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Merkel, Sarkozy Call for Single Eurozone Governance

August 16, 2011 at 12:00 AM EDT
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JUDY WOODRUFF: The struggle for economic recovery dominated developments on both sides of the Atlantic today.

The leaders of France and Germany, Nicolas Sarkozy and Angela Merkel, called for new discipline and unity on the continent. And here at home, President Obama urged Americans not to lose hope.

The French president greeted the German chancellor at the Elysee Palace in Paris, amid deepening worries about Europe’s economy. A new report showed overall growth in 17 eurozone countries increased just two-tenths-of-a-percent in the second quarter. Growth in Germany came to a near standstill.

Merkel and Sarkozy responded with a call for a single council to govern economic policy for all.

NICOLAS SARKOZY, French president (through translator): The first proposal we made is to create, within the eurozone, a true European economic government. This economic government will be made up of the council of the heads of state and governments. It will meet twice a year, and more if necessary, and it will elect a stable president for two-and-a-half years.

JUDY WOODRUFF: The French and German leaders also proposed that euro nations have mandatory balanced budgets, and they promised to coordinate corporate tax policy.

ANGELA MERKEL, German chancellor (through translator): Our proposals are aimed at regaining the confidence of the markets through our actions. The debt crisis started a few years back for some countries. It will not be overcome within a day, but we are convinced that, by permanent action, and thanks to in-depth work, we will be able to regain this confidence.

JUDY WOODRUFF: For the moment, Merkel and Sarkozy ruled out issuing government bonds guaranteed by the entire eurozone to aid troubled countries. That’s been a popular option with financial experts, who argue that so-called euro bonds would deal with the debt crisis and restore investor confidence.

ROBERT HALVER, Baader Bank (through translator): By now, euro bonds seem to be the only way to calm the eurozone for the moment. Now this last ultimate step is taken, the transfer and liability union, so that the strong countries like Germany and France can shield the weaker countries, and so calm down the markets.

JUDY WOODRUFF: Meanwhile, there was mixed news for the U.S. economy. Industrial production rose in July at the best pace in seven months, as automakers rebounded.

But, at the same time, residential construction was down last month. President Obama acknowledged the country’s economic worries on his three-day bus tour in the Midwest. But he told a crowd in Peosta, Iowa: We will get through this moment of challenge.

PRESIDENT BARACK OBAMA: There are two things that I know for sure. America is going to come back from this — this recession stronger than before. That, I’m convinced of. I believe that.

(CHEERING AND APPLAUSE)

BARACK OBAMA: And I’m also convinced that comeback isn’t going to be driven by Washington.

JUDY WOODRUFF: The president’s aides also welcomed word from the Fitch ratings agency that it will continue its AAA credit rating for U.S. government debt, with a stable outlook. By contrast, Standard & Poor’s had downgraded the U.S. rating.

In the end, though, none of the day’s pronouncements could keep the stock market rally going. The Dow Jones Industrial Average lost nearly 77 points to close below 11,406. The Nasdaq fell more than 31 points to close at 2,523. And in Europe, shares managed to recover from heavy losses earlier in the day, but still finished flat.