Merkel, Sarkozy to show united front ahead EU summit

(Reuters) – The leaders of France and Germany will seek to overcome deep-rooted disagreements on European economic governance at a meeting in Berlin Monday, setting the tone for a European Union summit later this week.

France | Germany

A show of unity from Berlin and Paris, the motors behind European integration, is seen as crucial for reaching decisions at the summit Thursday on tightening policy coordination and strengthening budget discipline to contain a debt crisis.

The EU must persuade financial markets the bloc has a common response to the worst crisis to hit the 16-country euro zone since the single currency was created 11 years ago and can prevent Greece’s debt problems spreading to other countries.

“The crisis showed the European system had arrived at its limits: you cannot have a common currency and such gaps in competitiveness,” a French government source said. “You cannot have one country (Germany) where everything is oriented toward gains in productivity and competitiveness and other countries favoring consumption and social protection.

“Either we manage to come closer or we risk having a political crisis as well as an economic and financial crisis.”

Yet Paris and Berlin are at loggerheads over the correct approach to closer economic governance — so much so that German Chancellor Angela Merkel and French President Nicolas Sarkozy postponed their talks initially scheduled for last week for fear they would be unable to reach an agreement, the source said.

Influential German magazine Der Spiegel said at the weekend Franco-German relations had reached a “historic low.”

France’s priority is to create an “economic government” for the euro zone — something Germany has resisted — with regular summits of the 16 leaders and a dedicated secretariat, to coordinate economic policy and focus on rebalancing the European economy and boosting growth.

Paris has also called for Germany to boost domestic spending in order to balance its huge trade surplus.

Berlin last week launched the biggest austerity drive in Germany since World War Two and sees budget discipline as a priority, pressing Paris to implement savings measures.

The German Finance Ministry has circulated a 9-point plan demanding stiffer sanctions against governments that flout European fiscal rules, including suspending repeat offenders’ EU voting rights, and an insolvency procedure for states.

CONCESSIONS

Nonetheless, Sarkozy and Merkel went some way to assuaging concerns about a French-German rift last week by issuing a letter to the European Commission calling for faster financial reform and an EU-wide ban on naked short selling of shares and sovereign bonds.

In addition, France looked to anchor its commitment to tighter fiscal policy at the weekend by pledging to cut the budget deficit by 100 billion euros by 2013 and to bring it down to the EU target of 3 percent of GDP.

According to the French government source, Paris believes firmer budget commitments by euro zone governments and other concessions such as approving Bundesbank President Axel Weber to succeed Jean-Claude Trichet at the head of the European Central Bank, could enable a rapprochement with Berlin.

He added new EU institutions for economic governance would not likely see the light of day any time soon.

“Economic governance is something that will take one or two years. You shouldn’t think we will have a breakthrough on June 14 or 17,” he said. “It is a birth that will be long and difficult because the interests at stakes are colossal.”

(Editing by Janet Lawrence)

PREVIEW-Merkel, Sarkozy to show united front ahead EU summit

BERLIN/PARIS, June 13 (Reuters) – The leaders of France and Germany will seek to overcome deep-rooted disagreements on European economic governance at a meeting in Berlin on Monday, setting the tone for a European Union summit later this week.

A show of unity from Berlin and Paris, the motors behind European integration, is seen as crucial for reaching decisions at the summit on Thursday on tightening policy coordination and strengthening budget discipline to contain a debt crisis [nLDE65C0FB].

The EU must persuade financial markets the bloc has a common response to the worst crisis to hit the 16-country euro zone since the single currency was created 11 years ago and can prevent Greece’s debt problems spreading to other countries.

“The crisis showed the European system had arrived at its limits: you cannot have a common currency and such gaps in competitiveness,” a French government source said. “You cannot have one country (Germany) where everything is oriented towards gains in productivity and competitiveness and other countries favouring consumption and social protection.

“Either we manage to come closer or we risk having a political crisis as well as an economic and financial crisis.”

Yet Paris and Berlin are at loggerheads over the correct approach to closer economic governance — so much so that German Chancellor Angela Merkel and French President Nicolas Sarkozy postponed their talks initially scheduled for last week for fear they would be unable to reach an agreement, the source said.

Influential German magazine Der Spiegel said at the weekend Franco-German relations had reached a “historic low”.

France’s priority is to create an “economic government” for the euro zone — something Germany has resisted — with regular summits of the 16 leaders and a dedicated secretariat, to coordinate economic policy and focus on rebalancing the European economy and boosting growth.

Paris has also called for Germany to boost domestic spending in order to balance its huge trade surplus.

Berlin last week launched the biggest austerity drive in Germany since World War Two and sees budget discipline as a priority, pressing Paris to implement savings measures.

The German Finance Ministry has circulated a 9-point plan demanding stiffer sanctions against governments that flout European fiscal rules, including suspending repeat offenders’ EU voting rights, and an insolvency procedure for states.

CONCESSIONS

Nonetheless, Sarkozy and Merkel went some way to assuaging concerns about a French-German rift last week by issuing a letter to the European Commission calling for faster financial reform and an EU-wide ban on naked short selling of shares and sovereign bonds. [ID:nLDE6580AA]

In addition, France looked to anchor its commitment to tighter fiscal policy at the weekend by pledging to cut the budget deficit by 100 billion euros by 2013 and to bring it down to the EU target of 3 percent of GDP. [ID:nLDE6510ZJ]

According to the French government source, Paris believes firmer budget commitments by euro zone governments and other concessions such as approving Bundesbank President Axel Weber to succeed Jean-Claude Trichet at the head of the European Central Bank, could enable a rapprochement with Berlin.

He added new EU institutions for economic governance would not likely see the light of day any time soon.

