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Economy

British PM Cameron tells Merkel confident eurozone will beat debt crisis

media Frosty relations between British PM David Cameron and German Chancellor … Reuters/Tobias Schwarz

British Prime Minister David Cameron says he is confident the eurozone will find its way out of its debt crisis and urged institutions including the European Central Bank to defend the common currency. He stressed he fully believed Germany's commitment to defend the euro which was in Britain's interest.

 

 

His comments came as he met German Chancellor Angela Merkel in Berlin on Friday amid sharp differences over how to deal with Europe's debt crisis.

Chancellor Angela Merkel has said she wants “more Europe” with greater concensus on issues such as fiscal policy while David Cameron is said to fear a two-tier Europe that could see non-euro countries sidelined.

According to the German weekly Der Spiegel, the Cameron government is facing a dilemma. “It wants to maintain the greatest possible distance to the crisis on the continent, but it also wants to have a say given that the crisis is changing the nature of the European Union.”

Dossier: Eurozone in crisis

The two leader’s opposing views could cause problems at the upcoming 9 December EU summit to hammer out changes to the fiscal guidelines for the 27-member bloc.

Among other concerns, Germany wants non-euro Britain to support a tax on financial transactions which the City of London fears would dissuade investors.

Meanwhile, Cameron wants the European Central Bank, the ECB, to step in to defend the euro by buying up government bonds on a major scale - a move Berlin strongly opposes.

ECB chief Mario Draghi on Friday resisted pressure to come to the rescue of the eurozone claiming it would undermine the bank’s credibility.

“Credibility implies that our monetary policy is successful in anchoring inflation expectations over the medium and longer term,” he said.
 

A week in the eurozone crisis.

  • Italy – Former EU commissioner Mario Monti becomes the country’s new prime minister and names a technocrat government to deal with the debt crisis. Markets react favourably, but the cost of government borrowing soon rises to the seven per cent danger level. Monti unveils crisis plan and wins vote of confidence in parliament.
  • Greece – Interim Prime Minister Lucas Papademos outlines coalition government plans, wins a vote of confidence by a huge majority and presents 2012 austerity budget to parliament.
  • Spain - Treasury pays a record interest rate of 6.975 per cent at a new debt issue to raise 3.563 billion euros on government bonds. General election on Sunday expected to see victory for centre-right People’s Party.
  • France – Figures for third quarter show growth of 0.4 per cent but the gap between German and French 10-year bonds widens to a record level. The lower house of the French parliament approves a tight 2012 budget as Paris aims to eliminate its deficit within five years.

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