Merkel and Sarkozy to unveil eurozone rescue package
Germany's Angela Merkel and Nicolas Sarkozy of France will set out plans for a eurozone rescue package when they meet tomorrow, and the European Central Bank could offer a €1 trillion (£640bn) cash injection if closer fiscal union is agreed later this week.
Mrs Merkel last week vowed to create a 'fiscal union' and signalled an uncompromising push for treaty changes at Friday's EU leaders meeting.
The Sunday Times reported that new measures to be set out by Mrs Merkel and Mr Sarkozy in Paris tomorrow will not require changes to European Union treaties, according to diplomatic sources.
However, Mrs Merkel last week vowed to create a "fiscal union" and signalled an uncompromising push for treaty changes when all of the EU's leaders meet this coming Friday.
She made it clear that eurozone states would be called upon to relinquish economic sovereignty and be subjected to close central supervision – a pre-requisite for the eurozone to secure vital extra financial help.
"We are going to Brussels with the goal of achieving treaty change," she said.
Mr Sarkozy has used more moderate language because the French public does not support the idea of handing over tax and spending powers to central EU control, but he did call for a "true economic government" in the eurozone.
The Sunday Times also reported that the ECB is lining up €1 trillion to be used for a "colossal" intervention in European bond markets.
The cash injection will only be carried out if leaders can agree on handing over more fiscal control to the EU and for strict controls to be imposed on nations struggling to control their debts, the newspaper said.
The expanded bond-buying programme could be announced when the ECB holds its monthly interest rate-setting meeting on Thursday.
The intervention would also be presented as a "stop gap measure" until the closer fiscal union is achieved, according to the report.
European leaders have so far promised four "comprehensive" but unsuccessful rescue packages in 19 months, but stock markets climbed last week after Mrs Merkel's comments about closer union.