France and Germany clash over ECB role

France and Germany, Europe's two central powers, clashed yesterday over whether the European Central Bank should intervene more forcefully to halt the euro zone's accelerating debt crisis as markets failed to calm down following modest bond purchases.

As it sees borrowing costs rise with its 'AAA' credit rating jeopardised, France remains in favour of  ECB action, adding to mounting global pressure.

With bond market turmoil spreading across Europe, Italian 10-year bond yields are up over 7 per cent, which is not affordable over the long term. Also yields issued by France, the Netherlands and Austria, which along with Germany constitute the core of the euro zone -- have also climbed.

Valerie Pecresse,  a spokewoman of the French government said after a meeting of French government that the ECB's role was to ensure not only the stability of the euro, but also the financial ability of Europe.

French finance minister Francois Baroin also repeated that view saying the euro zone's EFSF bailout fund should have a banking license. Berlin is opposed to this. The move would give the fund the power to borrow from the ECB, giving it extra firepower to fight the spreading crisis.

Baroin said on the sidelines of an award ceremony that the position of France was that the way to prevent contagion was for the EFSF to have a banking license.