Europe

Europe

Merkel, Cameron agree to disagree on rescue plan for Europe

19 November 2011 03:16 (UTC +04:00)

German Chancellor Angela Merkel and British Prime Minister David Cameron might have given it their best shot to present a united front on Friday in Berlin.

Following a war of words prior to the meeting, they have reached an consensus that they are unsurprisingly divided on how to save the eurozone and the larger European Union, as admitted by observers that the two did not have a second choice.

Regarding the dreadful debt crisis, Merkel prefers a step-by-step approach, calling for more fiscal and political union, while Cameron favors "decisive action" and simply wants "less Europe" to keep Britain out of the trouble.

Indeed, it has the least possibility for the eurosceptic UK and the eurozone’s paymaster Germany to think alike even when they are somehow on the same boat shattered by a sweeping sovereign debt crisis.

The Germany-Britain bilateral ties had been sidelined since the crisis hit almost two years ago, said Ferdinand Fichtner, chief economist at the German think-tank DIW Berlin, adding that intra-eurozone discussions took all the precedence.

After Friday’s meeting, the two heavyweight heads also maintained an irreconcilable clash over the introduction of a financial transaction tax in Europe, which was highly advocated by Merkel and rebuffed by Cameron.

"A major fear in the UK is that the tax can be contrary to the interests of the maintenance of London as a global financial center," said Michael Callingaert, a visiting scholar with the Washington-based Brookings Institution, in an email interview with Xinhua.

As the British economy, especially London, highly depends on the financial industry, a financial transaction tax might undermine the competitiveness of its financial industry while a possible form of fiscal federalism for the eurozone could have serious implications for the UK.

However, Cameron has been accused, most recently by Merkel’s closest ally French President Nicolas Sarkozy, of attempting to intervene the decision-making while staying outside the eurozone.

"Those who object to the UK’s position, France in particular, argue with varying degrees of vociferousness that the is trying to have it both ways," said Callingaert.

So far it has been widely expected that the tax might be first introduced in the eurozone countries and that Merkel, together with Sarkozy, will further push for a more politically and fiscally integrated Europe.

Merkel has also called for changing the Treaty of Lisbon, in an apparent attempt to calm down the market by integrating all the other eurozone countries into the well-reputed German budget discipline.

"Merkel has realized that a currency without a state is unsustainable and there’s a need to balance solidarity and discipline," said Pierre Defraigne, executive director of the College of Europe-Madariaga Foundation.

Meanwhile, for the UK, European integration has always been of second-order importance if there’s any, but the contagion of the current debt crisis will also continue to pose a notable risk for the British economy.

The German-Briton clash could cast a shadow on the winter summit of the EU’s top leaders in early December. It may come up with a strategic direction rather than concrete amendments for Europe’s future, according to Fabian Zuleeg, chief economist at the Brussels-based think tank European Policy Center.

"Countries like Germany and France are likely to signal that deeper integration is now firmly on the agenda," Zuleeg said.