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Merkel rebuffs pleas on eve of summit

Wednesday, June 27, 2012 - 02:44

June 27 - Just ahead of a crucial European summit which could determine the future of the euro zone, EU leaders are more openly divided on what to do than at any time since the crisis began, with Germany brushing aside Spain and Italy's calls to help lower their borrowing costs. Joanna Partridge reports.

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A plea from the Spanish government as one of the most crucial European summits approaches. Prime Minister Mariano Rajoy will ask European leaders to stabilise the financial markets. SOUNDBITE: SPANISH PRIME MINISTER MARIANO RAJOY, SAYING (Spanish): "We can't keep funding ourselves at the current funding prices for long. There are many institutions, and also financial institutions, which have no access to the financial markets. It's happening in Spain, in Italy and in other countries." Spain's still under market pressure despite requesting a bailout for its banks. And investors are increasingly concerned the summit won't achieve much. European leaders seem more divided than ever over how to proceed and political tensions are rising. German Chancellor Angela Merkel told parliament that paymaster Germany's strength isn't unlimited. (SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "I am not under any illusions, I expect controversial discussions in Brussels and once more, all eyes -- or at least a lot of eyes -- will be focused on Germany." France, Italy and Spain are in favour of issuing joint euro zone bonds. Merkel tried to bury the idea once and for all on Tuesday, saying Europe wouldn't share total debt liability "as long as I live". Nick Parsons from National Australia Bank can see why. SOUNDBITE: Nick Parsons, Head of Markets Strategy, National Australia Bank, saying (English): "The analogy I would use here is that between allowing someone to use your credit card and allowing them to use a prepaid card for spending. And I think what Miss Merkel is seeking actively to avoid is giving Germany's credit rating to someone else to do what they will with." Germany does however seem ready to move towards using euro zone rescue funds more flexibly to help banks - and calm investors. Angus Campbell from Capital Spreads expects some kind of compromise. SOUNDBITE: Angus Campbell, Head of Market Analysis, Capital Spreads, saying (English): "Germany obviously is having serious pressure put upon it by all its European counterparts. People realise that Germany has obviously benefited substantially from the single currency over the years and now it is time for them to at least provide some kind of backstop." But Germany does not seem to want to move any further. Europe's leaders appear united in their attempt to move towards closer fiscal and banking union. But many fear the crisis could spin out of control long before union is achieved. Joanna Partridge, Reuters

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Merkel rebuffs pleas on eve of summit

Wednesday, June 27, 2012 - 02:44