Monday marked the beginning of the eurozone’s most critical week to date, with German Chancellor Angela Merkel and French President Nicolas Sarkozy meeting to agree on joint proposals. The two leaders have been working so closely together that the news media has started to call them ‘Merkozy.’
The agreed-upon proposals will then be brought to an EU summit on Friday, which is seen as one of the most important meetings dictating the fate of the single currency thus far.
However, Germany favours stricter control on all countries within the EU, calling for “concrete steps towards a fiscal union.”
This would mean extremely close integration throughout the eurozone, including taxing and spending policies. France is not ready to commit this far, as Sarkozy promised his constituents in a speech last week. He vowed to keep France’s sovereignty, saying that he opposed Merkel’s idea to allow Brussels have a final say in national budgets and spending.
The pressure is mounting for Sarkozy and Merkel to agree on joint measures and push them through in Friday’s summit. Sarkozy has said that the two countries must work together to form the heart of “a zone of stability.”
Both leaders are vehemently against the breakup of the eurozone. “What will remain of Europe if the euro disappears?” Sarkozy asked. His answer was “nothing.”
The stakes are high as the two leaders of the ‘heart’ of Europe come together in the first of many eurozone talks for the week. As the world waits for a solution that all EU countries deem acceptable, two of the eurozone’s most highly indebted nations are floundering.
Italy’s new Prime Minister Mario Monti is set to seek approval for his government’s austerity plans this week. He has said that taxes on the wealthy will go up, in addition to a rise in retirement ages.
Italians are also in dire need of tackling a centuries-old tax evasion problem that has left the country’s coffers empty.
Meanwhile, Irish Prime Minister Edna Kenny has also said that citizens must be prepared for tough budget cuts to be announced this week.
Ireland is preparing to cut spending by 2.2 billion euros a year, and raise taxes by 1.5 billion euros. VAT is set to increase to 23% in the Irish Republic.