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Sarkozy, Merkel To Address Europe's Debt Crisis


This is MORNING EDITION from NPR News. I'm David Greene.


And I'm Renee Montagne.

The leaders of Germany and France meet today in Paris to discuss the European debt crisis. Those two countries run the biggest economies in the Eurozone. But even France was rocked over the past week by rumors that its credit rating might be downgraded. And this morning, new numbers from Germany show its economy slowed more than expected in the second quarter.

NPR's Jackie Northam is in Paris, and joins us to talk about all of this. Good morning.

JACKIE NORTHAM: Good morning, Renee.

MONTAGNE: Now, European leaders have had lots of meetings, Jackie, and they've announced a number of plans to put a stop to the debt crisis. What makes this particular meeting today so significant?

NORTHAM: Well, because it's coming on the heels of, certainly, some very bad economic news out of France last week. It showed that the economy here had ground to a halt, but also problems with Italy and Spain as well. And certainly part of the discussions, today, will be President Nicolas Sarkozy assuring Chancellor Angela Merkel that he's on top of the economic crisis here in France, and that he's willing to take some tough measures - measures to ensure that the country can stay on its feet, fiscally.

There were enormous concerns that France would start going the way of Italy and Spain another European nations with their troubled economies. And this is the second largest economy in the European Union after Germany, so it's sent shockwaves throughout, you know, the financial world.

But one analyst I spoke with reminded me that France is not the Greece. It's highly productive country, and Sarkozy has taken some steps to cut spending.

But, Renee, more broadly, the two leaders are going to be discussing what to do about the economic crisis that's gripping much of the rest of Europe. And that's going to be a real challenge to get that under control.

MONTAGNE: Do you know what serious proposals might come out of these discussions?

NORTHAM: Well, in fact, people watching this situation very carefully are predicting that it's going probably be more show than substance. The meeting is intended to show the two leaders are taking control of the debt crisis, they're trying to be proactive. And they're expected to dress things like, you know, better economic governance and coordination throughout the Eurozone, and just ways of bringing better fiscal discipline, if you like, among the 17 nations that really do make up the Eurozone.

But there's likely to be a disconnect between their words which are meant to bring assurance and comfort and what the markets want to hear. And that would be tangible steps out of this economic mess.

MONTAGNE: Well, Jackie, we of course - we all lived through last week's roller coaster ride in the market and panic in the markets around the world. Is there anything leaders of France and Germany can do to reassure the financial community that Europe's going to be okay?

NORTHAM: Well, one of the things we're hearing much more about is the introduction of Eurobonds as a way of stemming the debt crisis. And these are bonds that are jointly issued and guaranteed by all the Euro states. And it would be a way of spreading the debt around, and this would allow the smaller and/or troubled nations some market access and keep their borrowing costs low.

But countries like France and Germany and the Netherlands, which all have Triple-A credit ratings, would feel they would bear the brunt of the responsibility and it would vastly increase their borrowing costs. So, not surprisingly, these are very unpopular, especially in Germany. And Chancellor Merkel has definitely said she will not sign off on this. And, in fact, German officials are saying that Eurobonds will not even be discussed today during the meeting with President Sarkozy.

MONTAGNE: So it may turn out nothing of substance comes out of this meeting, even though it's an important meeting.

NORTHAM: Well, that's exactly right. And that's what economists and analysts are saying here, which is that, you know, it's going to be sign that the two leaders get together to show or try to show their under control. But Eurobonds are going to be the key issue and it's very, very unlikely that those are going to be introduced today, if even discussed during the meeting.

MONTAGNE: We've been speaking with NPR's Jackie Northam in Paris. Thanks very much.

NORTHAM: Thank you, Renee. Transcript provided by NPR, Copyright NPR.

Renee Montagne, one of the best-known names in public radio, is a special correspondent and host for NPR News.
Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.