A press conference after that big meeting between German Chancellor Angela Merkel and Nicolas Sarkozy to address the expansion of the European Financial Stability Facility and measures to curb mounting debts in the struggling periphery is just about to take place.
It should happen around 12:30 PM 12 PM ET. There might be leaks before that.
A media frenzy over eurobonds has ensued since this weekend, but eurobonds are NOT supposed to be discussed at the Merkozy meeting today. Expect markets to go nuts if one of them breaks this promise not to talk about them. Here are answers to everything you always wanted to know about euro bonds but were afraid to ask >
Just to recap, here’s what they might — and probably won’t — talk about:
– Unity — per usual — is likely to top the agenda. While we won’t see any groundbreaking changes, signs abound that a solution to the sovereign debt crisis will necessitate some kind of expansion in central banking powers. Steffen Seibert told Bloomberg that reconciling interest rate disparities was a medium-term goal.
– Merkel and Sarkozy will discuss tougher rules for profligate spenders like the PIIGS. The Telegraph calls this the focus of the meeting, but it’s a moot point since all the PIIGS countries have been bragging about the success of their austerity measures.
– Merkel faces mounting dissent from the Bundestag, which is likely to weigh heavily on all proposals. The Telegraph cites polls that find 59% of Germans are against further bailouts, a majority want Greece expelled from the euro, and 44% want out of the European Monetary Union.We’ll have coverage here of the presser right here as it develops.
Developments will be posted below.
UPDATE (12:56): And that wraps up the press conference. Merkel and Sarkozy are off to more meetings this evening over the issues that were discussed today.
UPDATE (12:51): Last question is on the Lisbon Treaty, signed by the 27 member states of the EU. Merkel and Sarkozy both deny that they should be criticised for the problems of the treaty, but neither of them propose any current changes. Both embrace “institutional reform” immediately, however.
UPDATE (12:49): “Rapprochement” between Germany and France is valued by the two leaders and Sarkozy hopes the markets will appreciate the relationship as well. Interestingly enough, both Sarkozy and Merkel are both referring back to the countries’ quarrels in the last two world wars.
UPDATE (12:46): Sarkozy emphasises that Germany and France — as the largest two EU economies — need to “converge” on economic policy and in economic situation, and that the euro area will continue to benefit and equalise in economic standing from membership in the currency.
UPDATE (12:44): Merkel reassures German corporations that they would not suffer from this corporate tax that’s being thrown around. Unclear how this plays out practically.
UPDATE (12:41): Sarkozy says the “golden rule” would require all states’ individual budgets to be part of a 5-year plan aimed at restoring a sustainable equilibrium to the euro zone. This would be a “binding and mandatory” rule in order to require all member states to comply with it.
UPDATE (12:38): Merkel says the lack of sanctions could be a part of the reason that this debt nonsense happened.
UPDATE (12:36): Sarkozy says public sector reform — particularly in France — will be instrumental in restoring confidence in the euro area, and will continue. This includes getting pensions and other government spending under control.
UPDATE (12:33): Merkel is “not optimistic” about prospects for growth in Germany, at least not without competitiveness measures to nurture growth.
UPDATE (12:29): Sarkozy’s now responding to a question on the EFSF, telling reporters that its current size is large enough. He says there’s no point in increasing it right now, which would cause speculation about increasing it once again. He believes this is the right instrument to control the euro right now.
UPDATE (12:26): Sarkozy says that euro bonds should be on the table at the end of the European integration program, but not today. That’s because such an instrument will provide no control over individual countries’ spending. Such euro bonds “could jeopardize the stability of the strongest economic powers in Europe.” A harmonization pact to increase competitiveness is what’s called for now, he says.
UPDATE (12:24): First question is on euro bonds. Merkel says that euro bonds are not part of the solution today, even though some people think they’re a magic solution to the crisis. Euro bonds are not part of the solution right now, she says.
UPDATE (12:22): Questions starting from the audience.
UPDATE (12:21): Policy on pensions to accompany the “golden rule” Sarkozy discussed.
UPDATE (12:20): France and Germany to deepen “bilateral cooperation.” Taxation on corporate transactions is “much needed,” according to Merkel, echoing Sarkozy.
UPDATE (12:18): The EU commission should be granted more powers to “enhance competitiveness and growth.” This would include giving nations in the periphery more money.
UPDATE (12:17): Merkel says more cooperation within the euro area will provide confidence to the markets. Members must ensure that financial policies are followed to the T, and work on reducing their sovereign debt. France and Germany will both include the same “golden rule” in their constitutions based on maintaining financial balance, and want all other member states to do the same.
UPDATE (12:15): “We need to integrate to a greater extent our financial and economic policies.”
UPDATE (12:14): Now Merkel’s speaking.
UPDATE (12:13): “Germany and France must set an example of convergence.” A joint corporation tax will be drawn up by the beginning of 2012, set to take effect in 2014. “We will basically agree” on financial acts from this point, in order to act together to govern the euro.
UPDATE (12:11): Restoring “fiscal balance” is a huge priority for Merkel and Sarkozy. Big surprise. In France, debate continues about rules to enforce fiscal limits on spending, etc.
UPDATE (12:08): First joint proposal to set up a more formal government for the EU, with a president who governs for 2.5 years. Merkel and Sarkozy think Herman Von Rompuy should be president.
UPDATE (12:07): France and Germany are working on “ambitious” joint proposals but are “determined to fight against suspicious” rumours — could he be talking about euro bonds?
UPDATE (12:06): Meeting begins with President Sarkozy.
UPDATE (11:57): A Bloomberg report says the meeting will be brought forward to 12 PM ET. We’ll cover the meeting as soon as it happens.