Expectations have faded for any kind of breakthrough from Tuesday’s Franco-German emergency summit on the euro zone debt crisis.
Chancellor Angela Merkel and Nicolas Sarkozy will not discuss the creation of a euro bond, which is seen by many in the financial world as the best way to help debt-saddled Greece and other struggling euro zone members recover by being able to borrow at more affordable rates.
Euro bonds would be guaranteed by all 17 countries that share the euro.
Germany’s Economy Minister Philipp Rösler explained Berlin’s objections: “We think euro bonds aren’t the right way. They would punish the countries that have kept their finances in good order and have strong economies – like Germany – and thanks to that have good credit worthiness and so pay low interest rates to borrow.”
Italy is one of those under threat and Prime Minister Silvio Berlusconi updated Merkel by phone over the weekend on Rome’s planned new spending cuts.
Germany praised those austerity measures and said it is positive that countries like Italy and Spain are now more willing to make similar moves.
Berlin believes the weaker euro zone nations need to get their finances in order and become more competitive rather than hope to be helped out with euro bonds. In addition Merkel knows that she could not get political backing at home for Germany signing on to euro bonds.