BERLIN, Jan 24 (Reuters) – Angela Merkel’s conservative allies warned on Tuesday against committing additional German funds to euro zone bailout schemes, underscoring how difficult it would be for the chancellor to meet international demands to boost the bloc’s defences.

International Monetary Fund chief Christine Lagarde and Italian premier Mario Monti have both travelled to Berlin to urge Merkel to increase the 500 billion-euro European Stability Mechanism (ESM), which is due to become operational mid-year.

German government sources have told Reuters Merkel does not rule out an increase if the euro zone crisis deteriorates over coming months. But only the threat of a disaster would persuade her coalition to back a bigger firewall for the currency bloc.

In particular, she faces stiff opposition from the Bavarian Christian Social Union (CSU), whose leaders have flirted with euroscepticism, and the liberal Free Democrats (FDP), whose freefall in opinion polls has thrown them onto the defensive.

A senior official in the government put the odds of Germany agreeing to an increase in the ESM at 50-50, but said Merkel would risk a coalition crisis just a year ahead of elections if she ignored the misgivings of her allies.

“The (opposition) Social Democrats would back it and she could probably get her Christian Democrats on board. But the FDP could well see it as a no go,” the official told Reuters, requesting anonymity.

Euro zone finance ministers have agreed to “reassess the adequacy” of their current rescue fund – European Financial Stability Facility (EFSF) – and its permanent successor, the ESM, in March.

BERLIN (Reuters) – While much of Europe suffers debt downgrades and job losses, Germany can boast of cheap borrowing, near record employment and a AAA credit rating that may even prove impervious to a mild recession.

But it has reason to avoid overt displays of enjoying others’ misfortune – Schadenfreude, as Germans would call it.

The steady drip of reassuring news for the economy did inspire a front-page cartoon on business daily Handelsblatt of Superman opening his shirt to reveal a German eagle, with the comment: “The gap between Germany and the rest of Europe is growing.”

But Germany knows that the downgrades inflicted on close euro zone partners like France and Austria, and on the bloc’s rescue fund, are likely to mean more demands on its generosity, and it may not relish the extra burden of responsibility.

With Italy’s Mario Monti now leading calls for Germany to boost the firepower of bailout funds and bring down borrowing costs of countries like his with tools such as common euro zone bonds, Chancellor Angela Merkel’s conservative government has made it abundantly clear that such suggestions are unwelcome.

Finance Minister Wolfgang Schaeuble said after S&P’s downgrade of the European Financial Stability Facility (EFSF) that its funding was “sufficient by far” for the job in hand, while Berlin remains unlikely to consider joint bonds.

Berlin’s priorities are to introduce the EFSF’s permanent successor, the European Stability Mechanism (ESM), a year ahead of schedule in mid-2012 and to get the whole European Union save Britain to sign up to a “fiscal compact” to avoid future crises.

BERLIN (Reuters) – While much of Europe suffers debt downgrades and job losses, Germany can boast of cheap borrowing, near record employment and a AAA credit rating that may even prove impervious to a mild recession.

But it has reason to avoid overt displays of enjoying others’ misfortune – Schadenfreude, as Germans would call it.

The steady drip of reassuring news for the economy did inspire a front-page cartoon on business daily Handelsblatt of Superman opening his shirt to reveal a German eagle, with the comment: “The gap between Germany and the rest of Europe is growing.”

But Germany knows that the downgrades inflicted on close euro zone partners like France and Austria, and on the bloc’s rescue fund, are likely to mean more demands on its generosity, and it may not relish the extra burden of responsibility.

With Italy’s Mario Monti now leading calls for Germany to boost the firepower of bailout funds and bring down borrowing costs of countries like his with tools such as common euro zone bonds, Chancellor Angela Merkel’s conservative government has made it abundantly clear that such suggestions are unwelcome.

Finance Minister Wolfgang Schaeuble said after S&P’s downgrade of the European Financial Stability Facility (EFSF) that its funding was “sufficient by far” for the job in hand, while Berlin remains unlikely to consider joint bonds.

Berlin’s priorities are to introduce the EFSF’s permanent successor, the European Stability Mechanism (ESM), a year ahead of schedule in mid-2012 and to get the whole European Union save Britain to sign up to a “fiscal compact” to avoid future crises.

