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Sarkozy, Merkel propose more united regulation to guarantee growth

08-17-2011 08:40 BJT

PARIS, Aug. 16 (Xinhua) -- France and Germany proposed more united regulation on financial market to guarantee growth during a bilateral summit Tuesday at the Elysee Palace, amid fears of worsening eurozone debt crisis and slowing economic growth in both states.

France's President Nicolas Sarkozy (R) and German Chancellor Angela Merkel attend a joint press conference at the Elysee presidential palace in Paris, France, Aug. 16, 2011. France and Germany said they want more united regulation, including an EU tax on financial transaction and common economic government to tame financial market volatility and guarantee growth. (Xinhua/Gao Jing)

The proposals of French President Nicolas Sarkozy and German Chancellor Angela Merkel included a common economic government, a financial transaction tax on EU level and the "golden rule" to reduce members' deficit, according to a joint press conference after their two-hour meeting.

Both leaders underlined their determination to fight for the stability of the eurozone and fight against the debt crisis and prioritized the necessity for all 17 eurozone members to form a closer unity in terms of financial and economic policy.

They called for a common economic government within the eurozone led by European Union President Herman Van Rompuy and set to incorporate discussion over a tax on financial transaction into next Eurpean session in September.

In addition, the two leaders also called eurozone peers to adopt the "golden rule", approved in Germany and considered in France, in a bid to reduce worrying deficit and public debts.

Germany has approved the "golden rule," a fiscal policy guideline that imposes strict censorship to public spending and helps better control budget increase. Discussion over the rule in France also unfolded.

Pending on the Franco-German summit outcome, European stocks ended in red, sent down at poor economic data of Germany.

Tuesday morning, the German Federal Statistical Office (Destatis) reported 0.1 percent growth of gross domestic product (GDP) in the second quarter and revised down the first quarter growth rate to 1.3 percent from 1.5 percent.

This formed a second blow to the European bloc as France, the second largest economy in the region, reported zero GDP growth in second quarter. In Paris, shares at Tuesday close lost ground by 0.25 percent. Frankfurt index fell by 0.45 percent while London closed with slight a 0.13-percent rise.

"After the United States and France, it's the turn for Germany to report stagnated growth. It is disappointing news which deepened markets' fear of global recession," said Jean-Louis Mourier, an analyst at BGC Aurel.

"Governments need to take tough measures to narrow deficit and avoid debt crisis, but they must keep boosting economic growth if they want to restore stability in financial markets," he told Xinhua.

Citing a source close to the Elysee, Les Echos, a local business newspaper, said French officials are likely to revise down the country's growth forecast in 2012 initially set at 2.25 percent on the back of sluggish economic performance and the eurozone debt crisis.

Sarkozy and Prime Minister Francois Fillon met shortly after midday with their senior economic advisors, according to local press, to talk over France's own economic growth targets.

Doubts over the solidity of larger Euroepan economy like France has triggered turmoil in world financial markets last week following the downgrade of U.S. credit rating as Italy and Spain has already been too big risks for the eurozone to expect default.

While a growing number of economists deemed the "eurobonds" as the only way to stem contagion of debt crisis from Greece, Ireland and Portugal to bigger eurozone members, Sarkozy and Merkel excluded the option at the meeting.

"The eurobonds are not expected today," Merkel said concisely, while Sarkozy stressed: "the eurobonds, we can imagine them at the end of the process of European integration, but not at the beginning."

Citing the European Financial Stability Fund (EFSF) as a good example, both leader confirmed their faith in the "perspective of eurozone and the world" and meanwhile took into account further institutional reforms regarding aligned financial and economic policies.

According to estimate of the Organization for Economic Cooperation and Development, the eurozone would grow by 2.0 percent in 2011 compared with that of 2010, and the world annual GDP increase could reach 4.2 percent in 2011, slower than 4.9 percent in 2010. In June, the International Monetary Fund had revised its growth forecast for the eurozone to 2 percent.

However, GDP in the 17-nation euro area rose only 0.2 percent in the second quarter of 2011 compared with a 0.8-percent rise in the previous quarter, according to Eurostat.

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ECB to buy Eurozone gov't bonds to curb debt crisis

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Editor:Wang Xiaomei |Source: Xinhua

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