Merkel, Monti clash over euro fund


German chancellor Angela Merkel and Italian prime minister Mario Monti disagreed on whether the euro area's permanent bailout fund should receive a bank license as they seek to keep Europe's debt-crisis response on track.

"It is my conviction, as far as the ESM is concerned, that a banking license for the ESM is not compatible with the treaties," Dr Merkel said after hosting Mr Monti for talks in Berlin today, referring to European Union treaties and the planned European Stability Mechanism. She said her view is shared by European Central Bank president Mario Draghi.

Mr Monti's visit is part of a string of summits as European leaders embark on a critical month of decision making. Whether governments should give the ESM access to the central bank financing by granting it a bank license has been a source of dispute for months between southern members of the euro area and the northern camp led by Germany.

A banking license for the ESM should "be seen in the perspective of a broad mosaic," Mr Monti said at a joint news conference with Dr Merkel. "Some things that aren't possible today under current conditions could become possible tomorrow under different conditions. Modifications to the treaties can be asked for," though changes should not be made lightly

Dr Merkel said euro-area policy makers face "a very ambitious agenda in the next few weeks" and need to improve their cooperation in the months ahead. She praised Mr Monti's "impressive" effort to overhaul Italy, the euro region's third-largest economy. "We are convinced that the path we've chosen is the right one."

Efforts to stamp out the debt crisis now in its third year have intensified as Europe's political summer break recedes. French president Francois Hollande visited Berlin last week to coordinate a strategy with Dr Merkel on conditions for extending Greece's bailout.

Dr Merkel is due to meet Spanish prime minister Mariano Rajoy in Madrid on September 6th, the same day Mr Draghi may give some guidance on the ECB's bond buying plans after he leads a meeting of the bank's Governing Council.