Eurozone’s big four meet
June 22, 2012
At the meeting Merkel was expected to defend Berlin's policy of promoting austerity and opposing joint liability among eurozone member states.
The mini-summit brings together the leaders of the eurozone's largest four economies ahead of a full European summit on June 28 and 29.
Italian Prime Minister Mario Monti was expected to once again present himself as a mediator between Merkel and both French President Francois Hollande and Spanish Prime Minister Mariano Rajoy.
This week, on the sidelines of the G20 summit, Monti proposed that eurozone members should look at using Europe's 500 billion euro ($635 billion) emergency fund, the European Financial Stability Facility, and the European Stability Mechanism to buy government bonds.
While Paris and Madrid were open to the idea, Italy's Foreign Ministry said on Thursday, Berlin remained unconvinced.
There were also calls for Germany to change track by the head of the International Monetary Fund (IMF), Christine Lagarde, on Thursday.
Lagarde said that the eurozone should consider easing the approach of austerity that has so far been championed by Merkel.
Fresh approach urged to bank aid
She also urged leaders to consider jointly issuing debt and called for the eurozone to offer direct support to troubled banks, rather than channeling it through already debt-laden governments.
Specifically, Lagarde criticized plans to rescue the Spanish banking sector by loaning money to Madrid, preferring instead that the money be given directly to the banks. The proposals have caused jitters on financial markets, with fears that it might add to the country's debt.
"We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area," Lagarde said late on Thursday.
"Clearly the preference of the IMF ... is to try to break this negative loop between banks and sovereigns," she said.
Asked if she thought the Germans might agree with her suggestions, Lagarde said: "We certainly hope that wisdom can prevail."
On Thursday, two independent audits commissioned by the Spanish government showed that lenders have recapitalization needs of up to 62 billion euros ($79 billion). Eurozone partners have already said they can provide as much as 100 billion euros.
rc/ai (AFP, Reuters)