When Nicolas Sarkozy and Angela Merkel spoke to the press after their talks in Berlin on Sunday (9 October), their performance revealed wide gaps in what they had been able to agree on. 

They did, of course, emphasise, yet again, the urgency of the situation. A clear timeline has emerged, with the pair pledging that the eurozone’s sovereign- debt crisis will be solved by the time that the leaders of the G20 hold their summit in Cannes on 3-4 November. That summit now looks as if it will become as important as the one in London in April 2009, when leaders pulled the global economy back from the brink. This time, the eurozone’s problems will be firmly in the spotlight.

“We need to deliver a response that is sustainable and comprehensive,” Sarkozy said after the talks. “Europe must solve its problems by the G20 summit in Cannes.”

This means that the next three weeks are crucial. Germany and France are working on plans currently being discussed with other member states and the European Commission. The aim is to recapitalise banks in the EU, to deepen economic integration in the eurozone, and to provide a final comprehensive solution to Greece’s sovereign-debt difficulties. They said that their plans could include “significant changes” to the European Union’s treaties.

They want leaders of the EU’s member states to discuss their ideas at the European Council in Brussels, which has been postponed from next Monday and Tuesday (17-18 October) to the following Sunday (23 October), to allow more time to thrash out the plans.

Lack of detail

Sarkozy and Merkel said that their unity was “total”, and financial markets rallied after their announcements.

But, as always, the devil is in the detail, and details were conspicuous by their absence. The greatest disagreement between the two leaders is over how banks should be recapitalised. Sarkozy wants France to be able to support its financial sector by tapping into the eurozone’s bail-out fund, the European Financial Stability Facility, but Merkel believes that the fund should be used only as a last resort. France’s underlying concern is that if it uses its own resources to bail out its financial sector, its triple-A credit rating could be in jeopardy.

Fact File

IMPORTANT DATES

Today (13 October)
George Papandreou, Greece’s prime minister, meets Herman van Rompuy, president of the European Council, in Brussels.

Today (possible)
Slovakia’s parliament could hold its second vote to approve changes to the European Financial Stability Facility.

Tomorrow and Saturday (14-15 October)
Finance ministers and central bank governors of the G20 group of rich and emerging economies meet in Paris.

20 October
Jean-Claude Trichet presides for the last time over a meeting of the governing council of the European Central Bank (ECB).

21 October
Finance ministers of the eurozone expected to meet.

22 October
General Affairs Council (foreign or EU affairs ministers) and EU finance ministers expected to meet separately to prepare for European Council.

23 October
New date for European Council (originally scheduled for 17-18 October).

3 November
Mario Draghi presides over his first governing council meeting of the ECB.

3-4 November
G20 leaders to hold summit in Cannes.

There is also disagreement over the extent to which the private sector will be involved in any plan for a Greek default. Germany is keen for Greek bondholders to take a greater ‘haircut’ than the 21% agreed by eurozone member states on 21 July. France is eager to maintain the current arrangement.

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