GERMANY:GERMANY MAY propose the creation of a euro zone "stability council" to undertake competitiveness checks and impose sanctions on profligate EU states.
The proposal, floated yesterday by German economy minister Philipp Roesler, includes plans for debt controls that would be written into state’s constitutions. “We need a new stability pact for Europe” to bring about a “new culture of stability”, said Mr Roesler.
“It’s not enough to just open rescue umbrellas,” he told reporters at a news briefing in Berlin. Mr Roesler is vice chancellor and leader of Chancellor Angela Merkel’s Free Democratic coalition partner.
He said the proposal would be made at the next meeting of EU finance ministers.
However, a German government source later told The Irish Times the proposal was an “interesting idea” but was not a formal proposal of the Federal Government.
Mr Roesler’s proposal echoes elements of the EU’s Euro-Plus pact, which covers competitiveness and national and fiscal rules. This pact was floated by Dr Merkel and French president Nicolas Sarkozy.
Mr Roesler said euro zone states would have to undergo competitiveness tests that would examine the flexibility of their labour markets and a “debt brake”, which would be based on the German model.
A provision inserted into the German constitution in 2009 forbids politicians from borrowing beyond 0.35 per cent of gross domestic product. It was introduced in an attempt to deal with the challenges posed by an ageing population.
Berlin’s approach to tackling the debt crisis is that members of the 17-nation currency bloc must implement their own reforms to boost competitiveness and cut debt rather than rely on EU-aid.
Germany is opposing calls to expand the European Financial Stability Facility – a €440 billion rescue fund to bolster euro states in financial difficulty. It argues markets simply won’t believe that Italy or Spain could be bailed out and individual member states must implement their own reforms to maintain investor support.
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