Merkel, Sarkozy: comprehensive euro solution by end of month

Berlin – German Chancellor Angela Merkel and French President Nicolas Sarkozy announced Sunday that they would present a comprehensive solution to the eurozone debt crisis, including bank recapitalization measures, before the end of the month.

‘We are determined to do what is necessary to ensure the recapitalization of our banks to ensure a decent credit supply, as this is the basis of good economic development,’ Merkel said during talks with Sarkozy in Berlin.

The French president said a ‘durable and global’ solution to the eurozone crisis must be found ‘before the end of the month,’ while the leaders reiterated that Greece should remain in the eurozone.

Merkel said they expected a ‘permanent solution for Greece, as part of the eurozone,’ to emerge from a report on Athens’ finances by the so-called troika of the European Commission, the European Central Bank (ECB) and the International Monetary Fund.

‘We are stressing again our determination to ensure the stability of the euro,’ the chancellor said. Both Merkel and Sarkozy said they were aware of their countries’ responsibility to ensure financial stability.

The leaders said they were in ‘absolute agreement’ over bank recapitalization measures and the implementation of the European Financial Stability Faccility (EFSF) bailout mechanism.

However they said it was premature to discuss details, insisting these would be finalized at an EU summit and a special meeting of eurozone leaders later this month, before a summit of the Group of 20 (G20) leading economies in Cannes, France, in November.

‘Europe must resolve these problems between now and Cannes,’ Sarkozy said, while Merkel stressed, ‘The G20 in Cannes must be a success for the global economy.’

Paris holds the rotating presidency of the G20, which is due to discuss changes to the international financial system at the Cannes summit.

Sarkozy and Merkel also expressed confidence that Slovakia would approve changes to the EFSF in a key parliamentary vote on Tuesday.

Earlier in the day, German negotiators told dpa that eurozone members were considering a possible Greek debt write-down of up to 60 per cent, slashing investors’ returns on Greek assets, many of which are held by European banks.

Paris has so far rejected German demands for a drastic haircut on Greek bonds, as French banks are heavily exposed to Greek debt. Berlin, for its part, has resisted French demands that the EFSF should be able to draw on ECB funds to refinance banks hit by a write-down.

Greek media voiced concern ahead of the Berlin talks that the country’s future – including a radical debt write-down – was being determined in their absence. Surveys indicate that two thirds of Greeks believe a default on their debts is imminent.

Sarkozy countered comments by World Bank President Robert Zoellick that Europe’s leaders lacked a vision for the future of the eurozone, and said this would emerge at the end of the month, along with the solution to the debt crisis.

Merkel said that France and Germany, the two largest economies in the eurozone, were pushing for treaty changes that would bring about ‘even closer and binding cooperation on issues of financial and economic policy for the euro member states.’

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