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December 01, 2011

German Chancellor Sees European 'Fiscal Union'

by Lisa Bryant

Stock markets rallied after German Chancellor Angela Merkel called Friday for stricter fiscal rules for the 17-nation eurozone. In a speech before the German parliament, Merkel warned it will take years before the struggling currency union gets back on its feet -- echoing similar remarks aired the day before by her French counterpart, Nicolas Sarkozy.

Speaking before the German parliament, Merkel said there are no simple or fast solutions for Europe's spreading sovereign debt and banking woes. But she also dismissed suggestions that Europe's leaders only have one last shot to fix the problems when they meet at a summit next week.

Merkel said the eurozone crisis was not just a state crisis but a crisis of trust, as investors shun the eurozone bond market, banks dump government debt, and doubts grow about the survival of the euro union.

Germany is the eurozone's most powerful member, and Merkel's speech was closely followed at home and abroad. The German chancellor holds talks Monday in Paris with President Nicolas Sarkozy of France - Europe's second-largest economy. The two leaders hope to cobble a joint rescue plan before next Thursday's European Union summit.

In a speech Thursday evening, Sarkozy also warned of a long, tough road ahead for the eurozone.

Sarkozy said France and Germany want a new eurozone pact and treaty reforms that demand more discipline, more solidarity and more responsibility toward Europe's citizens.  

But analysts say shorter-term solutions are also critical to restore confidence and help ailing eurozone members, along with the longer-term ones the two leaders are proposing.

Sarkozy's speech also comes just months before French presidential elections. The main opposition Socialist Party swiftly criticized the president for abandoning French sovereignty on fiscal matters and taking his marching orders from Germany.