France and Germany clash over ECB crisis role
By Nicholas Vinocur and James Mackenzie
PARIS/ROME (Reuters) - France and Germany, Europe's two central powers, clashed on Wednesday over whether the European Central Bank should intervene more forcefully to halt the euro zone's accelerating debt crisis after modest bond purchases failed to calm markets.
Facing rising borrowing costs as its 'AAA' credit rating comes under threat, France urged stronger ECB action, adding to mounting global pressure spelled out by U.S. President Barack Obama.
Bond market turmoil is spreading across Europe. Italian 10-year bond yields have risen above 7 percent, unaffordable in the long term. Yields on bonds issued by France, the Netherlands and Austria -- which along with Germany form the core of the euro zone -- have also climbed.
"The ECB's role is to ensure the stability of the euro, but also the financial stability of Europe. We trust that the ECB will take the necessary measures to ensure financial stability in Europe," government spokeswoman Valerie Pecresse said after a cabinet meeting in Paris.
French Finance Minister Francois Baroin repeated Paris's view that the euro zone's EFSF bailout fund should have a banking license, something Berlin opposes. Such a move would allow the fund to borrow from the ECB, giving it extra firepower to fight the spreading crisis.
"The position of France ... is that the way to prevent contagion is for the EFSF to have a banking license," Baroin said on the sidelines of an awards ceremony.
But German Chancellor Angela Merkel made clear Berlin would resist pressure for the central bank to take a bigger role in resolving the debt crisis, saying European Union rules prohibited such action.
"The way we see the treaties, the ECB doesn't have the possibility of solving these problems," she said after talks with visiting Irish Prime Minister Enda Kenny. Continued...