French President Nicholas Sarkozy and British Prime Minister David Cameron have clashed at emergency meetings on the euro in Brussels. It comes as Members of Parliament in Britain debate a motion calling for a referendum on leaving the European Union altogether.
In front of the cameras, it was all smiles at Sunday’s summit in Brussels. But tensions still bubbled below the surface. French newspaper headlines highlighted a rift between their president and German chancellor Angela Merkel.
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Speaking Monday, French finance minister Francois Baroin insisted the talks were on track.
"I think that if one says two-thirds progress since last Friday, that would be a fair statement,” he said. “We have had an agreement on the disbursement of the final tranche of the previous rescue plan for Greece, and we have agreed on the level of recapitalisation of banks to deal with any shocks," said Baroin.
Modifying bailout fund
So exactly what has been agreed? European banks will be forced to raise 100 billion euros in new capital to shield them from losses.
Lenders also will be asked to write off much more than the 21% of Greek debts agreed back in July.
The biggest hurdle is boosting the firepower of the EU’s bailout fund.
Analysts say the current pot of 440 billion euros is too small to rescue Spain or Italy if they get into trouble.
French President Nicolas Sarkozy stated his case for a new way of raising revenue.
"We have reminded all of our European partners of our attachment to the introduction of a tax on financial transactions.,” he said. “It is a commitment that we took together and we will stick to it.”
Britain's objections
Britain, which is not part of the euro, opposes such a tax as its economy relies heavily on financial services. The prime minister says members of the single currency should not dictate policy to the whole Union.
"Treaty change can only happen if it is agreed to by all 27 member states of the European Union and any treaty change, as the last treaty change did, is an opportunity to advance our national interest,” said Cameron.
Anglo-French tensions are rising. Sarkozy is quoted as telling the British prime minister that he is ‘"sick of you criticizing us and telling us what to do."
Debating EU exit
Cameron meanwhile is fighting a European battle both abroad and at home.
Rebel MPs from his own Conservative party want to force a national referendum on whether to leave the European Union altogether.
The prime minister said with Europe in turmoil, now is not the time for Britain to be stirring even more trouble.
EU leaders will meet again on Wednesday to finalize the rescue deal. Many hope this will mark the beginning of the end for Europe’s debt crisis.