Germany presses again for treaty to drive integration

Mon, Aug 27, 2012, 01:00

GERMANY IS once more pressing EU partners to begin negotiations by the end of the year on a new treaty to drive on European integration.

Officials close to Chancellor Angela Merkel are lobbying for leaders to announce in December a date for the opening of a new European convention to debate the contents of the treaty.

The German leader said yesterday that the euro zone crisis had reached a “decisive phase” and urged European leaders to “weigh carefully” their public remarks on the currency bloc and, in particular, Greece. This latest initiative, according to Der Spiegel magazine, reflects Berlin’s wish to provide a solid legal foundation for new EU fiscal oversight rules.

A particular priority, the magazine says, is to award the European Court of Justice in Luxembourg the competence to oversee member state budgets and impose sanctions for deficit rule breaches.

As with previous efforts, this latest attempt to reopen European treaties has been met with a lukewarm response. Ireland in particular is not enthusiastic about any treaty changes that would require ratification by referendum.

This lack of enthusiasm is evident across the continent. A group of 10 foreign ministers, invited by Germany’s Guido Westwerelle to present a “future plan” for the EU, were similarly unmoved by talk of treaty change, with Poland particularly opposed.

On the one hand Warsaw has expressed concern that new fiscal rules will widen the gulf between the euro zone and non-euro members such as itself. On the other, like many EU partners, it sees little chance of compromise on treaty progress at present among 27 EU members.

The issue of treaty change is likely to dominate the autumn agenda of the EU alongside concerns over Greece and hopes of new crisis measures from the European Central Bank (ECB).

Bundesbank president Jens Weidmann has stepped up his campaign against future bond-buying by the European Central bank. He has emerged as the most vehement opponent of a new policy in the ECB, expected to be unveiled in the autumn, to drive down borrowing costs of crisis-hit euro zone members in exchange for binding reform.

News of the measure has been welcomed by European governments, lead by Berlin – but not by the Bundesbank. Mr Weidmann said that once established it would “open a door” that would be difficult to close again – creating a link between independent ECB monetary policy and the fiscal policy steered by EU leaders.

The promise of ECB bond-buying to reduce borrowing costs could act as an addictive “drug”among members that would eventually undermine not just price stability but European democracy.

“If the ECB buys up bonds, they land on the euro system books, which all euro zone taxpayers have to guarantee,” he said. “But in democracies it is parliaments and not central banks that should decide on such far-reaching pooling of risk.” Mr Weidmann agreed that, thanks to the ECB’s core mandate of maintaining price stability, there was no immediate danger of a return to the double-digit inflation of the 1970s.

“But when monetary policy is allowed to be used as a solution for political problems, there’s a danger that its actual purpose drops into the background,” he said. “Stable prices don’t just make economies work better, they form the basis for companies that want to invest and protect savings so that people can live from them tomorrow. In that sense, stability policy is the best social policy.”

Having first backed the ECB bond plan, Dr Merkel said she welcomed the warnings. “I support Jens Weidmann, and believe it is a good thing that he, as the head of the German Bundesbank, has much influence in the ECB.