MERKEL IS UNDER PRESSURE AND WILL BUCKLE

Hollande is threatening to veto the appointment of Schauble as Head of the Eurogroup.

After maiden talks in Berlin with his German counterpart, Mr Moscovici issued a veiled threat to block Wolfgang Schäuble’s nomination to lead the Eurogroup of finance ministers unless Berlin gives ground on new measures to boost economic growth. “There will be a comprehensive solution including the important position of Eurogroup head and there are political issues to be considered,” Mr Moscovici said.

His stance reflects the French view that all outstanding questions in the battle against the debt debacle are interlinked.

The German minister is favourite for the Eurogroup post. Asked whether Paris might block his nomination, Mr Moscovici said there was “nothing personal” in the French position.

[source : Noonan hopeful on eurobond talks, Irish Times, http://www.irishtimes.com/newspaper/breaking/2012/0522/breaking25.html, 22/05/2012]

And Merkel is now getting an earful from all sides.

Giles Merritt, head of the Brussels think-tank Friends of Europe, said the mood is ugly in the corridors of EU power. "The sheer anger directed against Angela Merkel is starting to shake the Germans for the first time. They are beginning to understand how deeply unpopular they have become, and how little time they have to act. The pressure from Beijing and Washington is mounting," he said.

[source : Germany isolated as Latin Bloc calls the shots, The Daily Telegraph,http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9280847/Germany-isolated-as-Latin-Bloc-calls-the-shots.html, 21/05/2012]

A concession from Germany may be the Eurobond-lite which does not require a referendum or ratification in Germany.

"If the new French President François Hollande now starts constantly calling for euro bonds, he will be doing himself no favors. German taxpayers are opposed to being held liable for other countries -- and rightly so. But maybe Hollande is only creating confusion that will soon dissolve into thin air. Apparently when he talks about 'euro bonds,' he doesn't mean the jointly issued sovereign bonds that put such fear into Germans, but rather what Germans refer to as 'project bonds,' which would be issued to fund large-scale infrastructure projects."

"In that case, he might indeed manage to find a compromise position with Chancellor Angela Merkel, who at the end of the day will have to make some concessions if she doesn't want to destroy the cohesion of the euro zone. Hollande would be able to sell project bonds as a kind of first step toward joint liability, while Merkel could play them down as a limited community project, similar to, say, Germany's financing of the European Investment Bank. Both sides would have saved face. In the best-case scenario, the markets would interpret it as a signal of greater solidarity, thereby slightly easing the pressure on the weaker euro-zone countries. At the moment, that's about as much as we can hope for in the euro zone."

[source : 'Hollande Is Provoking Merkel to the Utmost', Der Speigel, http://www.spiegel.de/international/europe/german-commentators-split-over-euro-bond-proposal-a-834214.html, 21/05/2012]

But Merkel will demand further integration but slightly less austerity.

In which case, who will have won?