BERLIN, Jan 13 (Reuters) – German Chancellor Angela Merkel will gather the leaders of Austria, Sweden and Portugal next Thursday in a bid to broaden consultations on key European Union issues after criticism about Germany and France making too many big decisions themselves.

With Italy now being consulted closely by Berlin and Paris since Silvio Berlusconi’s departure, and Franco-German proposals for a fiscal pact and transaction tax needing broader backing, she plans a series of cosy chats with small groups of leaders.

By starting with such disparate partners as euro-zone stalwart Austria, bailout recipient Portugal and euro outsider Sweden, she aims to canvass a wide range of opinions for an EU summit on March 1-2 which could launch the new pact on budget discipline and decide on Greek aid and future bailout funding.

The first round of these talks will take place next Thursday at Schloss Meseberg, a government guest house outside Berlin, and there are no plans for a news conference, Merkel’s spokesman Steffen Seibert said.

He was vague about the agenda, saying it would be “an informal exchange of views on European issues and the future of the economic and currency union … It is certainly linked to the fact that we have to take important decisions in March and we will try to have these conversations completed by then”.

The meeting takes place a day before Merkel and Sarkozy go to Rome for their second round of triangular talks with Mario Monti, the technocrat Italian prime minister who replaced Berlusconi in an attempt to convince markets Italy can cope with its debt pile.

Sarkozy and Monti visited Merkel separately in Berlin this week, giving the impression that the recent pattern of “Merkozy” taking major decisions for Europe bilaterally, for rubber-stamping by the rest of the bloc at a subsequent summit, may have had its day.

BERLIN (Reuters) – German Chancellor Angela Merkel praised Italy’s new government on Wednesday for the speed with which it has launched reforms, prompting Prime Minister Mario Monti to say it was important for markets also to recognize Italian economic policy progress soon.

Merkel said at a joint news conference with Monti in Berlin that his technocrat government had been quick to launch urgent budgetary measures and now structural reforms aimed at making the Italian economy more competitive in order to boost growth.

“This will strengthen Italy,” said Merkel on Wednesday.

Monti, while thanking the Italian people and parliament for what he called their “mature” response to very painful reforms, said his country could only make further progress within a more helpful European environment, including cheaper borrowing.

“The European context must become more favorable, by permitting in good time a lowering of interest rates and greater integration of the EU,” said Monti.

Italy still faces 10-year borrowing costs of around 7 percent, widely viewed as unsustainable for an economy saddled with a debt of around 120 percent of GDP. Rome must refinance tens of billions of debt in the first four months of the year.

“In the financial markets, high interest rates could have been justified when markets were diffident about Italian economic policy, but not anymore, especially after representatives of those same markets have said they appreciated the efforts made,” Monti said.

BERLIN, Jan 9 (Reuters) – Germany and France warned Greece on Monday it will get no more bailout funds until it agrees with creditor banks on a bond swap and pressed for an early deal to avert a potential default in the euro zone’s most debt-stricken nation.

Chancellor Angela Merkel and President Nicolas Sarkozy, the euro zone’s two leading powers, insisted after talks in Berlin that private sector bondholders must share in reducing Greece’s debt burden, along with new European and IMF lending.

They rejected both a call by a European Central Bank policymaker to abandon plans to make private investors take losses, and a leaked International Monetary Fund memo that cast doubt on Athens’ ability to reform its public finances.

“We must see progress on the voluntary restructuring of Greek debt,” Merkel told a joint news conference. “From our point of view, the second Greek aid package including this restructuring must be in place quickly. Otherwise it won’t be possible to pay out the next tranche for Greece.”

Merkel and Sarkozy both voiced their determination to press ahead with a tax on financial transactions opposed by Britain, but they appeared to diverge on the timing.

Sarkozy, facing a strong left-wing challenge in his struggle for re-election in May, suggested France could go it alone and challenge other states to follow suit.

Merkel said all 27 EU finance ministers should report in March, and the 17-nation euro zone should move ahead if other countries continued to block an EU decision. But she acknowledged that she did not have full agreement on this within her centre-right coalition government.

BERLIN (Reuters) – German Chancellor Angela Merkel warned Greece on Monday it would not be possible to give further aid without rapid progress on its second rescue package, including a voluntary write-down on Greek debt held by private creditors.

