August 16, 2011 / 11:40 AM / 8 years ago

Sarkozy, Merkel to discuss debt brake laws for EMU: source

BERLIN (Reuters) - Chancellor Angela Merkel and French President Nicolas Sarkozy will discuss on Tuesday the possibility of instituting national ‘debt-brake’ laws, similar to that adopted in Germany, across the euro zone, a source said.

The leaders will meet in Paris later in the day to discuss how to reinforce economic cooperation and contain the euro zone’s debt crisis.

Germany’s fiscal policy is now partly governed by the debt brake, which came into effect this year and obliges the federal government to reduce the annual gap between revenue and spending to under 10 billion euros ($14.5 billion) by 2016.

In Paris, the two leaders will also likely discuss holding regular euro zone summits, as France has long sought, and ways of improving peer monitoring of fiscal policies, before they issue proposals by the end of August, the source said.

Those in turn will be evaluated by European Council President Herman Van Rompuy, who has been charged with putting together a package on economic coordination for an EU summit in October seen as essential for the bloc’s cohesion.

The heads of the two European heavyweights will also discuss better bilateral cooperation and possible organizational changes in the euro zone including the possibility of selecting a coordinator and spokesman for the euro, the source said.

Officially off the table at the meeting is discussion over the idea of common euro zone debt issuance, supported yesterday by some leading German business groups but fiercely opposed by Berlin.

Germany fears such “euro bonds” would push up German borrowing costs and reduce incentives for weaker euro zone members like Greece to reform.

A joint news conference is due at 12 p.m. EDT.

Reporting by Andreas Rinke, writing by Brian Rohan; Editing by Ruth Pitchford

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