Berlin, London rift as Spain debt crisis looms

Nov. 18, 2011 at 1:53 PM   |   0 comments

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BERLIN, Nov. 18 (UPI) -- Britain and Germany are talking to heal a rift over the eurozone troubles as renewed worries loom over a developing debt crisis in Spain and continuing problems in Greece and Italy.

German Chancellor Angela Merkel and British Prime Minister David Cameron revealed sharp differences of opinion over ways of tackling the eurozone crisis after they met in Berlin. Although Britain is outside the eurozone its vast financial networks from the City, London's so-called Square Mile, to the rest of Europe are increasingly exposed as the focus shifts toward Spain, seen as the next debt casualty.

Britain is also fighting European plans to tax financial transactions throughout the continent, whether the member countries are part of the 17 eurozone constituents or outside it, as is Britain.

If implemented the taxation regime will spell ruin for London's financial center, but Germany and France are vigorously pushing for the move. They also want the 2009 Lisbon Treaty revised to allow for a closer monitoring of individual countries' handling of their finances, something that has prompted calls in Britain to ditch Europe.

Worries over the eurozone crisis, compounded by most recent market analyses of Spain's troubles, pushed global markets to new lows.

"As Spain prepares for its general election on Sunday, it has become the weaker link in the eurozone chain," the BBC said, after Spain found the borrowing rate available to its institutions was inching dangerously close to 7 percent -- generally thought to be unsustainable.

Opinion polls ahead of Sunday's general election in Spain predict a clear victory for the right-wing Popular Party.

Market analysts said in addition to the Spanish outcome they would await details of plans to boost the eurozone bailout fund to one trillion euros -- about $1.3 trillion. Fears that European leaders would fail to agree on a deal led to more nervous selling in Asia, Europe and North America.

There were also fears that European banks might fail to raise enough cash to pump up the European Financial Stability Facility used to bail out troubled member states. Spain had trouble raising funds to the level it wanted this week.

Britain has angered France and Germany by questioning approaches to the crisis. Cameron and Merkel showed their differences when Cameron made comments in London seen to be challenging the German chancellor's pronouncements in Leipzig, Germany.

Merkel told her party's followers, "The task of our generation is to complete economic and monetary union, and build political union in Europe, step by step... that does not mean less Europe, it means more Europe."

A short while later Cameron declared at the London Lord Mayor's banquet those skeptical about eurozone solutions had the right to question "grand plans and Utopian visions."

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