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French finance chief says euro budget convergence inevitable as EU demands measures from Italy
PARIS (AP) ' European governments' budget policies will inevitably converge as a result of the debt crisis, France's finance minister said Monday, a day after Paris and Berlin pushed Italy to commit to new growth measures.
French Nicolas Sarkozy and German Chancellor Angela Merkel put public pressure on Italian premier Silvio Berlusconi in Brussels on Sunday to implement new reforms, arguing Europe's new plan to fight the debt crisis, to be finalized Wednesday, would do no good if Rome does not boost market confidence in its own finances.
Italy is considered to be the next weakest link in the eurozone, after the three countries already bailed out ' Greece, Ireland and Portugal.
French Finance Minister Francois Baroin said that "budgetary and fiscal convergence," a sensitive topic for some governments that fear losing control of their own spending policies, cannot be avoided.
"This is a crisis that is serious, that is threatening on a global level, that requires that we be very precise, that requires that we are determined and that requires that we are coordinated," Baroin said on Europe-1 radio.
Differences among European governments' policies have exacerbated tensions between richer countries such as Germany and poorer and more profligate like Greece.
Italy's Cabinet will meet later Monday to discuss the new growth measures that Berlusconi promised to his EU counterparts.
The 17 euro countries are trying to work out a three-pronged plan to solve the crisis. They need to reduce Greece's debt burden so the country eventually can stand on its own, force banks to raise more money so they can take losses on the Greek debt and ride out the financial storm that will entail, and show that the European bailout fund is big enough to protect larger economies from getting dragged into the crisis.
Baroin confirmed that the anti-crisis plan under discussion among European countries would force their banks to raise about euro100 billion ($138 billion) more for their rainy-day funds, so that they can afford to help Greece out of its debt quagmire.
He said European leaders are still holding "technical discussions" on how to boost Europe's bailout fund for the continent's indebted governments. He said France, in a bid to "avoid tensions," has agreed to abandon its push to turn the fund for indebted governments into a sort of bank.
"We know that the Germans don't want this," he said.
Differences between Germany and France have been blamed in part for the failure of talks last week and an EU summit Sunday to produce a comprehensive new plan to stem the eurozone's debt crisis.
"Between Friday and Monday morning, work in all the necessary areas has either progressed very strongly or finally got moving," Merkel's spokesman, Steffen Seibert, told reporters in Berlin on Monday.
He would not comment on how large a haircut Germany envisions private investors taking on Greek government debt, but brushed off questions about talk of friction between the governments and banks.
"I cannot confirm conflicts with banks," he said, adding that "intensive cooperation with the private sector" continues on how to deal with Greece's debt.
Europe's woes have roiled global markets and threatened the world economy. Hopes for a solution by Wednesday buoyed stocks on Monday.
The costs of the crisis for average taxpayers have fueled protests in Europe and across the world.
Anti-capitalist protesters from a group ironically called "Save the Rich" stormed the Paris offices of the ratings agency Moody's on Monday, denouncing the ratings agencies as "dictators of the markets."
Geir Moulson in Berlin contributed to this report.