March 5, 2021

Merkel Arrives in Paris to Begin Economic Talks With Sarkozy

PARIS — With new official figures showing that economic growth in the heart of Europe is slowing, Germany’s chancellor, Angela Merkel, arrived in Paris on Tuesday for a highly anticipated meeting with France’s president, Nicolas Sarkozy, to discuss new measures aimed at reining in government deficits and calming investor worries about the future of the euro currency union.

As Mrs. Merkel arrived at the Élysée Palace, she and Mr. Sarkozy faced mounting pressure to forge a joint approach to a widening economic crisis that has already engulfed Ireland, Greece and Portugal and threatens to pull in Spain and Italy as well.

A news conference was scheduled for 6:30 p.m. Paris time. Yet even before the leaders spoke, aides to both sought to temper expectations of any breakthrough proposals.

Steffen Seibert, Mrs. Merkel’s chief spokesman, warned Monday against expectations of a “big bang” from the meeting. “It is and remains a process,” he told reporters in Berlin, Bloomberg News reported. François Baroin, France’s budget minister, indicated that the two leaders would probably limit themselves to vague recommendations about tighter enforcement of the union’s deficit limits and closer coordination of national economic policies.

The summit meeting comes as European stock markets were in retreat Tuesday for the first time in four days. The euro slid against the dollar after fresh economic data showed that growth in the euro area fell more than expected in the three months through June and that growth in Germany came almost to a standstill.

Gross domestic product in the 17-nation euro area rose 0.2 percent in the second quarter of 2011 compared with the previous quarter, according to Eurostat, the bloc’s statistics agency. Euro area growth was down from 0.8 percent in the first quarter.

G.D.P. growth in Germany, which has been the region’s economic locomotive, fell to 0.1 percent compared with the previous quarter, when the economy expanded 1.3 percent, the German Federal Statistical Office said. Analysts had expected growth of 0.5 percent.

Those gloomy statistics followed news on Friday that showed the French economy, Europe’s second-largest after Germany’s, did not grow at all in the second quarter. Slower growth means that tax receipts will also grow slowly, which will make it harder for Germany and France to support countries like Italy and Spain that are finding it increasingly difficult to borrow money at interest rates they can afford.

Greece is already in recession, while growth in Spain is slowing down more than expected this year. The Portuguese government expects the economy to contract 2.3 percent this year, compared with a previous forecast for a 2 percent decline.

German and Italian shares led a broad decline in European stocks Tuesday. Germany’s DAX index was down 0.7 percent in late afternoon trading, while the FTSE Italia index shed 1.3 percent. France’s CAC 40 was 0.6 percent lower and Spain’s IBEX slipped 0.87 percent.

The euro fell 0.47 cents to $1.4397.

Mrs. Merkel’s critics have accused her of lacking the necessary sense of urgency to restore confidence in the euro and calm the crisis. But Germany is in many ways in the eye of the storm, with barely a hint of the winds swirling nearby. There is no tear gas, as in Athens; no tires burning, as in London; no chanting crowds packing public squares, as in Spain. While much of the rest of Europe is struggling to pass harsh austerity packages, Germany is in the midst of a debate over cutting taxes by as much as $14.2 billion.

In France, the streets have also been calm so far. But last week, Mr. Sarkozy, who faces re-election in 2012, interrupted his vacation to fight concerns that the country might lose its AAA credit rating if it could not bring down a high debt and deficit. Meanwhile, several of France’s leading banks were buffeted by rumors over their financial health, prompting the country’s stock market regulator to impose a two-week ban on short-selling of financial shares and to open an investigation into the market turbulence.

Nicholas Kulish contributed reporting from Berlin and Jack Ewing from Frankfurt.

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