Sarkozy and Merkel meet to discuss Eurozone debt crisis

The markets are watching anxiously ahead of a meeting on Tuesday in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel, to discuss ways to try to resolve the eurozone debt crisis. 

Reuters

Both Paris and Berlin have been trying to dampen expectations of a major announcement.

Merkel and Sarkozy are divided over how to address the crisis, with Berlin opposed to any proposals where German taxpayers effectively underwrite the debts of their eurozone partners.

After recent rumours that France might lose its Triple A credit rating, Berlin seemed in a stronger negotiating position, but poor German growth figures out today will give Merkel pause for thought.

Prior to today's talks, the two leaders made clear that they would not address calls from some quarters to issue a "eurobond" to pool eurozone member state governments' debts.

Eurobonds would certainly help weak economies like Greece and Portugal to finance their massive deficits, but by transferring some of the cost of servicing these debts to German taxpayers.

Sarkozy has long pushed for a more centralized system of controls across the Eurozone, but Merkel will not consider such moves without tougher new rules to enforce fiscal discipline throughout the bloc.

The French president will still advocate speeding up reforms to Europe's financial institutions and officials in Paris say he hopes that he and Merkel will agree "common positions on the reform of the governance of the Eurozone."