Sarkozy, Merkel agree to stop sniping on ECB crisis

Thu Nov 24, 2011 3:55pm EST
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By Daniel Flynn and Emmanuel Jarry

STRASBOURG, France (Reuters) - France and Germany agreed on Thursday to stop arguing in public over whether the European Central Bank should do more to rescue the euro zone from a deepening sovereign debt crisis.

President Nicolas Sarkozy and Chancellor Angela Merkel said after talks with Italian Prime Minister Mario Monti that they trusted the independent central bank and would not touch its inflation-fighting mandate when they propose changes of the European Union's treaty to achieve closer fiscal union.

They also demonstrated their backing for Monti, an unelected technocrat, to surmount Italy's daunting economic challenges, in contrast to the barely concealed disdain they showed for his predecessor, media billionaire Silvio Berlusconi.

"We all stated our confidence in the ECB and its leaders and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it," Sarkozy told a joint news conference in the eastern French city of Strasbourg.

French ministers have called for the central bank to intervene massively to counter a market stampede out of euro zone government bonds, while Merkel and her ministers have said the EU treaty bars it from acting as a lender of last resort.

The Netherlands however moved closer to endorsing the ECB as lender of last resort, apparently breaking ranks with Germany.

Finance Minister Jan Kees de Jager said he would prefer that the European Financial Stability Facility, the euro zone bailout fund, should be strengthened. But if the EFSF did not succeed, other measures would have to be considered.

"In a crisis one should never exclude anything beforehand. In the end, something has to happen," he said.   Continued...