Germany, France battle over bonds

Germany dismissed a French-led call for eurozone governments to issue common bonds, a day before a European Union summit which investors are looking to for new measures to counter the bloc’s debt crisis. After a torrid week, stock markets rallied on optimism that today’s summit would produce measures to foster growth and ward off the threat of contagion should Greece exit the euro. The FTSEurofirst 300 index of top European shares closed up 1.9 per cent and Spanish and Italian borrowing costs fell, leaving scope for disappointment if the EU leaders underwhelm. French President Francois Hollande will push a proposal for mutualising European debt at the informal summit, a scheme which many economists and policymakers say could be one of the most effective ways of restoring market confidence. Hollande has also called for a focus on growth rather than austerity. But there is no sign that Germany, the EU’s paymaster, led by Chancellor Angela Merkel, is ready to soften its opposition. Berlin says more progress is needed first on coordinating fiscal policies, a stance in which it has the backing of the Netherlands, Finland and Austria among others. “[Today’s] meeting will not deliver any landmark solution. The market is likely to be more prone to disappointment,” said Matteo Regesta, a strategist at BNP Paribas.