October 10, 2011Merkel, Sarkozy in bank sector deal
BERLIN — The leaders of Germany and France, the eurozone’s two biggest economies, say they have reached an agreement on strengthening Europe’s shaky banking sector.
French President Nicolas Sarkozy said European leaders will cobble together a plan to resolve the debt crisis by the end of the month.
German Chancellor Angela Merkel says she and French President Nicolas Sarkozy “are determined to do the necessary to ensure the recapitalisation of Europe’s banks.”
Merkel spoke after talks with Sarkozy at Berlin’s chancellery Sunday aimed at forging an agreement ahead of a summit of the European Union’s 27 leaders later this month.
The two leaders thrashed out differences over how to use the eurozone’s financial firepower to counter a sovereign debt crisis threatening the global economy.
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With the turmoil threatening to spiral into financial meltdown as the value of banks’ sovereign bond holdings slide, Merkel and Sarkozy discussed in Berlin both how to manage Greece, prevent contagion and strengthen lenders.
The implosion of Belgian lender Dexia , the first victim of the crisis, has added a sense of urgency to the talks. The prime ministers of France and Belgium and the finance minister of Luxembourg agreed a rescue plan for Dexia on Sunday ahead of the stricken Franco-Belgian bank.
“Dexia will be among the topics that will be discussed but the main topic is Greece and the euro zone, as banks are only a consequence” of the crisis, a source at the French finance ministry told Reuters.
Talks are continuing over a vital aid tranche for Greece, which could run out of cash as soon as mid-November. European finance ministers are considering making banks take bigger losses on Greek debt — an issue that could be discussed at the Merkel-Sarkozy meeting. —
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