Leak reveals no let-up in Berlin austerity plan

An internal chancellery report on reform plans around Europe notes that ‘further room for labour market liberalisation’ exists in Italy, while similar reforms in Spain and Greece ‘were essential’

German finance minister Wolfgang Schäuble has confirmed that Berlin could live without treaty change to get the promised European banking union off the ground. Photograph: AFP

German finance minister Wolfgang Schäuble has confirmed that Berlin could live without treaty change to get the promised European banking union off the ground. Photograph: AFP

Mon, May 13, 2013, 21:52


Far from easing up, Berlin is anxious to maintain reform pressure on crisis-hit euro area countries, according to a leaked memo.

Calls from France, Spain and Italy for a greater balance in austerity and stimulus measures prompted speculation in some circles that Berlin would yield to pressure for greater flexibility in reform implementation.

However, an internal chancellery report on reform plans around Europe notes that “further room for labour market liberalisation” exists in Italy, while similar reforms in Spain and Greece “were essential”.

Advisers to German chancellor Angela Merkel say Berlin’s tough line on reforms in exchange for euro assistance had prompted a “general political mobilisation towards structural reforms and greater competitiveness”.

The reading: this political mobilisation should not be abandoned now, particularly after France was granted two extra years to meet its debt commitments.

Berlin officials note that, to date, Paris had reformed by increasing its tax take.

The time had now come, the German authors suggested, for the French government to reduce record state spending.


No treaty change
Meanwhile, German finance minister Wolfgang Schäuble has confirmed that Berlin could live without treaty change to get the promised European banking union off the ground.

Writing in yesterday’s Financial Times , Dr Schäuble suggest a two-stage process: first, linking national regulatory regimes and, later, treaty change for a Europe-wide banking wind-up fund. Berlin has demanded a water-tight legal solution for such a fund.