Eurozone project: Is Germany financing southern Europe?

European leaders have been holding crucial talks in Brussels aimed at resolving the region’s debt crisis and keeping another recession at bay. They are pushing banks to accept that the Greek debt will never be repaid in full.

­Any talk of Greece exiting the crisis has gone out of the window as record rioting continues to shake the streets of Athens. The EU leaders are putting pressure on banks to cancel losses on the huge loans to Greece – the latest news is the national debt of Greece will reach 181 per cent of GDP next year. The banks however are fiercely resisting these moves.

There have been plans for a European economic government with a single leader, and a new leak suggests that it might be created sooner than later and that EU leaders have agreed to create a European economic government with regular eurozone summits to enforce it.

Italian Prime Minister Silvio Berlusconi has reportedly refused any more national austerity measures, which has caused a row with Germany’s Angela Merkel. She pointed out Spain has taken these spending cuts, which means Italy can be expected to follow suit.

Discussions have also revolved around the amount required to recapitalize those European Banks deemed vulnerable to the crisis. The estimate of what will be required has ranged from €90 to 110 billion.

Meanwhile, France is insisting that the EFSF should be allowed to borrow whatever sums necessary from the European Central Bank to buy state bonds from eurozone countries to rescue any potential failures in the eurozone.

Germany, for its part, describes France’s standpoint as a violation of the Central Bank’s mandate. German officials say the whole eurozone project is starting to look like a single one-way flow of cash from Berlin to southern Europe.

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