Merkel and Sarkozy meet to discuss euro crisis
German Chancellor Angela Merkel and French President Nicolas Sarkozy are expected to meet later today to discuss differences on how the euro zone’s financial power can be used to counter a sovereign debt crisis which threatens the global economy.
As the value of banks’ autonomous bond holdings slide and threaten financial crisis, Merkel and Sarkozy are expected to discuss how Greece should be managed, the prevention of contagion and the strengthening of lenders.
According to an official within the French finance ministry, Belgian lender Dexia will be discussed since it was the first victim of the crisis involving implosion, but Greece and the euro zone will be the main topic because “banks are only a consequence”.
The meeting between Merkel and Sarkozy is expected to take place late this afternoon, and talks will be continued regarding the vital aid funds for Greece which risks running out of money by mid-November.
“There is a high risk that this crisis further escalates and broadens," German Finance Minister Wolfgang Schaeuble said.
There has been a disagreement between Germany and France regarding the best method to recapitalise Europe’s banks, which may require more than €100 billion to endure the sovereign debt crisis according to Ireland’s estimate made on Saturday. The International Monetary Fund (IMF) on the other hand, estimate a requirement of at least €200 billion in additional funds.
In order to recapitalise its own banks, Paris is requesting permission to use the euro zone’s €440 billion European Financial Stability Facility (EFSF) but Berlin insists this should only be used as a last resort. Use of the EFSF to buy sovereign debt to prevent expansion of the crisis is being disputed especially should Greece fail to secure its next aid tranche.
"Given that the EFSF is limited overall, it makes sense also to limit the purchases on the secondary market for each country. There is a danger, otherwise, the funds could be quickly used up," said Michael Meister, deputy parliamentary leader of Merkel's conservatives.
Worldwide pressure has been placed upon the French president and German chancellor to resolve the European financial crisis with US President Barack Obama urging quick actions to be taken to aid in the United States’ own recovery.
