Germany and France divided on fund use

GERMANY and France were split ahead of crucial talks tomorrow over how to strengthen shaky European banks and fight financial market contagion to prepare for a possible Greek default.

Under strong US and market pressure, German Chancellor Angela Merkel and French President Nicolas Sarkozy will try to bridge differences on how to use the eurozone’s financial firepower to counter a sovereign debt crisis that threatens the global economic recovery.

A German source said Paris wanted to be able to tap the eurozone’s €440 billion rescue fund to recapitalise its own banks, which have the largest exposure to peripheral eurozone debt, while Berlin insisted the fund should be used only as a last resort when no national funds are available.