Cool response to Franco-German proposals for euro zone

FISCAL PLANS:EUROPEAN LEADERS and euro-zone watchers gave a mixed reaction to Franco-German proposals for greater economic governance and a financial transaction tax.

The European Commission led the praise, followed by German chancellor Angela Merkel’s Free Democrat (FDP) coalition partner. “What we weren’t able to agree at the introduction of the euro – closer fiscal and economic co-ordination – is now being made up for,” said FDP foreign minister Guido Westerwelle. “That’s good news for the German taxpayer.”

As French and German officials struggled to define the competence of their proposed “economic governance” system, German opposition politicians attacked the idea. “Smoke alarms for the future won’t extinguish the fire we have in the euro zone,” said Frank-Walter Steinmeier of the opposition Social Democrats (SPD). French socialist François Hollande called the proposals “too little too late” and said the leaders had taken a “great leap backwards” by ruling out euro bonds.

The commission welcomed the Franco-German rejection of euro bonds. “We don’t think that this is a solution . . . we don’t think that there is a political consensus within Europe to move forward today with this idea,” said commission spokesman Olivier Bailly.

Commission president José Manuel Barroso welcomed the euro-zone governance idea, and the choice of European Council president Herman von Rompuy to chair twice-yearly meetings.

“The challenges we are facing have made even clearer that a shared currency implies shared responsibility and demands closer co-ordination of economic policies,” he said.

He promised a commission proposal on financial transaction tax. Austria’s Social Democrat (SPÖ) chancellor Werner Faymann welcomed the proposal. “I have been a vehement proponent of a financial transaction tax since the beginning of the crisis,” he said.

Spain was similarly enthusiastic, though cool on Franco-German determination to sideline the euro bond. Similar regrets could be heard in Italy and Greece, also backers of the proposal to pool euro-zone debt.

There was a cool reaction around Europe to the proposal for inserting a “debt brake” limiting deficit spending into euro-zone members’ constitutions.

Finnish finance minister Jutta Urpilainen said she was “less than excited” about altering the country’s constitution.