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Eurozone Leaders Consider Deficit Limits to Help Save Euro

December 5, 2011 at 12:00 AM EDT

JUDY WOODRUFF: Next: a critical meeting between Europe’s key leaders as pressure builds to resolve the continent’s economic woes.

We start with a report from Gary Gibbon of Independent Television News.

GARY GIBBON: After months of rising government debt crises, one managed default and the threat of others, the Euro’s two main leaders met in Paris to agree to the outline of a deal they now want the rest of Europe to adopt.

Chancellor Merkel and President Sarkozy agreed that the deficit limit of 3 percent of GDP for Eurozone countries should be enforced by pretty much automatic fines if the rules are broken. The fines could come to billions of euros.

Eurozone countries would also have to write balanced budget rules into their own national laws, all that to be locked down in a treaty change. All 27 members of the E.U. may sign up to it, but the leaders of France and Germany said the 17 Eurozone countries would go ahead and do it all on their own if the others get difficult.

ANGELA MERKEL, German Chancellor (through translator): If somebody doesn’t want to go with us and can’t keep up with us, we say the euro is so important to us, that we will go ahead together as 17 member states.

NICOLAS SARKOZY, French President (through translator): We will see at a roundtable whether it is going to be agreed by 27 or 17. Our wish is to frog-march this, to reestablish confidence in the euro and the Eurozone.

GARY GIBBON: Both ruled out pooling debt with Eurozone partners.

NICOLAS SARKOZY (through translator): We are completely in agreement that euro bonds are absolutely not a solution to the current crisis. What a strange idea it would be to pool all our debt, which basically means having France and Germany paying for the debts of others without having any say in how much debt other countries take on.

GARY GIBBON: A flavor of the pain ahead came as Italy’s new welfare minister tried to describe pension cuts to come.

Italy’s borrowing costs actually came down today, helped by the Franco-German proclamation that there would be no repetition of the managed Greek default, when private lenders lost billions they were owed by the Greek government.