Sarkozy and Merkel hold key meeting amid divisions over Tobin tax

German Chancellor Angela Merkel hosts the first major meeting of the year on the euro as differences emerge over how to tackle the economic crisis and a series of disappointing economic data emerges from the eurozone. 

Reuters

Merkel welcomes French President Nicolas Sarkozy for talks in Berlin at the start of a flurry of activity ahead of a key European Union summit on 30 January.

Ahead of the summit, Sarkozy has made it clear he is prepared to introduce a controversial tax on financial transactions on his own if necessary.

The issue is one of several on the agenda between the two leaders and has already created division within the EU.

Germany says the tax would have to be agreed unanimously within the EU while British Prime Minister David Cameron is fiercely opposed to the tax and has vowed to block its introduction.

On Friday, Italian Prime Minister Mario Monti said Rome was open to the idea of a tax on financial transactions, but only if the measure was part of an EU-wide effort.

Meanwhile, the latest unemployment figures show joblessness around a record high with slumping consumer and business confidence.

And the euro fell to another 16-month low against the dollar and Italian borrowing costs rose above the worrying seven per cent barrier.

Merkel and Sarkozy will also discuss the situation in Hungary after the IMF and EU officials broke off talks over a possible credit line due to concerns over the independence of its central bank.

The Italian PM is set to visit Berlin on Wednesday and a three-way France-Germany-Italy summit will take place in Rome on 20 January, three days before a key meeting of eurozone finance ministers in Brussels.