The disagreement also threatened a shift in the way the European Union has operated in recent times, suggesting new difficulties in charting a common course from often competing national interests among the E.U.’s 27 member nations.  In weathering the past four years of economic and financial storms, German Chancellor Angela Merkel and then-French President Nicolas Sarkozy worked as a team, jokingly referred to as “Merkozy,” reaching accord between themselves and then imposing a broadened version of their solution on the rest of the European Union.  But that was before France elected a new Socialist president this month who pledged to inject measures to promote economic growth into an E.U. fiscal discipline treaty reached last December after much patient diplomacy by the Merkozy tandem.  Since then, talk has largely veered from cutting deficits and debt to stimulating European economies.  “Even the best of discipline doesn’t get you to a solution,” said Nicolas Veron of the Brussels-based Bruegel research institute. It must be paired, he said, with “solidarity.”  A potential financial instrument known as eurobonds has become the main bone of contention between Paris and Berlin. Eurobonds would be issued by national governments but backed jointly by the euro-zone governments. That means Germany’s top-tier credit rating would stand behind the borrowing by heavily indebted nations, such as Greece and Spain, whose own limp credit ratings make raising funds costly.  The new French president, Francois Hollande, said he will insist on discussing Eurobonds during Wednesday evening’s dinner meeting, but not in a spirit of conflict with Germany. The idea, he told reporters on arrival by a high-speed train from Paris, is to settle on measures that can stimulate European economies right away, “within the next 12 months.”  French officials have suggested it may not be necessary to renegotiate the December treaty, as Hollande pledged in his campaign, but that swift and visible pro-growth steps—such as Eurobonds—must be approved for Hollande to fulfill his mandate.  For Merkel, however, the issue is a political no-go zone, repudiated by German taxpayers who have no desire to countersign on loans for their spendthrift neighbors. At a pre-summit background briefing in Berlin on Tuesday, her government declared once again that it views eurobonds as a mistake and will not change its mind, no matter what Holland says or how late the dinner talks go on.  “The socializing of risk and responsibility, which is the eurobond concept, would be very premature,” said Steffen Kampeter, a German deputy finance minister, in an interview in Berlin on Wednesday. “Common debt management may be at the end of a completely integrated fiscal and economic policy. I don’t see that happening within the next years.”
Clashing views between the European Union’s two most influential members threaten to produce stalemate even as predictions of recession mount.