Skip to main content

Euro failure is 'luxury we can't afford,' Sarkozy warns

By the CNN Wire Staff
updated 12:24 PM EST, Thu December 8, 2011
German leader Angela Merkel arrives in France ahead of a crucial meeting later in Brussels billed as make or break for the Euro
German leader Angela Merkel arrives in France ahead of a crucial meeting later in Brussels billed as make or break for the Euro
STORY HIGHLIGHTS
  • NEW: U.S. stocks fall after the European Central Bank doesn't say it will buy debt
  • If the European Union fails this week, it will not get a second chance, Sarkozy says
  • Germany and France want the EU to have more influence over national budgets
  • Britain's David Cameron may be an obstacle to the changes

Brussels, Belgium (CNN) -- European leaders must band together to save the euro this week, the leaders of the eurozone's two biggest economies said Thursday, even as the head of the European Central Bank was warning of more bad economic times ahead.

Failure to reach an agreement at a summit in Brussels, Belgium, is a "luxury we cannot afford," French President Nicolas Sarkozy said.

"This is our duty. We have no other choice," he said, warning that the European Union would not get a second chance.

German Chancellor Angela Merkel said countries had to put their "national egotisms" aside and find a joint solution to the continent's debt crisis.

The national debts of euro members, including Ireland and Greece, have pushed the common currency to the brink of collapse, forcing international lenders to swoop in with bailouts.

S&P issues Europe debt crisis warning
Will Germany bend the rules?
Euro crisis a global game changer?
Breaking down eurobonds

The budget cuts they have demanded have led to mass protests that brought down governments in both countries -- and they are not the only ones with worrying levels of debt.

The French minister for European affairs, Jean Leonetti, warned earlier Thursday that the euro could "explode" and Europe could "unravel."

That would be a "disaster not only for Europe but for the whole world," Leonetti told the French TV station Canal+ on Thursday morning.

Hours later, the European Central Bank cut a key interest rate to 1%, effective December 14. It's the second cut in the rate in as many months, bringing the rate down to match its lowest level ever.

The head of the bank, Mario Draghi, warned that inflation was likely to stay high in the eurozone and growth would remain low. He announced extraordinary measures to ease financial markets.

But he did not announce that the bank would buy up the debt of eurozone nations struggling to balance budgets, and U.S. stocks fell at the opening.

Germany and France are now pushing for more European Union influence over the national budgets of the countries that use the euro.

Sarkozy and Merkel will present details of their plans at the summit.

But the plans could require all 27 members of the European Union to agree to change fundamental EU treaties -- and British Prime Minister David Cameron has vowed to drive a hard bargain before he will go along.

The United Kingdom is one of 10 EU countries that do not use the euro.

U.S. Treasury Secretary Timothy Geithner has been touring Europe ahead of the summit to underline the importance of the EU's bringing the crisis under control.

"I want to emphasize again how important it is to the United States and to countries around the world that Europe succeeds in this effort to build a stronger Europe, and I'm confident they will succeed," Geithner said in France on Wednesday.

On Thursday he met Italian Prime Minister Mario Monti, who came to power when his country's government collapsed over a debt crisis.

Geithner assured Monti that Washington supported his efforts to balance his country's budget.

Monti said he would meet President Barack Obama in Washington next month.

Some details about another EU plan have already leaked.

European nations could be penalized by being stripped of some powers if they fail to manage their budgets, according to a confidential memo from European Commission President Herman Van Rompuy, leaked Tuesday.

Van Rompuy's proposals may be even stricter than those of Merkel and Sarkozy.

The five-page memo proposes that the European Commission might be given the right to strip voting rights within the European Union from some countries who have been bailed out but are still not meeting their deficit targets.

The executive arm of the EU could force bailed-out countries, such as Greece, Ireland and Portugal, to comply with deficit regulations, which for the entire EU currently stand at 3% of GDP.

The meeting will occur under the shadow of a recent report from the rating agency Standard & Poor's, which threatened to downgrade 15 eurozone member states. Even the AAA-rated nations France and Germany have been placed on review for possible downgrade as the debt crisis continues to worsen.

Two eurozone members were not placed on credit watch -- Greece, because its credit rating already reflects a high risk of default, and Cyprus, which was already under review.

CNN's Naima Benallal reported from Paris; CNN's Jim Boulden reported from Brussels; CNN's Hada Messia reported from Rome, and CNN's Nina dos Santos, Richard Allen Greene and Irene Chapple reported from London.

ADVERTISEMENT
Part of complete coverage on
updated 3:43 PM EDT, Tue August 27, 2013
German Finance Minister Wolfgang Schaeuble says the eurozone's problems are not solved, but "we are in a much better shape than we used to be some years ago."
updated 11:28 AM EDT, Wed September 4, 2013
The G20 is held in Russia but, amid disagreements over Syria, can anything be done? John Defterios investigates.
updated 11:02 AM EDT, Wed July 10, 2013
Summer could not have come soon enough for Lloret de Mar, a tourist resort north of Barcelona. Despite the country's troubles, it's partying.
updated 1:50 PM EDT, Fri June 7, 2013
The euro club has suffered major shockwaves but its newest member has emerged as an economic star. What;s behind Estonia's success?
updated 9:23 AM EDT, Wed May 29, 2013
The global recovery has two speeds: That of the stimulus-fed U.S. and that of the austerity-starved eurozone, according to a new report.
updated 9:26 AM EDT, Tue May 14, 2013
The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.
The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
updated 10:56 PM EDT, Sun May 26, 2013
Europe's competitiveness is threatened as manufacturing companies scrambling to find enough skilled engineers.
updated 11:02 AM EDT, Wed July 10, 2013
Spain's economic crisis is in its sixth straight year yet tourism, worth 11% of GDP, is holding its own, one of the few bright spots on a bleak horizon.
updated 6:44 AM EDT, Thu May 2, 2013
As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
updated 8:10 AM EDT, Fri April 26, 2013
As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."
updated 12:56 PM EDT, Thu April 25, 2013
Spain's unemployment rate rose to a record high of 27.2% in the first quarter of 2013, the Spanish National Institute of Statistics said Thursday.
updated 9:55 AM EDT, Mon March 25, 2013
The financial uncertainty in Cyprus is generating images of long lines at ATM machines and anti-European Union protests.
updated 2:15 PM EDT, Mon March 25, 2013
Cyprus will "step up efforts in areas of fiscal consolidation." Where have we heard that before? Oh yes. Greece.
updated 9:39 PM EDT, Fri March 22, 2013
The Cyprus debt crisis is being felt by the banks but also by the people who work at them. Nick Paton Walsh reports.
updated 8:10 PM EDT, Thu March 21, 2013
CNN's Nick Paton Walsh reports on a Russian hotel maid caught up in Cyprus' financial crisis.
updated 12:08 PM EDT, Mon March 18, 2013
Never underestimate the capacity of the Eurozone to shoot itself in both feet, says CNN's Richard Quest.
updated 11:03 AM EST, Thu February 21, 2013
Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.
ADVERTISEMENT