PARIS, June 27: Germany's Angela Merkel heads to Paris on Wednesday for last-minute talks before a crucial EU summit, waving a warning that she will not budge in her opposition to pooling eurozone debt.
Upping the stakes ahead of the two-day summit starting on Thursday, Spain meanwhile raised the spectre of becoming the next eurozone country to need a full bailout amid the bloc's spiralling debt crisis.
Just hours before heading to Paris to meet with French President Francois Hollande, Merkel made clear she would not accept the idea of eurobonds that would share eurozone debt among members of the currency bloc.
France and others have pushed the idea of issuing bonds backed by the entire eurozone as a means of tackling the debt crisis, but Germany insists closer political and economic integration is needed first.
“Guarantees and controls must go hand-in-hand. There can only be joint liabilities when sufficient controls have been put in place,” Merkel told the German parliament.
“Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive.”
Merkel's Paris meeting is the latest in a rush of shuttle diplomacy to prepare for the summit in Brussels that will seek to tackle the short-term crisis and thrash out measures to prevent it occurring again.
The centrepiece of the summit is likely to be a repackaging of existing accords into a “growth pact” hailed as amounting to one per cent of European output, or about 130 billion euros ($162 billion).
But leaders will also seek to define the shape of the embattled eurozone for the next decade, seeking closer integration in the form of a banking union and handing powers to the European level for countries' financial sectors and budgets.
European leaders were handed a stark warning by crisis-hit Spain earlier on Wednesday, whose prime minister, Mariano Rajoy, said his country cannot continue to finance itself at the high rates it currently pays on the markets.
“The most urgent subject is the subject of financing,” Rajoy told parliament.
“We cannot finance ourselves for a long time at prices like those we are now paying,” he said, as the yield on Spanish government 10-year bonds traded at more than 6.8 per cent.—AFP