CRUNCH talks between the eurozone’s two biggest economies have been described as a “defining moment” for Ireland and the eurozone by one of Ireland’s top economists.
It is hoped today’s meeting in Paris between German chancellor Angela Merkel and French president Nicolas Sarkozy will produce a road map for the 17-nation eurozone as it battles a growing sovereign debt crisis.
Last week, European markets saw their worst losses since 2008, adding further impetus to calls from the French government for the eurozone countries to forge a more centralised financial system — a move strongly opposed by Berlin.
Commenting on the talks, UCD professor Ray Kinsella has said today’s meeting has the capacity to “change the trajectory not only of our economy but of modern Irish history”. He said the meeting may prove a defining moment in the evolution of the eurozone.
“The leaders may talk of many things but the real agenda for the meeting is simple,” he said. “Firstly, is there anything left that can halt the implosion of the eurozone? Secondly, is political union the only solution left on the table?”
Mr Kinsella said that political union is very much an issue and there is “very little” left that has not been attempted and which has not already failed. “In the short-term perspective, it would mean the eurozone could borrow as a single entity, underwritten by the economy and people of Germany,” he said.
Such moves could mean a single European Department of Finance, resulting in fiscal policies and national budgets being determined by Germany, said Mr Kinsella.
Ms Merkel and Mr Sarkozy are expected to discuss ways to improve economic governance in the eurozone, and could agree to introduce regular meetings of eurozone leaders and enlarge the role of European Council president Herman van Rompuy.
These steps could bring greater fiscal discipline to the currency bloc.
The idea of eurozone-backed “eurobonds” will not, however, be discussed at the meeting, it emerged yesterday.
Essentially, such bonds would be IOUs issued to investors and backed by the eurozone as a whole, rather than individual countries.
The idea of “eurobonds” has been strongly opposed by Germany, which is fearful such a step would push up its borrowing costs.
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