Sarkozy Threatened to Quit Euro to Prod Merkel on Bailout, El Pais Says

French President Nicolas Sarkozy threatened to pull out of the euro unless German Chancellor Angela Merkel agreed to back the European Union bailout plan at a summit last week in Brussels, El Pais newspaper said.

The Madrid-based newspaper cited comments made by Spanish Prime Minister Jose Luis Rodriguez Zapatero at a May 12 meeting of Socialist politicians. A spokeswoman at Sarkozy’s office in Paris declined to comment on the report. Spokesmen for Merkel and Zapatero had no immediate comment.

France, Italy and Spain pressed the Germans to back the rescue at a May 7 meeting of euro-area heads of government in Brussels. Finance ministers hammered out the details of what became a $1 trillion package of emergency lending facilities at an all-night meeting two days later.

The euro slumped as much as 0.8 percent to $1.2433, sliding below $1.25 for the first time since March 2009. That’s down from $1.2755 before the leaders met last week as doubts grew that Greece would avoid default.

According to El Pais, which didn’t say how it obtained the information, Zapatero said that Sarkozy demanded “the commitment of everyone, that everyone should help Greece, everyone according to their means, or France would reconsider the situation of the euro.”

Sarkozy banged his fist on the table and threatened to quit the euro, which forced Merkel to cave in, Zapatero told the Spanish politicians, according to the El Pais account.

“If at this point, given how it’s falling, Europe isn’t capable of making a united response, then there is no point to the euro,” the newspaper quoted the French President as saying.

It wouldn’t be the first time Sarkozy linked the fate of the euro to a willingness to support Greece.

On March 7, before meeting Greek Prime Minister George Papandreou in Paris, Sarkozy said: “If we created the euro, we cannot let a country in the eurozone fall. Otherwise there was no point in creating the euro. We must support Greece because they are making an effort.”

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@Bloomberg.net; Ben Sills in Madrid at bsills@bloomberg.net

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