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France and Germany commemorate 50 years of reconciliation as Spain’s borrowing costs surge

French President Francois Hollande and German Chancellor Angela Merkel met in Reims yesterday, where in 1962 their predecessors Charles de Gaulle and Konrad Adenauer put the shadow of World War Two behind them.

The 1962 meeting was the beginning of the two nations ‘special relationship’ and led to the two country’s leading the way for the creation of the Eurozone. After the unveiling of a commemorative plaque, the two modern day leaders attended a special service inside Reims Cathedral.

Despite all of the smiles and flag waving the two leaders are at odds on how to tackle the ongoing Euro crisis. Relations have become strained after the ousting of previous French President Nicolas Sarkozy a firm friend of Merkel. Now François Hollande calls the shots and his policy’s run against the grain of Merkel’s vision. Hollande wants to see more spending to boost growth – a view that is garnering more and more support – while Merkel is reluctant to give up her austerity policies.

Despite their differences Hollande offered an olive branch to the German chancellor by saying; “Madam Chancellor, I propose from our side to open and even cross a new threshold together that will lead to even closer friendship between our two nations.”

Merkel replied: “Europe is more than just a currency, and the Franco-German relationship is vital in this regard.”
The anniversary was blighted by the desecration of a number of war graves of more than 50 German soldiers. A military cemetery in the Ardennes, not far from Reims saw a wooden crosses being knocked over and vandalised, with some being used for firewood.

“Well we’re a bit shocked to see this damage in a military cemetery, which shows the lack of respect for those who lie here. For us this is sickening,” said Gilles Colson, the Mayor of Saint Etienne-a-Arnes.
Around 12,000 graves of mostly German soldiers from World War I are spread over 4 hectares near the town. French police have launched an investigation but say it is too early to say whether this is was a political act or just the work of drunken youths.

Elsewhere in the Eurozone, Spain saw its borrowing costs surge over the dreaded 7% mark once again. Confidence continues to be low across Europe and the world, with fears that the Eurozone crisis is turning into a global one. Weaker than expected job figures out of the United States last week and a slashing of interest rates by the European Central Bank and China caused investors to flee to the safe haven currencies of the Yen and Dollar.

Spain’s yields of 7% are extremely bad news for Mariano Rajoy who would’ve been hoping that the markets would be more lenient following the result of the EU summit held last month. Details of the Spanish banking bailout should be revealed at the two day European finance ministers meeting taking place today and tomorrow in Brussels. Italy’s borrowing costs have also risen to the 6.1% level.

The Pound hit a fresh 3 ½ year high against the Euro as worried investors opted to buy the Pound as a safer alternative to the troubled single currency. Against the US Dollar the Pound is trading steady above a four week low of $1.546 which it hit last Friday. The low level follows the release of worse-than-expected jobs data out of the world’s biggest economy which prompted demand for the safe haven of the ‘Greenback’.

The Pound to Euro exchange rate is currently trading at 1.260

The Pound to US Dollar exchange rate is currently trading at 1.549

The Euro to Australian Dollar exchange rate is currently trading at 1.207

The Euro to US Dollar exchange rate is currently trading at 1.228

The Euro to Pound exchange rate is currently trading at 0.792

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