Berlin wants explicit punishment of the banks, even if this triggers a Greek default.
Paris has laboured day and night to find a default-free solution, fearing a euro-Lehman crisis
Ambrose Evans-Pritchard, 8:55PM BST 20 Jul 2011
They are even further apart on the larger issue that overshadows this summit: whether to take the fateful step towards an EU debt union in order to defend Spain and Italy
This could be done by issuing eurobonds, or allowing the eurozone’s €440bn bail-out fund to buy Italian and Spanish bonds preemptively
Otmar Issing, the European Central Bank’s first chief economist and EMU’s most iconic figure, has made it very hard for the Chancellor to justify any of the key options on the table.
“The issuance of eurobonds amounts to financial power without democratic legitimacy. We must not forget that Western democracy began through parliamentary control over tax and public spending,” he told the Frankfurter Allgemeine, though he might equally have been speaking to the German consitutional court as it prepares to rule on the legality of the EU bail-outs.
Both eurobonds and the use of the EFSF for mass bond purchases would require EU treaty changes.
These would have to be ratified by 27 parliaments, a very slow process.
In Germany’s case it would require a two-thirds majority.
Full text here med bra bild.
Ever closer union