Key European political leaders became embroiled in the eurozone debt drama as they gathered in the Frankfurt Opera house to mark the end of Jean-Claude Trichet’s tenure as president of the European Central Bank.
An emergency meeting headed by France’s President Nicolas Sarkozy and German Chancellor Angela Merkel ended in deadlock.
Paris and Berlin are at odds over the involvement of the European Central Bank in the rescue plan with France wanting the ECB to use its balance sheet to boost the European Financial Stability Facility and for it to have a banking licence.
Germany rejects the plan. Merkel and Sarkozy left without talking to reporters or making statements. Jose Manuel Barroso the President of the European Commission has called for compromise.
The deadlock has hit the markets, as European shares fell in early trading on Thursday. Stocks fell across the board, with the heavyweight banking sector among the biggest casualties, as investors worry about the level of funds needed to recapitalise banks. European shares were down 1.2 per cent before midday after a small rise on Wednesday.
Public patience is wearing thin. This week marks two years since Greece’s debt crisis started to escalate. Analysts say the breakdown in talks show the leaders are no nearer a solution just days away from what has been dubbed the make-or-break European summit on Sunday.