Eurozone Debt Crisis Divides France, Germany
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Europe's leaders apparently cannot bring themselves to solve their debt crisis. France's President Nicolas Sarkozy this week left his wife's side in a Paris hospital this week just as she was giving birth. He went to try to work out a deal with German's Chancellor Angela Merkel, but to no avail. The two leaders remain far apart on how to handle a nearly bankrupt Greece. A European summit this weekend was supposed to produce a bailout plan, but the deal is not yet ready, as NPR's Tom Gjelten reports.
TOM GJELTEN: More emergency meetings ending without agreements, more deadlines set and missed. Angela Merkel was supposed to brief the German parliament today on Europe's new plan to resolve its debt crisis, but she had to cancel.
There is no plan on how to deal with the big issues: how to finance a Greek bailout, how to shore up European banks, how to keep other countries from slipping toward bankruptcy and what role the European Central Bank should play. And the longer this stalemate goes on, the greater the danger to Europe's economy. Jacob Kirkegaard is with the Peterson Institute for International Economics.
JACOB KIRKEGAARD: If you had a scenario of complete disagreement among the European politicians and the unwillingness of the European Central Bank to act as the sort of financial market firefighter, that's really what could lead to a downward uncontrollable spiral in Europe.
GJELTEN: We're talking financial doomsday.
KIRKEGAARD: There's going to be a run on banks in a number of these countries.
GJELTEN: Kirkegaard still thinks a meltdown like this will be avoided. In fact, he says, the emergency meetings going on and the parliamentary debates may just be what Europe has to go through to come up with a definitive plan to solve the debt crisis.
But in the meantime, very tense negotiations. Earlier this week, French President Sarkozy said, Those who destroy Europe and the euro will bear responsibility for the resurgence of conflict and division on our continent. He was pressing Merkel to go along with a French proposal to empower the European Central Bank. The French want the bank to play a bigger role in solving the debt crisis. But Merkel fears it will cost Germany too much, and she's showing no signs of giving in.
Jacob Kirkegaard sees parallels to the debt ceiling standoff between the White House and the Congress. In Europe, another game of chicken - this one among bankers, presidents, and parliaments.
KIRKEGAARD: Every time, going right up to the brink before a decision is taken, this is very detrimental to the European economy, in the same way that we saw it here in the United States. So no, certainly games of chicken, and especially as in the case of Europe, these repeated games of chicken being played out between multiple actors, has a very negative impact on economic growth.
GJELTEN: They undermine consumer and business confidence. Investors get nervous. Banks cut back on their lending on both sides of the Atlantic. No wonder the Obama administration, worried about the U.S. economy, has been leaning hard on the French, the Germans, and other Europeans to reach an agreement, and soon.
Tom Gjelten, NPR News, Washington.
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