“We must see progress on the voluntary restructuring of Greek debt,” Merkel told a joint news conference with French President Nicolas Sarkozy in Berlin.

“From our point of view, the second Greek aid package including this restructuring, must be in place quickly. Otherwise it won’t be possible to pay out the next tranche for Greece.”

Merkel said she would talk about Greece with International Monetary Fund chief Christine Lagarde in Berlin on Tuesday.

Banks, insurers and investment funds have been negotiating with the Greek government for weeks on a bond swap scheme which aims to cut its debt-to-GDP ratio to 120 percent from roughly 160 percent currently.

Under the plan, private creditors are being asked to voluntary accept a nominal 50 percent cut in the value of their Greek bond holdings in return for a mix of cash and new bonds, although there are suggestions that may not now be enough.

The private sector involvement is a key part of a new 130 billion euro bailout package that needs to be in place by March to ensure Greece does not default on its massive debt.

ROME/BERLIN (Reuters) – The credit rating agency Fitch said on Friday it thought a comprehensive solution to the euro zone’s debt crisis was beyond reach, putting six euro zone economies including Italy on watch for potential near-term downgrades.

It reaffirmed France’s top-notch triple-A rating but even here said the outlook was now negative, meaning it could be downgraded within two years.

Underscoring the tensions within the bloc over a crisis that has spread relentlessly over the past two years, Italy’s prime minister urged European policymakers to beware of dividing the continent with their efforts to fight its debt crisis.

In a swipe at Germany, he warned against a “short-term hunger for rigour” in some countries.

Germany has led resistance to allowing the European Central Bank to ramp up its buying of government bonds on the open market to a big enough scale to douse the crisis, but Fitch added to the pressure for just such a move.

Fitch said that following the EU summit a week ago it had concluded that “a ‘comprehensive solution’ to the euro zone crisis is technically and politically beyond reach.”

“Of particular concern is the absence of a credible financial backstop,” it said. “In Fitch’s opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States.”

ROME/BERLIN, Dec 16 (Reuters) – The credit rating agency Fitch said on Friday it thought a comprehensive solution to the euro zone’s debt crisis was beyond reach, putting six euro zone economies including Italy on watch for potential near-term downgrades.

It reaffirmed France’s top-notch triple-A rating but even here said the outlook was now negative, meaning it could be downgraded within two years.

Underscoring the tensions within the bloc over a crisis that has spread relentlessly over the past two years, Italy’s prime minister urged European policymakers to beware of dividing the continent with their efforts to fight its debt crisis.

In a swipe at Germany, he warned against a “short-term hunger for rigour” in some countries.

Germany has led resistance to allowing the European Central Bank to ramp up its buying of government bonds on the open market to a big enough scale to douse the crisis, but Fitch added to the pressure for just such a move.

Fitch said that following the EU summit a week ago it had concluded that “a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach”.

“Of particular concern is the absence of a credible financial backstop,” it said. “In Fitch’s opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States.”

ROME/BERLIN, Dec 16 (Reuters) – Italy’s prime minister urged European policymakers on Friday to beware of dividing the continent with their efforts to fight its debt crisis, warning against a “short-term hunger for rigour” in some countries, in a swipe at Germany.

German Chancellor Angela Merkel gained some respite from domestic pressure for a tougher line in the euro zone crisis when Eurosceptics hostile to more bailouts lost a referendum in her junior coalition partner, the Free Democrats, aimed at blocking a permanent rescue fund.

Merkel — under pressure from the revered Bundesbank to force debt-saddled euro zone countries to reform and save their way out of crisis with austerity measures — has led a push for automatic sanctions for deficit “sinners” in the bloc.

This has fed concerns that excessive belt-tightening in southern countries could send their economies into a negative spiral with no prospect of growing out of the crisis, while feeding resentment in the prosperous north.

Italian Prime Minister Mario Monti said Europe’s response to the debt crisis “should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigour in some countries.

“To help European construction evolve in a way that unites, not divides, we cannot afford that the crisis in the euro zone brings us … the risk of conflicts between the virtuous North and an allegedly vicious South,” he told a conference in Rome.

The head of Italy’s largest labour federation CGIL said on Wednesday the country risks a “social explosion” over austerity measures, and unions plan more protests against them.