July 21, 2011
Nobody really believes that Greece can pay down its debt any time soon. Which is why, say German commentators, it is time for Chancellor Angela Merkel to stop weighing her options and take action. The markets, they argue, need a signal of European solidarity.
The talks lasted for more than six hours. German Chancellor Angela Merkel and French President Nicolas Sarkozy holed up in the Chancellery in Berlin until shortly after midnight on Wednesday night, in an attempt to find a common position on the euro ahead of Thursday's special summit aimed at assembling a second bailout package for heavily indebted Greece. At 10 p.m., the two were joined by European Central Bank head Jean-Claude Trichet. European Council President Herman Van Rompuy participated by telephone.
Finally, shortly after midnight, Merkel's spokesman Steffen Seibert was able to announce that the two leaders had reached an agreement. Though details have still not been announced, the euro immediately began rising against the dollar in Asian markets.
Wednesday's meeting had become necessary after weeks of head-butting between Paris and Berlin over the correct strategy to pursue in renewed efforts to prevent a Greek insolvency. Merkel had long been insisting on significant private involvement in the second Greek bailout package, which is likely to be similar in size to the €110 billion fund passed just over a year ago. France, however, had been skeptical, in part because French banks are heavily exposed to Greek debt.
Ratings agencies, too, had not taken kindly to Merkel's plan and had indicated that they might view such involvement as a partial default. The ECB had likewise voiced its strict rejection of the plan. In a meeting several weeks ago, Sarkozy got Merkel to back away from her original position of making private involvement mandatory, going for an optional plan instead. That, though, has likewise proven to be unworkable.
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