Cameron and Merkel paper over splits on how to solve debt crisis

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DAVID Cameron and Angela Merkel insisted that the UK and Germany would work together in a spirit of “strong friendship” to restore order to the European economy.

Speaking after talks in the German capital Berlin, the two leaders stressed areas of agreement over measures to improve competitiveness in Europe, hold down the EU budget and encourage member states to deal with their debts and deficits.

However they left no doubt that the two countries were still divided over Germany’s demands for treaty change to prevent a repeat of the sovereign debt crisis in the eurozone and European Commission calls for a Financial Transaction Tax, which Britain opposes.

Mr Cameron said: “It is obvious that we don’t agree on every aspect of European policy, but I am clear that we can address and accommodate and deal with those differences.”

Neither Mr Cameron nor the German Chancellor directly addressed the contentious issue of whether the European Central Bank (ECB) should act as a lender of last resort by printing more money to assist single currency members in economic difficulties.

The Prime Minister said he remained convinced the ECB should get involved despite German concerns that this would risk triggering inflation.

Mrs Merkel said that Germany wants a “limited treaty change” – which she suggested would not involve countries, like the UK, which have not adopted the single currency – to ensure that eurozone members stick to their commitments under the Stability and Growth Pact in future.

Germany hopes that the forthcoming summit of the European Council on December 9 will agree measures to amend EU treaties.

The pact, which was intended to prevent single currency members from running up unsustainable debts, has been breached more than 60 times since its introduction, according to the German Chancellor. Mr Cameron is concerned that amendments affecting only countries using the single currency would hasten the creation of a two-speed Europe.

Mrs Merkel said: “The UK has made it clear to us that they have a few difficulties here and there with certain legal provisions of the EU and also have their own ideas on how to boost competitiveness.

“We both have interests, but we also have strong bonds of friendship and these strong bonds of friendship bring us to say we will work together closely in the period leading up to December 9 because we absolutely understand each other’s viewpoints.”

Both Germany and Britain have a shared interest in an effective single market, said Mrs Merkel, adding: “The UK has a great interest, and very sensibly so, in seeing the euro area being strong.”

Mr Cameron echoed this saying that he and Mrs Merkel agreed that “a strong, successful and sustainable euro is in all our interests”.

“We need this crisis to be resolved. Britain, like Germany, has a big national interest in this crisis being resolved,” he said.

The two countries “share the same plan” for growth, competitiveness and deregulation.

“This is a big agenda and, as growth in Europe stalls, it becomes an even more essential agenda for us to work together and for us to make sure that we get this through the European Council and elsewhere,” he said.

Mr Cameron characterised yesterday’s talks as “very good discussions between very good friends”.

The PM added that he and Mrs Merkel were “absolutely” in agreement on the need for budget discipline and on their insistence that EU spending should not rise by more than inflation. He said a five per cent budget increase would not be acceptable.