France and Germany seek support for crisis plan

PARIS Wed Dec 7, 2011 6:11pm EST

German Chancellor Angela Merkel holds an umbrella as she arrives to the presentation of the first fully functional ''Energy Surplus House'' in Berlin, December 7, 2011.  REUTERS/Fabrizio Bensch

German Chancellor Angela Merkel holds an umbrella as she arrives to the presentation of the first fully functional ''Energy Surplus House'' in Berlin, December 7, 2011.

Credit: Reuters/Fabrizio Bensch

PARIS (Reuters) - France and Germany are to sound out conservative European leaders on Thursday about their plan to defuse the euro zone's debt crisis, eager to rally support before a high-stakes EU summit.

Paris and Berlin need to win backing quickly for their crisis plan, which aims to amend the European Union's Lisbon treaty to toughen budget discipline, if they are to have it ready as they hope by March.

President Nicolas Sarkozy and Chancellor Angela Merkel have a chance to rally some other leaders behind their masterplan before the EU summit at a congress of the conservative European People's Party on Thursday in Marseille, southern France.

With many details still to be hammered out, Sarkozy and Merkel want to secure other EU countries' support at the summit starting late Thursday in Brussels and scheduled to end on Friday.

But a senior German official dampened hopes for a breakthrough at the summit while, in contrast, France's finance minister said the leaders of the two countries would not leave Brussels until a "powerful" deal had emerged.

If all 27 EU states do not support more fiscal union by adapting the treaty, which took eight years to negotiate, then Sarkozy and Merkel want the 17 euro zone countries to go ahead alone with more integration.

The French and German leaders are due to arrive at mid morning in Marseille, and Sarkozy is due to make a speech at 1230 GMT. He and Merkel are both due to hold bilateral meetings later with Spanish Prime Minister-elect Mariano Rajoy before they head to Brussels.

"We need more binding and more ambitious rules and commitments for the euro area member states," Sarkozy and Merkel wrote in a letter to European Council President Herman Van Rompuy, who has made his own proposals for tackling the crisis.

"They should reflect that sharing a single currency means sharing responsibility for the euro area as a whole," the letter added.

THE ART OF BUILDING A CONSENSUS

The Franco-German plan would change the EU's treaty to slap automatic penalties on countries that overshoot deficit targets. The sanctions could be stopped only if three quarters of euro zone countries are against them.

Not all euro zone countries are comfortable with all the French and German proposals, with Finland opposed to their call for majority votes on major policy decisions.

"Finland's view is very clear, our stance is that unanimity is required in decision making ... and that is the view Finland will promote going forward as well," Finnish Finance Minister Jutta Urpilainen told reporters on Wednesday in Helsinki.

European Central Bank President Mario Draghi signaled last week that an overhaul of the euro zone's fiscal rules would be the condition for the central bank playing a greater role in calming the debt crisis.

With financial market doubts hanging over the euro zone's EFSF financial rescue fund, many economists say that the most effective way of getting a grip on the crisis would be for the ECB to play a more aggressive role.

As EU leaders prepare for their summit, the ECB will meet in Frankfurt on Thursday for a monetary policy meeting at which economists widely expect it to cut interest rates by 25 basis points to a record low of 1.0 percent

In a sign of concern about the crisis beyond Europe, U.S. Treasury Secretary Timothy Geithner has met Sarkozy and Draghi among other top officials during a whistlestop tour of Europe to seek a breakthrough in the debt crisis.

EU leaders attending the Marseille congress are due to head to Brussels mid afternoon in time for a summit dinner, likely to run late into the night with many details about the crisis plan to be worked out.

(Reporting by Leigh Thomas and Terhi Kinnunen; editing by David Stamp)

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