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German, French leaders to meet on European debt crisis

08-16-2011 14:04 BJT

The issuing of jointly guaranteed European government bonds as a means to end the Eurozone's crippling debt crisis is an ongoing topic of fierce debate on the continent.

European officials are searching for a lasting way to solve the debt crisis and the arguments over euro bonds intensified a day ahead of a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy.

European markets closed flat ahead of a key meeting on the euro zone debt crisis between German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Merkel and Sarkozy meet in Paris on Tuesday and are expected to come up with initiatives to restore confidence in the markets.

One issue they've ruled out discussing is the introduction of a common euro zone government bond, despite calls in support of the idea from the head of Germany's leading export association and Italy's Economy Minister Giulio Tremonti.

French President Nicolas Sarkozy, right, and German Chancellor
Angela Merkel will meet in Paris on Aug. 16, Sarkozy’s office
said in a statement.Michele Tantussi/Bloomberg

Germany has always been against common eurobonds, saying they don't make sense.

Philipp Roesler, German Economy Minister said, "We still think that eurobonds are the wrong way to go. It would punish those countries that were doing their homework, which are economically sound, like Germany, which enjoy a good credit rating and therefore pay low interest rates. And Eurobonds would mean that everyone has the same interest burden because the conditions for financing would be the same. That would punish the 'good' countries, and we don't want that for Germany, or for Europe."

German officials have warned not to expect a major breakthrough from Tuesday's meeting.

Rabobank analyst Jane Foley says she's not expecting concrete measures to come from it, and believes the euro zone crisis will get worse, before it gets better.

French President Nicolas Sarkozy (left) and German Chancellor Angela Merkel are
meeting as the eurozone debt crisis swirls. -- PHOTO: AP

Jane Foley, Rabobank senior currency analyst said, "We think it needs pinnacles of each crisis to bring politicians the ammunition they need to convince their electorates to move ahead with the reform for the euro zone as a whole, so we do think there will be an intensification of the crisis."

Whatever the meeting's outcome, many will be looking for strong economic leadership.

That's something which World Bank head Robert Zoellick says has been missing during events of the last couple of weeks in the United States and Europe.

Speaking at a weekend dinner in Sydney, he said leaders need to get ahead of their problems.

Robert Zoellick, World Bank President

Robert Zoellick, World Bank President said, "The process with dealing with the sovereign debt, but more than the sovereign debt some of the competitive issues have been done a day late and a euro short I guess I'd say."

Investors will also be watching for euro zone second-quarter GDP data out Tuesday, for more clues on the health of the global economy.

Editor:Li Wanran |Source: CNTV.CN

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