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Merkel backs Europe-wide growth pact

June 28, 2012

PARIS - Germany's Chancellor Angela Merkel rallied Wednesday for a 130 billion ($162 billion) Europe-wide stimulus package in a gesture to French President Francois Hollande - but the two leaders remained at odds over the bigger, tougher steps needed to end Europe's spiraling debt crisis.

The so-called "growth pact" was the only obvious area of agreement as Hollande and Merkel went into talks Wednesday night meant to set the stage for a closely watched summit of European Union leaders in Brussels on Thursday and Friday.

Earlier in the day, Merkel brushed aside the latest push to pool European debt, arguing that it would be "economically wrong and counterproductive" before governments have shown they can comply with budget rules.

Article Photos

French President Francois Hollande, left, welcomes German Chancellor Angela Merkel at the Elysee Palace, Wednesday. Germany's Chancellor Angela Merkel says she hopes European leaders adopt a €130 billion ($162 billion) stimulus package this week, in a gesture to French President Francois Hollande despite their differences over how to end Europe's spiraling debt crisis. The two leaders went into talks Wednesday night sharply opposed over whether to share debt among the 17 nations that use the euro, and how much sovereignty to surrender over national budgets.

Pressure has been mounting on Germany from the other leading economies in the eurozone to soften its opposition to joinly issued eurobonds or other forms of debt pooling.

Hollande, who won election last month campaigning against austerity policies championed by Merkel, has pushed for the 130 billion stimulus package and smiled broadly when Merkel, standing stiffly at his side, offered her endorsement.

"We have made progress toward a pact for growth, which we hope can be decided tomorrow. We will then talk about the political future of the economic and currency union," said Merkel.

Amid increasing fears that the eurozone could break up, both the German and French leaders said Wednesday they want "more Europe" - meaning closer union among European countries.

But they disagree on how to get there: Merkel wants strong political union first, with centralized control of national budgets, before considering eurobonds or other financial integration.

Hollande's aides say EU leaders need to decide on some short-term measures right away, such as a banking union with a single authority.

In his brief remarks with Merkel, Hollande said he wants "to deepen the economic and monetary union, and then political."



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