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Merkel's new partners

By ANTHONY HALL, United Press International   |   June 22, 2012 at 10:15 AM   |   Comments

There is no more Merkozy in Europe.

That cute term designated a merging of minds of former French President Nicolas Sarkozy and German Chancellor Angela Merkel.

Sarkozy and Merkel were so in step with their solutions for the sovereign debt crisis in Europe that they would routinely meet before a big European Union decision -- which was most of the time in the past three years -- and work out the details privately.

With the two largest economies in Europe pledging support for one program or another, Germany through France could name its tune on the financial strategy for the 17 nations that share the euro as currency.

What a difference an election makes.

Merkel on Friday was to follow up a Thursday meeting of financial leaders with a small powwow that included new French President Francois Hollande and the prime ministers of Spain and Italy, Mariano Rajoy and Mario Monti.

This would require much more adroit movement on Merkel's part, especially now because the director of the International Monetary Fund, Christine Lagarde, "is throwing down the gauntlet," as one eurozone official was quoted as saying in The New York Times Friday.

Lagarde has called for a fiscal union, an idea Germany has stridently opposed.

The IMF has called for the so-called eurobonds, which would be the most logical step for any currency region, but has not found favor in Germany.

But a eurobond backed by 17 nations would have considerable credibility and bonds are somewhat synonymous with credibility. They are expected to be the safest bet out there and even if an investor had doubts about the economy in Greece following a standard forward trajectory, it would be hard to imagine all 17 nations of Europe floundering for very long.

U.S bonds are stable because, to coin a phrase, just look at the economic diversity behind them. The same would apply to eurobonds should 17 nations put their credibility behind them.

The IMF has also called for Europe's rescue funds to be permitted to go directly to banks rather than to governments, which would sidestep the problem of economic rescues contributing to one of the problems they are designed to solve, which is to help countries lower debt. Loans that go directly to governments add to their debt, which is patently counter-productive.

Scheme No. 3 is to create a region-wide fund that would guarantee bank deposits around Europe, much like the Federal Deposit Insurance Corp. does in the United States.

Again, Germany is stuck in a position of having to reject a sound idea simply because it is stuck as the primary underwriter for each of these noble schemes.

Merkel certainly will miss the days when there were only two cups of coffee on the table and only one hand to shake after the meeting. But Europe's sentiment has been clear all along and now even voters in Greece have agreed that the common currency should be saved. Now is the time to put the money and the rhetoric together.

In international markets Friday, the Nikkei 225 index in Japan lost 0.29 percent and the Shanghai composite index in China gave up 1.4 percent. The Hang Seng index in Hong Kong shed 1.4 percent and the Sensex in India dropped 0.35 percent.

The S&P/ASX 200 in Australia shed 0.87 percent.

In midday trading in Europe, the FTSE 100 index in Britain slipped 0.69 percent while the DAX 30 in Germany dropped 0.66 percent. The CAC 40 in France lost 0.38 percent and the Stoxx Europe 600 lost 0.41 percent.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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