Wednesday

1st Feb 2023

Obama phoned Merkel on euro bail-out

US President Barack Obama telephoned German Chancellor Angela Merkel over the weekend to persuade her to agree to the €750 billion bailout package for the eurozone.

Mr Obama made two phone calls to German Chancellor Angela Merkel in the last three days and also spoke to French President Nicolas Sarkozy as EU leaders and then their finance ministers were struggling to pin down the deal, White House spokesman Robert Gibbs said Monday.

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  • Barack Obama had a long phone conversation with Angela Merkel (Photo: White House)

"The president and his economic team have been following and engaged in this situation for quite some time," he said, noting Mr Obama had spoken about the need for "strong action" to give confidence to the markets. "We are pleased thus far with that result," he added.

According to the New York Times, Mr Obama was on the phone with the German chancellor on Friday "offering urgent advice" and "some not so subtle prodding" that Europe needed an overwhelming rescue package of the sort Washington came up with in 2008.

"He was trying to convey that he knew these were politically difficult steps that the leaders there had to take, that he had gone through them as well. And that, from his experience, trying to get out ahead as much as possible was the right way to go," one senior administration official familiar with the conversation told the US newspaper.

His administration also offered concrete help: the Federal Reserve would swap euros for dollars, easing pressure on European central banks.

Europeans "waited too long" with the Greek bailout and fueled speculation about the fragility of the entire eurozone, another US official told the New York Times.

"Had they acted sooner," he said, "They might have gotten away with less."

Ms Merkel is seen as responsible for dragging out the European response to the Greek crisis and systematically opposing moves for greater economic integration.

The Social-Democratic opposition has accused her of concealing the real proportions of the euro-crisis, for political reasons. There were regional elections North Rhine-Westphalia on 9 May, which in the end were lost by her party and with it the majority in the upper house.

Social Democrat MP Thomas Oppermann, one of the leaders of the party in the Bundestag, told Die Welt newspaper Ms Merkel was now standing in front of "the wreckage of her own delaying tactic."

"Now Ms Merkel is at the mercy of the unleashed financial markets," he said.

The SPD will be instrumental in approving the German contribution to the bail-out, as it holds the majority in the upper chamber, which has to approve it.

Ms Merkel has called for a cabinet meeting today (11 May) to sketch out a legislative bill to this end. The Social Democrats estimate that the total bill for Berlin will be around €150 billion, higher than the estimated €123 billion as not all of the eurozone countries will have the cash to pay for it.

Ms Merkel's own coalition partner, the Liberal Free Democratic Party, has expressed dissatisfaction at the "firefighting" action agreed over the weekend, especially at having the European Central Bank buy up government bonds – so far a taboo for Berlin.

"Such actions need to be taken with consideration of the independence of the ECB," Liberal leader Wolfgang Gerhard said, according to Spiegel Online.

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