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Cameron and Merkel fail to progress

The pair's smiles couldn't disguise the level of disagreement.

After this week's war of words over an EU Robin Hood Tax, David Cameron and Angela Merkel were all smiles at their press conference in Berlin. But their avowals of friendship ("we are very good friends," said Cameron, protesting rather too much) couldn't disguise the level of disagreement between the pair. On the Tobin tax itself, Merkel admitted that while they both favoured a global transactions tax they had made "no progress" on a European version. Unlike the German Chancellor, Cameron and George Osborne, who has described the proposed EU tax as "a bullet aimed at the heart of London", remain unwilling to introduce it without the agreement of China and the US.

Worse, Merkel restated Germany's opposition to the use of the European Central Bank as a lender of last resort. She spoke of the need for European leaders to use all available "weapons" to defend the single currency but added: "one should also not pretend to be more powerful than one is"

Cameron spoke simply of the need for all eurozone countries to show a "commitment to fiscal discipline", refusing to acknowledge that austerity has failed in Europe. As historian Richard J Evans argues in his magisterial essay in this week's New Statesman: "German-style fiscal discipline is all very well but it is not going to solve anything in the short run." But both Cameron and Merkel remain unwilling to grasp the nettle.