GERMANY:BERLIN IS pushing ahead with its demand to beef up the stability pact with greater punitive powers against errant euro zone members.
Chancellor Angela Merkel has called for a temporary revoking of voting rights for indebted euro zone members while her political allies revived a call for an “orderly default” mechanism to be introduced. As the Bundestag rushes through a bill to loan €22.4 billion over three years to Greece, German politicians are anxious to be seen to be acting to avoid a repeat performance in the future.
“We need a working group to discuss what can be done about speculation and about countries that no longer meet euro zone criteria,” said Dr Merkel on German television.
She accepted that many countries, including Ireland, are opposed to any measures that would require reopening existing treaties. “But if you never at least started a process you’d never get anywhere,” she said, adding that a “growing number of countries” now shared Berlin’s view.
Government ministers and officials have fanned out to sing from the same hymn sheet a message that Dr Merkel’s Free Democrat (FDP) junior coalition partners have dubbed “from crisis management to crisis prevention”.
FDP leader Guido Westerwelle has called for a “debt brake” – cutting off structural funds to EU member states who indebt themselves more than 0.35 per cent of gross domestic product.
The proposal is one idea in a five-point plan, leaked from Mr Westerwelle’s foreign ministry.
Other proposals include allowing the EU to intervene in national budgetary and economic policy, a red line that Ireland and Britain have made clear they will never cross.
German finance minister Wolfgang Schäuble has taken a different approach. “For the European Monetary Union we urgently need the option of a restructuring procedures in the event of looming insolvency that helps prevent systemic contagion risks,” he said.
In November 2001 the International Monetary Fund (IMF), then headed by current German president Horst Köhler, presented a “Sovereign Debt Restructuring Mechanism”. The SDRM would give indebted states, similar to companies, the opportunity to enter insolvency proceedings to seek protection from creditors while debts are restructured. The measure was supported by Berlin but stopped by the Bush administration.
With Germany’s Greek loans likely to become law by Friday, a move rejected by two-thirds of German voters, leading German officials admitted yesterday their calls for action stemmed from the “pressure to do something, anything”.
