–Adds Quotes On Eurobond, EFSF, Franco-German Collaboration

PARIS (MNI) – Germany’s Chancellor Angela Merkel and France’s
President Nicolas Sarkozy on Friday vowed jointly to do whatever is
needed to defend the euro, but they made clear that there is virtually
no chance for approval of a recently floated proposal to issue joint
Eurozone bonds.

They also, especially Merkel, poured cold water on the idea of
injecting additional resources into the E440 billion European Financial
Stability Facility. Merkel said it was not a question that needed to be
entertained.

The actual use of EFSF funds that is currently envisaged only
amounts to about 10% of its capacity, “so this debate is not really a
timely one,” she said.

In a press conference following a Franco-German summit in Freiburg,
Germany, both leaders stressed instead the need for greater convergence
and harmonization of fiscal and economic policies rather than dramatic
new measures.

Merkel vowed that Germany will “actively support” France’s
presidency of the G20 next year. High on the agenda of that presidency,
Sarkozy said, will be reforming the international monetary system.

“We are deeply attached to the euro and will do whatever is needed
to defend it,” Sarkozy said. “The euro is Europe, and Europe is our
future.” Merkel later echoed that sentiment, saying that “Germany, along
with the others, will do all that’s necessary to defend the euro.”

However, Merkel stressed he German line that the Eurobond idea did
not bring anything of “utility” to the table. What’s needed, she said,
is not “a collectivization of risks,” but rather “competitiveness and
consistency in a common economic space.”

Sarkozy complained that “we were not consulted before the Eurobond
idea was floated” last weekend by Eurogroup President Jean-Claude
Juncker and Italian Finance Minister Giulio Tremonti.

If the creation of a Eurobond “had the effect of increasing debt at
the European level, it would have an effect of taking responsibility
away from each state. And what’s needed is the contrary: to put
responsibility in the hands of the states,” Sarkozy said.

He did say that it might be possible to revisit the idea of a
Eurobond at some point in the future, if Europe moves further along the
road of economic integration and harmonization. “You must not put the
cart before the horse,” he cautioned.

He added: “In the current state of affairs, the French position is
exactly the same as the German one.”

Both leaders dodged a question on whether they supported Bundesbank
President Axel Weber to be the next president of the ECB. “We did not
talk about the problem of the ECB today,” Sarkozy said. “But we will
talk about it when the time is right.”

Sarkozy announced that he and Merkel had agreed to greater fiscal
harmonization between France and Germany. The two countries had been
giving a “bad example” with their lack of such coordination, but now
that will change, Sarkozy pledged. “We must have convergence to defend
the euro.”

Both leaders said that the primary task at the EU summit in
Brussels on December 16 and 17 will be to complete work on a permanent
bailout facility, the European Stability Mechanism, which will take the
place of the EFSF when it expires in mid-2013.

Sarkozy rejected the notion that Germany and France are more
concerned with their own national interests than with the collective
interest of the Eurozone. He noted that Germany is the top contributor
to the bailout facility and the emergency loan package for Greece, and
France is the second largest contributor.

“You can’t accuse the first and second contributors of being
selfish,” he said.

–Paris Newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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