EU leaders look to Merkel to stand up to Sarkozy

(BERLIN) - European leaders are looking to Germany's Angela Merkel to head opposition to French President Nicolas Sarkozy's hands-on attempts to confront the financial crisis, over fears they could drive a wedge through Europe.

In the latest round of tug-of-war between the European powerhouses, Merkel has led resistance to a proposal by Sarkozy, who holds the rotating EU presidency, to create an "economic government" for the 15-nation eurozone.

Sarkozy would also like to see Europe create national sovereign wealth funds to shelter strategic parts of their economies from global turmoil -- moves that are anathema to Merkel's more laissez-faire approach.

Germany, the world's third largest economy, has sought to block much of Sarkozy's plan, which he is pushing ahead of crisis talks in Washington on November 15 between the world's richest nations and largest emerging economies.

Merkel's advisors, speaking anonymously in the press Monday, said Germany's neighbours were looking to her to rein Sarkozy in.

"Several influential politicians are counting on Germany to persuade Sarkozy to back off and agree emergency regulations for the eurozone instead," the conservative Frankfurter Allgemeine Zeitung said in an editorial.

Reacting last week to Sarkozy's sovereign wealth fund proposal, eurosceptic Czech President Vaclav Klaus -- who succeeds Sarkozy as holder of the EU presidency in January -- described the plan as "old socialism."

Germany also made clear its unease at the project with Economy Minister Michael Glos said it "goes against the successful principles of our economic policy."

The Financial Times Deutschland, citing diplomatic sources, said leaders including Italian Prime Minister Silvio Berlusconi, Spain's Jose Luis Zapatero and European Commission chief Jose Manuel Barroso tended to avoid confronting Sarkozy themselves.

"They prefer to seek out the chancellor and ask her to talk Sarkozy out of one or two of his ideas," it said.

Sarkozy succeeded in convening on October 12 the first EU emergency summit to seek a coordinated response to the financial turmoil in which the world's top economies find themselves.

But the 12 European Union countries that do not use the common European currency fear being frozen out of coordinated action to keep the global crisis at bay.

An "economic government," in which the leaders of the 15 eurozone countries would meet regularly to discuss the bloc's financial health, would replace the informal pow-wows currently held by the countries' finance ministers.

Smaller countries outside the eurozone also fear such a format would supplant the power of the rotating EU presidency, which France holds until January 2009 when the Czech Republic, which is not in the eurozone, will take over.

Berlin has long seen French calls for greater government control of financial markets as an attempt to undermine the sovereignty of the European Central Bank.

The differing approaches have led Berlin and Paris to clash repeatedly over the years. But rarely were the stakes so high.

News weekly Der Spiegel said Germany viewed France's proposal for an economic government as part of a struggle over which model should dominate in Europe -- the social market economy or the state-controlled economy.

The Frankfurter Allgemeine Zeitung said Sarkozy's eurozone "economic government" was yet another move that would short-circuit existing EU institutions.

It is also obvious to Berlin that coordinated European measures to cope with the financial crisis could not exist without Britain, the largest of the EU countries outside the eurozone.

The German chancellor will travel to London Thursday for talks with British Prime Minister Gordon Brown to discuss a coordinated response to the crisis.

Happily for Merkel, the calls for her to play a greater role on the world stage come amid sharp criticism of what pundits have called her ham-handed management of the financial crisis at home.