France drops bail-out fund proposal
Germany and France had been divided over how to strengthen European Financial Stability Facility.
France has dropped its demand that the eurozone’s bail-out fund should be strengthened through guarantees provided by the European Central Bank (ECB).
The proposal caused a clash with Germany, which strongly opposed the idea, and delayed the adoption of measures to expand the lending capacity of the European Financial Stability Facility (EFSF).
Jean-Claude Trichet, who steps down as president of the ECB at the end of the month, had also opposed the idea.
Angela Merkel, Germany’s chancellor, speaking at today’s meeting of EU leaders in Brussels, said: “Finance ministers yesterday envisaged two models [for strengthening the EFSF], both of which do not refer to the ECB because the treaty base does not allow this.”
She made this comment as she stood alongside Nicolas Sarkozy, France’s president, at a joint press conference.
Sarkozy said: “The ECB is independent and France is attached to this independence, as is Germany, and therefore it is not up to the heads of state or government to give any sort of instructions to the ECB. No solution is viable if it doesn’t have the support of all the European institutions.”
It was disagreement between Merkel and Sarkozy on strengthening of the EFSF that necessitated next Wednesday’s extra meeting of the European Council and Eurozone Council (26 October). The earlier intention had been to settle changes to the EFSF during today’s meetings in Brussels. But that plan fell apart when Merkel and Sarkozy met in Frankfurt last Wednesday (19 October).
Herman Van Rompuy said that agreement between France and Germany was “important” and “necessary” but that all leaders needed to sign up to a deal.
He said: “As far as the differences between France and Germany are concerned, I can assure you after numerous meetings that we are working in a spirit of compromise, in a spirit of having the ambitious package to reassure the rest of the world of our determination to safeguard the financial stability of the eurozone.”
He said that he saw “a French president and a German chancellor determined to work together with the other members of the eurozone”.