GERMANY, FRANCE DIVIDE ON GREECE, EUROZONE
- A major rift has opened up between Germany and France for the first time in 30 months of euro crisis over how to restore confidence in the single currency, The Guardian reports.
A special EU summit marking the debut of France's President François Hollande saw him challenge Germany's chancellor, Angela Merkel, on the euro, arguing that the pooling of eurozone debt liability - eurobonds- had to be retained as an option for saving the currency. Merkel has ruled out eurobonds as illegal under current EU law.
Hollande told the dinner of 27 leaders that he wanted to see eurobonds established, while conceding that this would take time, witnesses at the talks said.
Merkel responded that this was nigh-on impossible since it would require changes to the German constitution and around 10 separate legal changes, the sources said.
There was no policy breakthrough at the summit, rather a reiteration by leaders of known positions. Any decisions were postponed until the end of next month after French and Greek parliamentary elections on June 17.
The fissure between Paris and Berlin widened further when Hollande also called earlier for the eurozone's new bailout vehicle to be allowed to draw funds from the European Central Bank and to be able to recapitalize banks directly, both proposals fiercely resisted by Berlin and also currently impossible under EU law.
Senior German government officials had insisted that eurobonds should not be even discussed at the summit. The Hollande team maintained that all topics were on the table and also held open the prospect that France could refuse to ratify Merkel's fiscal pact compelling debt and deficit reduction in the eurozone unless eurobonds were recognized as a possible tool.
Officials said that the inconclusive meeting saw a shift in the balance of power towards the French, with supporters of Hollande's eurobonds demands increasing in number and becoming bolder.
The Franco-German clash was framed in terms of German-scripted austerity which has dominated two years of European response to debt crisis against a new French-led drive for growth policies at a time of record eurozone unemployment.
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