European leaders seek new accord on debt crisis

German chancellor Angela Merkel said after meeting French president Francois Hollande the two countries were “aware of our great responsibility” to end the crisis and make growth possible. She said both were convinced competitiveness was hugely significant.

The two countries plan to come up with proposals by May.

Germany and France are marking 50 years of an accord that enshrined the two former adversaries’ post-Second World War reconciliation with a joint cabinet meeting and a joint session of their parliaments.

The 1963 Élysée Treaty marked a milestone for the two former foes.

The pair have often been openly at odds over how to resolve Europe’s debt crisis since Mr Hollande took office last year. He has criticised Germany’s austerity-led approach, while Mrs Merkel has resisted talk of pooling countries’ debt.

That has raised questions about the now-traditional role of Germany and France as the motor of political integration in Europe.

The two countries will produce joint proposals by May, ahead of an EU summit the following month, on how to improve economic co-ordination and competitiveness.

“We have to give Europe confidence in its future,” Mr Hollande said.”We will try to be as concrete as possible... so that growth can be reinforced and stability guaranteed.”

Meanwhile, pressure is growing on Spanish conservative prime minister Mariano Rajoy to explain how a former party treasurer amassed 22 million euros (£18.5m) in a Swiss bank account.

Although no arrests have been made or charges filed, the scandal is hitting Mr Rajoy, who is demanding sacrifices from Spaniards as the country battles to emerge from recession with 25 per cent unemployment.

His Popular Party has been equally shaken by widespread newspaper reports that the former treasurer, Luis Barcenas, also allegedly distributed under-the-table bonuses to party leaders in payments from construction firms.

The Popular Party has denied all wrongdoing and promised it will commission an external audit.

The Barcenas case follows other scandals involving bankers, politicians, town councillors and even the royal family.

The Popular Party’s absolute majority allowed it to vote down a proposal by the Socialist opposition party and other groups for Mr Rajoy to make a special parliamentary appearance to discuss the case. But it was agreed that he should answer queries on the issue in the routine weekly questioning session on January 30.

In the year since taking office, his government has ushered in major labour and financial reforms, as well as cutting pension increases and civil service wages and raising taxes. The attempt to convince European Union authorities and investors it is serious about reducing its swollen deficit has caused widespread pain.

“It’s very difficult to sell austerity when there is suspicion you are being robbed,” said Jose Antonio Olmeda, a professor at Spain’s Open University. Opinion polls show Spaniards have little faith in their political parties while 300 politicians are reported to be implicated in corruption cases across the country.