Differing views

Chancellor Angela Merkel and British Prime Minister David Cameron on Friday agreed on the need for a decisive response to the economic crisis that threatens the eurozone.

The two leaders, who met in Berlin, also stressed they would "work together" to resolve differences over the handling of the economic situation. However, the pair admitted they had so far failed to narrow their difference of opinion on certain issues.

German calls for a tax on financial transactions have been met with resistance from Britain, which claims it would damage London's competitiveness as a financial center.

Asked about the tax, Merkel said the two had not made any progress in reaching an agreement on the introduction of such a tax within Europe.

There also appeared to be a difference of opinion over the need for urgency in dealing with the crisis.

Need for credibility

Speaking at a press conference in Berlin, Cameron said all eurozone institutions should work hard to reassure markets by building up the leverage of the European Financial Stability Facility (EFSF).

"As we agreed at the G20, all the institutions of the eurozone have to stand behind and back the currency and do what's necessary to defend it - that is what needs to happen," Cameron said, adding he was confident that this would be the case.

"This is obviously a difficult time, you can see that in the markets, but I don't underestimate for a minute the commitment of countries like Germany and those in the eurozone to make the currency work," he added.

However, Merkel said there was a limit to the amount of money that could be credibly guaranteed by the fund, saying she favored "a step-by-step" approach.

"The British demand that we use a large amount of firepower to win back credibility for the eurozone is right," said the chancellor. "But we have to take care that we don't pretend to have powers we don't have because the markets will figure out very quickly that this won't work."

The two conservative leaders were eager to demonstrate their spirit of cooperation, appearing relaxed and keen to offer each other their support. "As Angela has just said," was a recurring phrase used by Cameron.

"Whenever David and I have worked on a problem, we have found a solution," said Merkel, despite discord on both sides of the Channel over Britain's place within the EU.

'A bullet aimed at London'

It is estimated that the proposed transaction tax would generate some 50 billion euros ($68 billion) per year, a significant portion of which would come from Britain's large financial services sector.

However, many British politicians and business leaders have said it would simply cause financial institutions to desert the UK, and the EU as a whole. British Finance Minister George Osborne has described the tax as "a bullet aimed at the heart of London."

Britain has said it is open to the possibility of such a levy - if it could be agree at a global level - something Merkel even attempted to use in a show of accord at the press conference. "We are in agreement," said the chancellor. "Both countries would introduce a global tax immediately."

'Dialogue, not diktats'

Ahead of the meeting, Jean-Claude Juncker, Luxembourg's prime minister and head of the eurozone group, hit out at recent British calls for the 17 countries that use the common currency to bring the crisis to an end.

"I am for dialogue," Juncker told Deutsche Welle, pointing out that Britain had a higher level of debt than the average debt of the eurozone. "I am against a diktat from those who are doing less well than we are."

Meanwhile it was Britain's refusal to accept the transaction tax, as a non-eurozone member of the EU, that attracted criticism in Germany.

The parliamentary group leader of Merkel's Christian Democrats, Volker Kauder, stirred up controversy earlier in the week when he said Britain would not "get away with" not introducing the levy.

Wartime analogies rear their head

His deputy, Michael Meister, went so far as to compare the situation to that in the build-up to World War I - calling for countries to be less focused on their self-interest.

Both men's comments prompted fury from the British press, which was not slow to respond with its own wartime analogies.

However, in an interview published in London's Financial Times on Friday, German Foreign Minister Guido Westerwelle attempted to ease related British fears about Berlin's call for limited EU treaty change.

Westerwelle said any treaty changes to ensure stricter financial discipline within the eurozone bloc would only arise as a last resort. He also played down anxiety that a potential two-tier Europe would be created that would see non-euro countries sidelined.

Author: Richard Connor (AFP, dpa, Reuters)
Editor: Martin Kuebler