An event to mark the end of Jean-Claude Trichet’s tenure as president of the European Central Bank drew most of the main players in the debt drama to a Frankfurt opera house, and inevitably raised hopes that a deal to shore up European banks and offer Greece a way out of its debt trap was near.
Angela Merkel, the chancellor of Germany, tried to play down expectations, saying that it would not be possible “to erase the mistakes of the past in just one stroke.” A European summit meeting Sunday, she said during a speech praising Mr. Trichet, will be just “one point” in “a long journey.”
But the cast of characters at the event created the opposite impression. They included Christine Lagarde, president of the International Monetary Fund and Nicolas Sarkozy, the president of France, who bustled in after the speeches in praise of Mr. Trichet were over, trailed by a large entourage and looking grave.
Mr. Sarkozy and Mrs. Merkel later left the event, in an ornate concert hall known as the Alte Oper, without making statements. A spokeswoman for Mrs. Merkel, Elke Ramlow, said they discussed preparations for the meeting on Sunday, but had no other details.
Pressure on the leaders came not only from markets and from ratings agencies — one of which downgraded Spain — but also from Mr. Trichet. “The present calls for immediate action,” he said.
Helmut Schmidt, the 92-year-old former chancellor of Germany and a living symbol of the postwar reconstruction of Europe, delivered a blunt lecture on leadership to the officials assembled in the front row, who also included Herman Van Rompuy, president of the European Council, and José Manuel Barroso, president of the European Commission.
After being pushed onto the stage in a wheelchair and adjusting his hearing aid, Mr. Schmidt railed in a booming voice against German critics of the euro and leaders who put their parochial interests ahead of the European project. “Anyone who considers his own nation more important than common Europe damages the fundamental interests of his own country,” Mr. Schmidt said, in what could be read as a rebuke to Mrs. Merkel.
Reminding listeners that Germany received a de facto debt restructuring after World War II as well as huge economic aid, Mr. Schmidt said that “of course the strong should help the weak,” a clear reference to Greece, which was the scene of violent demonstrations again Wednesday.
Mrs. Merkel later responded that, while Germany would do everything necessary to preserve the euro, “we live in democracies and have to operate according to fundamental rules.”
Earlier, Mr. Barroso said the European Union was at a “turning point” and required decisive action from its leaders on the euro zone debt crisis. But he also tried to calm expectations ahead of a meeting of European leaders in Brussels on Sunday, warning that any agreement to end the crisis would take time to implement.
“Even if we do arrive at a political decision on everything that is on the table, which I hope we will, that doesn’t necessarily mean that there will not then have to be an implementing phase,” Mr. Barroso said. “You cannot hope that this will be the end of all our troubles, but I very much hope that important, long-term, positions, which are important for the future of the European Union and the euro, will come about.”
Numerous open questions remained, including how to increase the financial clout of the European bailout fund and find money to recapitalize weaker banks. “In Germany, the coalition is divided on this issue. It is not just Angela Merkel who we need to convince,” Mr. Sarkozy told French lawmakers at a lunch meeting, according to Charles de Courson, one of the legislators present, Reuters reported.
Expectations are also building that Greek bondholders may have to accept a deeper cut in the value of the debt, or “haircut,” than agreed to earlier.
Adding to the urgency, Moody’s Investors Service downgraded Spain’s long-term sovereign rating by two notches and placed it on watch for further downgrades.
Article source: http://www.nytimes.com/2011/10/20/business/global/spanish-debt-downgrade-points-to-uncertainty-over-euro-crisis.html?partner=rss&emc=rss
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