Clashing views

German Chancellor Angela Merkel and British Prime Minister David Cameron have widely divergent views on the eurozone debt crisis.

Berlin accuses London of being selfish for opposing a financial transaction tax, while touching off British sensitivities about transferring power to the European Union.

Germany, as Europe's largest economy, has played a leading role in efforts to resolve the eurozone crisis, but has been criticized as slow to respond by the United States, China and Japan, as well as equity and capital markets. Along with Britain, they all want the European Central Bank to be the lender of last resort and to pump money into the ailing EU economy.

Merkel – the defender of fiscal responsibility

By contrast, Chancellor Merkel wants to change the European Union's Lisbon Treaty to impose German-style budget discipline, preferably on all 27 EU members and not just the 17 eurozone countries.

She has been adamant that indebted countries, like Greece, Portugal, Spain, Italy and Ireland, impose strict austerity measures as a condition for bailout funds.

The chancellor has countered arguments that inflicting financial pain on a country's economy and its consumers will not induce the economic growth needed to pull them out of their doldrums. Instead, she insists that fiscal discipline is the foundation of a healthy economy.

Merkel has also ferociously parried advances by France and others to get the European Central Bank (ECB) to step up its limited bond purchases of indebted eurozone countries. She has rejected the idea of jointly-backed eurobonds, arguing that they would take the pressure off countries to implement their austerity measures. Fearing rampant inflation, she also opposes any plans to have the ECB print extra money.

The German chancellor is aware of the inherent structural problems of the British economy, with its high unemployment, its credit crunch for small businesses, and, its decades-long trend of de-industrialization. London's financial district, so far, has weathered the euro crisis, but the rest of the country is suffering.

Merkel knows that there is no quick fix to those problems, or to the eurozone crisis. At their meeting on Friday, however, she is likely to remind Prime Minister Cameron of the consequences a collapse of the euro would have for the British economy.

Author: Gregg Benzow (AP, Reuters, dpa)
Editor: Andreas Illmer