Cracks forming in Eurozone front
THE Eurozone's three biggest economies sought to present a united front in their struggle to save the single currency yesterday, but failed to conceal key differences over the European Central Bank's role in fighting the debt crisis.
President Nicolas Sarkozy of France said that he and German Chancellor Angela Merkel would be proposing changes to key EU treaties to allow deeper European integration. All three countries said they would do what it takes to save the euro.
"We want a strong, stable euro ... we will do everything to defend it," Ms Merkel said after the Strasbourg meeting at which the French and German leaders met with new Italian Prime Minister Mario Monti for the first time.
Despite most concern being focused so far on Italian debt, signs have emerged this week that even Germany and France - the Eurozone's two biggest economies - are not immune from the crisis that has already seen smaller eurozone countries bailed out.
Yesterday it appeared that German arm-twisting was necessary before Mr Sarkozy would emphasise the need for new EU treaties to rescue the Eurozone, as opposed to calling in the ECB in an emergency move to buy up debt.
Mr Sarkozy said that "propositions for the modification of treaties", designed to impose greater fiscal discipline, would be presented in the coming days - in time for the next EU leaders' summit on December 9.
Britain expects a "limited treaty change" that will affect only the 17 eurozone countries, a move which would reduce the pressure on the UK Government from Conservative MPs to put the issue to a referendum.
British officials say agreement on the detail may not be reached until next year. David Cameron will argue at the summit that the change must not undermine the single market or allow the 17 to form a "caucus" that takes crucial decisions affecting the 27-strong EU, relegating Britain and the other nine nations not in the euro to a second division.
Some EU countries fear that treaty changes will take too long and might prove politically difficult to enact.
Luxembourg's foreign minister, Jean Asselborn, said in an open letter to Ms Merkel: "If you, dear Chancellor, get your wish ... please do not forget the risk that the EU could implode. Do I need to remind you that Spain and Luxembourg were the only countries in 2005 to vote 'yes' to the EU's constitutional treaty?"
At the Strasbourg meeting Mr Monti briefed his French and German counterparts on new Italian reforms aimed at slashing debt. The markets, however, remained unimpressed by the show of unity. French stocks fell after the meeting, and Italy's bond yields surged back past the unsustainable 7 per cent threshold.