By Simon Miller

The German chancellor Angela Merkel is to meet her French counterpart Francois Hollande in a bid to iron out differences before the European summit tomorrow (28.06.2012).

The meeting comes the day after Merkel told coalition parter, the Free Democratic Party. MPs that a debt union would never happen "as long as I live".

According to reports, this stance on eurobonds was met with applause and MPs wishing her a "long-life".

With pressure mounting for the introduction of eurobonds, Merkel appears to be hardening her stance - turning her repeated "noes" into a "never".

However, the Chancellor appears to be increasingly isolated following the publication of proposals which would see a single Euro-wide banking authority, collective financing of members' debt and eventually a Treasury office to oversee the currency.

The eurozone's problems are mounting up with Cyprus becoming the fifth country to ask for a bailout of up to €10bn while the Spain's prime minister Mariano Rajoy has warned the Spanish parliament that the country could not keep funding itself with the yields demanded by the markets.

Yesterday, Spain's short-term debt hit record highs while the 10-year benchmark passed 7% last week and is hovering at the high sixes this morning.

He commented: "I will propose measures to stabilise financial markets, using the instruments at our disposal right now. The most urgent issue is the one of financing. We can't keep funding ourselves for a long time at the prices we're currently funding ourselves."

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