France, Germany in EU summit showdown

BRUSSELS, Belgium - France and Germany crossed swords Wednesday, May 23, over how to spur growth in the debt-stricken eurozone at an EU summit tinged by plunging markets and the euro hitting a near two-year low.

"We have to act straight away for growth," French President Francois Hollande insisted amid deepening worries over Greece's eurozone future and Spain's troubled banks. "Otherwise there will still be doubt on the markets."

"We have no time to waste," the freshly elected Socialist leader stressed at his first EU summit after a cost-conscious train ride from Paris.

German Chancellor Angela Merkel faced pressure to give ground on her hardline austerity doctrine as the European single currency fell to US$1.2564 and London, Frankfurt and Paris stock exchanges each shed well over 2%.

However, she rejected a call by Hollande for eurobonds -- jointly pooled eurozone debt -- on the grounds they are "not a contribution to stimulating growth in the eurozone" and adding that such instruments ran contrary to EU treaties.

Berlin fears eurobonds would only result in German taxpayers permanently underwriting the public finances of weaker eurozone economies.

In a German press interview appearing on Thursday, Merkel's finance minister Wolfgang Schaeuble maintained that "the differences between ourselves and France are not so great."

Floating ideas

Schaeuble said Hollande wants more done to kickstart growth, but insisted that the French president "does not want to water down" a treaty obliging balanced budgets the Frenchman initially said he wanted to re-negotiate.

"We're not talking about an easing of budgetary discipline," Schaeuble insisted.

A member of Hollande's entourage said he was "floating ideas" but "not coming to Brussels with a Kalashnikov."

Non-euro Britain also flexed muscles, ruling out in advance other core ideas put forward by European Union officials and backed by Hollande -- including a tax on financial transactions.

Home to three quarters of Europe's financial services industry, London vehemently rejects the tax.

Opening the dinner talks, EU president Herman Van Rompuy underlined the need to find "a strong will to compromise" with the risk of knock-on effects from a Greek eurozone exit exercising markets.

After Germany's central bank said the picture in Athens ahead of June 17 elections was "highly alarming," leaders were expected to remind Greek voters that they expect Athens to honour a 237-billion-euro ($300 billion) bailout deal agreed in March.

"I don't believe we can afford to allow this issue to be endlessly fudged or put off," said British Prime Minister David Cameron, notably urging the European Central Bank (ECB) to do more.

Treasury officials from the other 16 eurozone member states were told this week to "reflect" on what an exit would mean for their economies, a diplomat from one eurozone country told AFP.

Spain's case

The Greek finance ministry in Athens "categorically" denied this was the case.

Contingency planning that diplomats called "commonsense" stems from arguably greater worries about Spain and Italy, after a report by Fitch Rating agency showed foreign investors had fled Spanish and Italian debt in huge numbers.

Spanish Prime Minister Mariano Rajoy said Spain did not require the support of European rescue funds, saying there were "faster instruments" -- an apparent allusion to the ECB which has previously bought government bonds in sell-on markets.

Analysts see this as inevitable, with consultant Sony Kapoor warning that Spain otherwise "is headed toward needing a fully-fledged bailout."

Wednesday's talks were set to endorse a trial for 230 million euros in seed money from the EU's budget this year and next by way of EU "project bonds."

This is intended to attract 4.5 billion euros of long-term private investment for Europe's incomplete energy, transport and digital networks.

Other ideas on the table included a 10-billion-euro boost to European Investment Bank (EIB). - Agence France-Presse

View the original article here

Read More

Germany lends Libya rebels $144 million

Libyan rebel fighters attend the funeral of comrades killed during clashes with loyalist troops in the city of Benghazi on July 22.NEW: Rebel forces fight to hold on to village of QawalishGermany to lend money for "civilian and humanitarian purposes"Statement: The money ultimately will be repaid from unfrozen assetsGermany previously announced a smaller loan of $10 million

(CNN) -- Germany announced Sunday it has agreed to lend 100 million euros ($144 million) to the rebels in Libya for "civilian and humanitarian purposes" despite staying out of NATO's bombing campaign against Libyan government forces.

Germany had previously announced a loan of $10 million (7 million euros) for humanitarian aid to the Transitional National Council, the rebel movement that is battling to unseat longtime Libyan strongman Moammar Gadhafi.

"Because of Colonel Gadhafi's war against his own people, the situation in Libya is very difficult," German Foreign Minister Guido Westerwelle said in a statement announcing the loan. "There is a major lack of funds to build infrastructure, as well as a shortage of needed goods, ranging from medical supplies to food."

Germany has not participated in the NATO-led military effort in Libya and abstained from the U.N. Security Council vote that authorized military action to protect civilians from Gadhafi's forces. But German Chancellor Angela Merkel said in June that her country shares the hope "that this NATO mission is successful."

Merkel also said Germany was supporting the NATO mission by providing increased resources to the U.S.-led mission in Afghanistan, freeing other nations to contribute to the Libyan campaign.

Germany has recognized the rebels as the legitimate representative of the Libyan people and established a liaison office with the opposition in Benghazi in May.

Berlin indicated Sunday that the loan will eventually be repaid by the Transitional National Council, using frozen assets from the Gadhafi regime. The statement indicated the reimbursement would happen "when the U.N. Security Council unfreezes the assets for a legitimate Libyan government."

By agreeing to the loan, Germany added itself to a growing number of nations, including Turkey and Qatar, that have announced plans to hand over millions of dollars in frozen Gadhafi assets to the rebel council in Benghazi.

In an interview with CNN last week, the finance minister for the internationally isolated Libyan government in Tripoli warned that the proposed reallocation of frozen funds would violate international law.

"The international monetary system cannot withstand action in this manner," said Abdulhafid Zlitni. "If you are freezing, through United Nations Security Council action, funds for any country, then you can't confiscate it. There are legal obligations of the banks."

Also on Sunday, rebel forces fought to hold on to Qawalish, a key Libyan village along a major north-south route. Rebel fighter Talha Jwaili told CNN that Gadhafi forces advanced from nearby Al-Asaba using heavy machinery. The rebels called in a large rebel force from Zintan, a city 25 miles (40 kilometers) away, and "managed to repel the Gadhafi forces after a fierce fight that lasted almost four hours," Jwaili said.

One person died in the fighting, Jwaili said -- his 16-year-old cousin, Youssef Jwaili, son of the Zintan military commander. Several others were injured, Jwaili said.

State TV, meanwhile, offered a different version of events. It reported "armed gangs and the colonialist crusader alliance" attacked a march of Libyan tribes at the entrance of Qawalish. It broadcast video of a convoy of civilian vehicles with passengers waving green government flags. It also showed video of people being treated at a hospital.

In a speech last week, Gadhafi called on his supporters to march -- unarmed -- to reclaim rebel-controlled cities and towns.

"A million should march to Benghazi and liberate it from the traitors without any weapons," the strongman said. "Even without weapons, we can cleanse the western mountains by the march of men and women."

CNN's Ivan Watson in Tripoli, Kareem Khadder in Tunisia and Frederik Pleitgen in Cairo contributed to this report.

View the original article here

Read More