France and Germany clash sharply over debt crisis solution
European leaders are struggling to overcome a crisis-fighting stalemate as they face discord over a banking union, Greece’s ongoing debate on how to meet bailout commitments and foot-dragging by Spain on a possible aid bid.
Chancellor Angela Merkel and President Francois Hollande underlined Franco-German disagreement over the weekend as they clashed on a timetable to introduce joint oversight of the region’s banking sector, with Merkel rebuffing Hollande’s appeal to activate it “the earlier, the better.”
Financial markets “that are watching Europe want to see results,” Merkel said at the meeting on Sept. 22 near Ludwigsburg, Germany, celebrating the two nations’ reconciliation after World War II. Still, “it has to be thorough, the quality has to be good and then we’ll see how long it takes,” she said.
The squabbling is helping stem gains in European stocks and bonds of Spain and Italy that followed the European Central Bank’s rescue plan. Deadlock over the banking union could delay until next year a key building block in resolving the crisis, compounding turmoil that’s so far engulfed five of the euro area’s 17 nations.
“Complacency seems to have affected European policy- makers,” Joachim Fels, chief economist at Morgan Stanley in London, wrote yesterday. “One case in point is the disagreement between governments about the nuts and bolts of a banking union, which remains crucial to break the negative feedback loop between banks and weak sovereigns.”