euro.

EU commission president Jose Manuel Barroso on Wednesday listed five issues that at "minimum" needed to be clarified saying:

"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,"

Senior EU and member state officials will start consultations on a solution for Greece this morning, with the meeting itself expected to get underway at about 13.00h CET.

Other issues that will come up for discussion is making the eurozone rescue fund, the €440 billion European Financial Stability Facility (EFSF), more flexible so that it can to lend to recapitalise banks.

During the meeting, EU leaders are in the afternoon likely to hear a parade by the Belgian military. One of the consequences of the kerfuffle around when to hold this emergency summit - Berlin refused to a meeting proposed by Van Rompuy last week - is that today's meeting is taking place on Belgium's national holiday.

It has not gone unnoticed that the protracted divisions in Belgium between the richer northern Flanders and poorer Wallonia in the south is similar to the debate at the EU level about richer northern states helping their poorer southern cousins.

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