German Chancellor Angela Merkel and French President Nicolas Sarkozy called a summit of euro-area leaders next month on economic competitiveness as they sought to bridge differences over how to end the region’s debt crisis.
The German and French leaders announced a joint push for a “pact for competitiveness” to flank more immediate steps — still the subject of dispute — to shore up Greece and Ireland and prevent fiscal woes from swamping Portugal and Spain.
The two didn’t say whether Germany and France have resolved disagreements over the expanded use of the 440 billion-euro ($600 billion) rescue fund for debt-strapped countries.
“The year 2010 was a year of trials for the euro,” Merkel said at a joint briefing with Sarkozy at a meeting of European leaders in Brussels today. “Germany and France are firmly committed that 2011 will be the year of new confidence for the euro.”
No date was set for the 17-nation euro summit. It could come as late as the eve of the next scheduled meeting of all 27 European Union leaders on March 24, a French official said.
The euro region’s two leading economic powers are at odds over how to retool the rescue fund, with Germany opposing buybacks that would enable high-debt countries to buy their own bonds at a discount on the market, according to three European officials involved in the talks who declined to be identified because the deliberations remain private.
Instead, the focus is on mobilizing the full potential of the fund, now able to lend only about 250 billion euros due to collateral rules that underpin its AAA credit rating.
Signs of discord helped snuff out a three-day rally in European bond markets yesterday and knocked the euro off a three-month high, as investors questioned when Europe will come up with an anti-crisis formula.
The euro fell for a third day today, weakening as much as 0.5 percent to $1.3568.
The competitiveness proposal calls for debt-limitation rules in national constitutions, a revival of EU plans to harmonize the corporate-tax base, the abolition of wage indexation and promises to clean up the banking system.
Only the principles have been worked out so far, the French official told reporters, ruling out a further increase in the French retirement age after it was lifted to 62 from 60 last year.
“We are working together, Germany and France, hand in hand with an absolute determination to support the euro, to defend the euro, which we see as a major element in the European project,” Sarkozy said.
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