Europe on verge of launching 'fiscal union'

Germany: German Chancellor Angela Merkel and French President Nicholas Sarkozy said Friday that European nations were on the verge of creating a "fiscal union" with rigorous budgetary oversight to battle the eurozone debt crisis.

"We are not only talking about a fiscal union, we are beginning to create it," she said in a keenly awaited speech to parliament, adding it would be a "fiscal union with strict rules, at least for the eurozone".

Merkel said the last gruelling months, packed with market turmoil, the threat of Greek default on its towering debts and political strife in the European Union, had focused minds.

"Anyone who had said a few months ago that we, at the end of 2011, would be taking very serious and concrete steps toward a European stability union, a European fiscal union, toward introducing (budgetary) intervention in Europe would have been considered crazy," she said.

"Now these items are on the agenda, we are on the verge of it, there are still difficulties to be surmounted but their necessity is now widely recognised." Merkel was laying out what she said were the goals of Germany, the EU's top economy, ahead of a crunch summit in Brussels next week. She will hold talks with French President Nicolas Sarkozy on Monday to hammer out a common position ahead of the gathering.

In a landmark speech Thursday in front of 5,000 cheering supporters, Sarkozy warned that the developed world was entering a "new economic cycle" dominated by austerity, heralding tough times ahead for jobs and business.

He said that in Europe this would require a new political and budgetary consensus that would win back the confidence of the markets.

AFP