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European Debt Crisis

Merkel and Sarkozy meet to discuss fiscal union

Stephen Beard Jan 9, 2012

Steve Chiotakis: In Berlin today, German Chancellor Angela Merkel and French president Nicolas Sarkozy meet for the first time this new year. But the two will talk about old problems for the eurozone, and for their countries — European debt, treaties to allow for more budget control of eurozone nations.

Marketplace’s Stephen Beard is with us live from London with the latest on that meeting and what’s expect. Hey Stephen.

Stephen Beard: Hello Steve.

Chiotakis: Is today’s meeting more likely, do you think, to bear any fruit than any of the other meetings we’ve had? I mean there have been dozens of these things since the European debt crisis blew up, right?

Beard: Yeah, no — although, not for want of trying. These two meet so often they’re almost merging into one leader, called “Merkozy.” But the trouble is, deep down, they’re still divided. The French still believe the only way to stop this crisis is for the European Central Bank to print money, while the Germans say “absolutely not” — that’s anathema to the Germans.

Chiotakis: So what are they talking about today, then?

Beard: About this so-called fiscal union treaty. This emerged at a summit late last year — the plan to compell all the governments that use the euro to balance their budgets in future so they don’t run up huge debts in future. Now, the treaty probably won’t be finalized until the end of March; it probably won’t be ratified until April at the earliest.

And critics say it’s irrelevant anyway. It’s fiddling while Rome — and much of the eurozone — burns, because it doesn’t deal with the existing debt of some eurozone countries. Some of these could still default, especially since the eurozone economy as a whole is deteriorating.

He’s Sony Kapoor of the think-tank Re-Define.

Sony Kapoor: The economy is starting to seize up. We are probably going to see a recession in the euro area, in particular in Greece and Spain and also probably in Italy. So things are at this current point in time getting worse.

So the eurozone could still blow up, and that’s still casting a large shadow over the U.S. recovery.

Chiotakis: All right. Marketplace’s Stephen Beard. Stephen, thanks.

Beard: OK Steve.

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