Eurozone economic heavyweights Germany and France have scheduled a joint meeting to address the financial unrest gripping Europe. But critics say a lack of European leadership is making the situation worse.
Confidence in the eurozone's viability has taken a hit
French President Nicolas Sarkozy on Thursday called a joint meeting with German Chancellor Angela Merkel in order to draft common solutions to the financial turmoil that has shaken European stock markets over the past week and raised doubts about the viability of the eurozone.
European stocks plunged Wednesday amid rumors that France's AAA credit rating faced a downgrade due to the nation's gaping public deficits. But the three key rating agencies - Fitch, Moody's and Standard & Poor's - reassured markets that Paris would maintain its top-notch credit status.
The shares of France's leading bank, Societe Generale, also plummeted nearly 15 percent Wednesday due to fears of its exposure to Greek debt.
Sarkozy called an emergency government meeting to address market unrest
France's securities regulator, the AMF, released a statement Thursday in which it warned that spreading unfounded information about France's economic health was "subject to penalty."
"The AMF, which monitors the markets continuously, has been alerted to the spreading of unfounded rumors concerning banking shares listed in Paris," the agency said in a statement.
Austerity in Rome
The current market turmoil in Europe has also been exacerbated by fears that Italy and Spain, the eurozone's third and fourth largest economies respectively, will ultimately be forced to ask for a bailout.
In Italy, Prime Minister Silvio Berlusconi's government outlined new austerity measures on Thursday that would privatize public services, cut bureaucratic costs and add a balanced budget amendment to the Italian constitution.
"We need very strong austerity measures in 2012 and 2013," Finance Minister Giulio Tremonti told Italian lawmakers.
Silence in Berlin
Chancellor Merkel's center-right government, meanwhile, has come under fire for not jumping out in front of the current financial turmoil in order to bring Europe back from the precipice of an escalation of the current debt crisis.
"Policymakers are of course powerless against stock market losses," Andreas Schmitz, president of the Association of German Banks, told the German daily tabloid Bild.
"But the problem is the lack of leadership in Europe - the people on whom it all depends - the officials in Berlin, Paris and elsewhere are not courageously moving forward and making decisions."
Sarkozy and Merkel are set to meet on Tuesday
Germany's opposition Green Party has sharply criticized a suggestion made by Economy Minister Philipp Rösler to introduce a stability union. The proposed union would have a council empowered to award bailouts and impose sanctions on EU nations facing fiscal problems.
Although Rösler's predecessor, Rainer Brüderle, came out in support of the idea, Rösler himself indirectly acknowledged that he had not discussed his proposal with Finance Minister Wolfgang Schäuble.
"Rösler's uninformed chatter and the [comments] by his predecessor Brüderle threaten to sharpen the current crisis," said Jürgen Trittin, leader of the Greens' parliamentary group.
While the German government took political fire in Berlin, the French newspaper Le Parisien released a poll which indicated that the French trust Merkel more than Sarkozy to resolve the current economic turmoil gripping Europe.
According to the poll conducted by Harris, 46 percent of respondents trusted Merkel to help avert another financial crisis while 33 percent trusted Sarkozy. Sarkozy and Merkel's joint meeting is scheduled for Tuesday in Paris.
Author: Spencer Kimball (AFP, Reuters)
Editor: Martin Kuebler