“Economic governance is something that will take one or two years. You shouldn’t think we will have a breakthrough on June 14 or 17,” he said. “It is a birth that will be long and difficult because the interests at stakes are colossal.” (Editing by Janet Lawrence)

‘Israel won’t return to 1967 line’

Jerusalem, Aug. 25 (ANI): Israel is open to discussion on the final borders with Palestine, but the country will surely not return to the line of 1967, Israeli Intelligence Affairs Minister Dan Meridor has said.

“Surely, nobody expects Netanyahu to offer more than what Olmert (former PM) offered (to Palestinian Authority President Mahmoud Abbas)…Final borders are open for discussion. But we will not return to the line of 1967 – that’s for sure,” The Jerusalem Post quoted him, as saying.

In an interview with German magazine Der Spiegel ahead of Prime Minister Benjamin Netanyahu’s visit to Berlin, Meridor said he was optimistic about the resumption of Israeli-Palestinian negotiations.

“All in all, I am quite optimistic that things in the Middle East will develop in a positive way. There’s something in the air.”

However, Meridor pointed out that Abbas currently refuses to negotiate until Israel completely freezes settlement activity, despite the fact that he negotiated with Olmert for three years during the reign of President George W. Bush.

Drawing a red line, Meridor said: “The Old City with the Jewish Quarter and the Wailing Wall will never be part of an Arab state. There could be a compromise on land in Judea and Samaria. But all Israeli governments have agreed on having a united Jerusalem. This is our clear position, but we can negotiate about Jerusalem. There are no preconditions.”

He noted that the introduction of religion into a conflict that was historically defined on nationalistic ideas has complicated matters in recent times.

“It has become more difficult over the years because of the introduction of religion into this conflict. Arab rulers hated us in the past, but they did it because of nationalistic ideas. Since the (1979) revolution in Teheran, we hear a different tune: The Iranians, Hizbullah and Hamas fight us in the name of religion. This is very bad because people can compromise, but gods never compromise,” he said. (ANI)

US wants “serious response” from Pak on ISI terror links

WASHINGTON
: The United States expects a “serious response” from Pakistan about its spy agency ISI’s ties with terrorist groups, a key American
official has said, amid unrelenting pressure from Washington on Islamabad to forgo its pursuit of “strategic depth” and use of terrorism as a state policy.

Bruce Riedel, President Obama’s principal adviser on South Asia, became the latest US official to speak bluntly about Pakistan’s ties with terrorism in an interview to the German magazine Der Spiegel, following up on the riot act read out to Islamabad in this regard by the civilian-military tag team of Richard Holbrooke and Mike Mullen earlier this week.

Despite Islamabad’s denials and histrionics during the Holbrooke-Mullen visit when confronted about the ISI’s terrorist ties, Riedel did not back down from answering a loaded question by the magazine on the subject. This is how the exchange went:

Spiegel: Currently, there are many reports about how closely the Pakistani secret service ISI is intertwined with terror groups. Does the ISI actually supply the Taliban with ammunition, trucks and recruits?

Riedel: These are serious issues. We are raising them with the Pakistanis. The head of the ISI was here in February. We have put these issues on the table and we expect to see a serious response. In our engagement with Pakistan, I think our watchword must be an old one: trust but verify.

Implicit in the answer was a confirmation about the ISI’s terrorist ties. Asked further what the ISI expects to gain from their influence on these groups, Riedel explained that over the course of the last three decades, “the ISI used these relations to have leverage against India and influence in Afghanistan.”

Riedel’s exposition on the Pakistan-terrorism nexus came amid growing tensions between Washington and Islamabad that is being candidly acknowledged by US officials.

“We have been working with Pakistan as best we can to support them in their efforts to fight extremists…we’re going to continue to do so. Will there be differences of opinion from time to time on how we move forward? Yes. But this is normal in this type of relationship, particularly when you’re dealing with very difficult, thorny issues,” State Department spokesman Robert Wood said on Wednesday, when asked about the tensions.

The Pakistani establishment went into a rage during the visit to Islamabad earlier this week by Af-Pak Special Representative Richard Holbrooke and US Joint Chiefs of Staff Mike Mullen, after its whining about India did not find any traction. Newspaper editorials bemoaned Washington’s lack of empathy and commentators lamented its lack of confidence in Pakistan.

Islamabad’s main complaint – and excuse for keeping its terrorism option open — was India’s growing influence in Afghanistan which Pakistan found threatening, and lack of progress on resolving the Kashmir issue, which Pakistan attributes to Indian intransigence.

In addition, Pakistani leaders also complained about the drone attacks and the conditions and benchmarks attached to US aid. They wanted drones and helicopters to take on the extremists themselves and foreign assistance on the scale of the Marshall Plan with no strings attached.

From all accounts, the US team made no commitment on any of the Pakistani wish-list. Instead, they were told to abandon their policy of using terrorist groups, a tactic which had begun to consume Pakistan itself besides endangering the world, if they wanted to earn foreign aid and goodwill.

“More and more Pakistanis now recognize that they have created a Frankenstein that threatens the Pakistani state itself. We now need to help them bring this monster under control,” said Riedel.

Riedel also maintained that al-Qaida is trying to destabilize Pakistan and paralyze the government to the point that it becomes a failed state.

“Pakistan has nuclear weapons. Therefore it is in the interest of the international community that the Taliban not reach their goal. In many ways, Pakistan is the harder part of this problem,” he added.

The US official also squarely placed both the al-Qaida and Taliban leadership squarely in Pakistan, a charge that Islamabad is now denying with less and less frequency and conviction.

“After all, the sanctuary for al-Qaida is in Pakistan. The leadership of the Taliban, Mullah Omar, is in Pakistan. That is the more critical territory for them,” Riedel said.