Eurozone: A new 'politburo' forms
Eurozone woes forge new informal circle of leaders, who are struggling to pull the eurozone out of crisis.
Europe has a new informal leadership directorate intent on finding a solution to the euro zone's debt crisis, but it has yet to prove its ability to come up with a lasting formula.Skip to next paragraph
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Forged in the fire of a bond market inferno, the shadowy so-called Frankfurt Group has grabbed the helm of the 17-nation currency area in a few short weeks.
The inner circle comprises the leaders of Germany and France, the presidents of the executive European Commission and of the European Council of EU leaders, the heads of the European Central Bank and the International Monetary Fund, the chairman of euro zone finance ministers, and the European Commissioner for economic and financial affairs.
Europe's new politburo met four times on the sidelines of last week's Group of 20 summit in Cannes, issuing an ultimatum to Greece that it would not get a cent more aid until it met its European commitments, and arm-twisting Italy to carry out long delayed economic reforms and let the IMF monitor them.
In a tell-tale recognition of the new ad hoc power centre, members wore lapel badges marked "Groupe de Francfort".
U.S. President Barack Obama attended one of the meetings, getting what he joked was a "crash course" in the complexity of Europe's laborious decision-making processes and institutions.
"He proved to be a quick learner," one participant said.
Two people familiar with the discussion said he argued for the euro zone to make its financial backstop more credible by harnessing the resources of the ECB, but German Chancellor Angela Merkel and ECB President Mario Draghi resisted.
Obama also supported a proposal to pool euro zone countries' rights to borrow from the IMF to help bolster a firewall against contagion from the Greek debt crisis, but Germany's central bank opposed this too, the sources said.
The president referred obliquely to the debate at a news conference the next day, saying: "European leaders understand that ultimately what the markets are looking for is a strong signal from Europe that they're standing behind the euro."
Hours earlier, a television camera in the Cannes summit conference room caught Obama and British Prime Minister David Cameron discussing the issue while waiting for the start of the final working session.
Cameron, whose country is not in the euro, has called publicly for the ECB to act as the lender of last resort for the euro zone, as the Federal Reserve does for the United States, and the Bank of England for Britain.
When Merkel entered the room, Obama pulled her aside for a private conversation. An open microphone caught his opening words: "I guess you guys have to be creative here."
The Frankfurt Group came about on the hoof to try to fashion a crisis response in something closer to the short timespan of frantic financial markets.
It seems destined to endure, not least because the growing imbalance between a stronger Germany and a weaker France means other players are needed to broker decisions.
Crucially, it aims to bridge the ideological gulf between northern and southern Europe, and between supporters of the orthodox German focus on fiscal discipline and an independent central bank with the sole task of fighting inflation, and advocates of a more integrated and expansive economic and monetary union.