Sarkozy to host Merkel to address crisis in Europe

French President Nicolas Sarkozy will host later Tuesday evening German Chancellor Angela Merkel to discuss the turbulence on European financial markets and the broader economic challenge of rising debt in Eurozone countries. The meeting was called after the volatile reaction of Europe's stock markets as a result of a resurgence of the debt crisis in Greece and possible contamination of the Italian and Spanish economies which are also facing debt management problems. On July 21, a summit of the 17 Eurozone leaders agreed a number of measures to stem the debt problem, including a second bailout package for Greece and greater muscle for the European Financial Stability Facility (EFSF), which would help economies in difficulty. Sarkozy and Merkel found a difficult compromise just hours before the July 21 Eurozone meeting and have not always agreed on the mix of "public/private" input into the bailout of the troubled economies that use the Euro currency. Germany prefers a strong role for private banking in providing relief, while Sarkozy is keener on an institutional input and direct government intervention. The talks Tuesday evening are like to revolve around how to beef up the EFSF beyond the USD 620 billion currently allotted as a safeguard for ailing European economies. Also, France and other countries are pushing for a stronger role for the European Central Bank (ECB), which is already buying tens of billions of Euros in Italian and Spanish government bonds to ease pressure on those economies. There is speculation that a Eurobond issue might be considered to provide guarantees for government debts between the 17 Eurozone nations, but this could not be confirmed and Germany is known to be hostile to this idea. The two most important European leaders will, no doubt, show a unified front in Paris but are unlikely to go as far as adopting concrete measures that will satisfy markets, economists said here. Traders were also wary that the meeting would be a disappointment, noting there were divergences between Sarkozy's plan for public intervention and Merkel's opposition to having the government and tax payers pick up the tab for bad governance by some countries. Indeed, better governance is one area where both France and Germany are close. The need for improved monitoring of Eurozone budgets, deficits and especially fiscal policies is seen as a way of avoiding further crises which required two bailouts for the notoriously opaque, Greek economy.