Merkel, Sarkozy discussing the economy

BERLIN: The German chancellor and the French president met Monday to prepare for a European Union summit later this week, amid speculation of a rift in German-French views on economic policy.

Angela Merkel welcomed Nicolas Sarkozy to discuss a joint strategy on how to curb the debt crisis that has dragged down the common European currency and rattled economies across the continent.

The leaders of the eurozone's most important economies were to have held talks last week, but the meeting was canceled with only a few hours notice, fueling rumors the two are split on how Europe should best handle the financial crisis.

Germany is calling for sanctions on countries with high deficits and advocates the path of austerity as a model for Europe after presenting its own package of budget cuts on June 7, worth €80 billion ($97 billion) by 2014.

But the French government minister in charge of stimulus efforts, Patrick Devedjian, last week explicitly warned that German-style austerity measures "would be dangerous because it risks killing growth" in France.

The next test for the 16 countries sharing the euro currency — who passed a €110 billion rescue package for Greece and then set up a wider bailout found for countries in financial trouble worth €750 billion — could be ahead as pressure mounts on Spain to curb its deficit.

EU leaders meet for talks on June 17 on a new 10-year growth strategy for the region to build on a weak recovery.

While Sarkozy supporter creating an independent economic government for the eurozone, Merkel insists such decisions should be made by all EU leaders, such as the European Council.

Despite recent tension over the bailout packages for Greece and the eurozone, Sarkozy and Merkel last week showed that France and Germany were still working together closely, and wrote a joint letter urging the European Commission to speed up efforts to regulate financial markets.

The combined economic output of Germany and France, with their respective GDP in 2009 standing at €2,400 billion and €1,950 billion according to EU statistics, represents almost half of the eurozone's GDP of some €9,000 billion.