Begg to urge Merkel to step up stimulus measures

IRISH CONGRESS of Trade Union (Ictu) general secretary David Begg will tell Chancellor Angela Merkel that Ireland faces a “decade of despondency” unless EU austerity policy is matched with economic stimulus measures.

Mr Begg is part of a delegation of EU officials meeting the German leader tomorrow afternoon in Berlin.

Ahead of the meeting he warned that the euro zone crisis had seen the European integration ideal of a “European Germany” replaced with a “German Europe”.

“Germany is emerging as the natural hegemon for an integrated Europe [and] it is dictating the pace in a way which is quite damaging to the prospect of growth,” he said.

“We need to do something to stimulate demand, we can’t do this on the basis of austerity. Apart from consequences for domestic economy, permanent deflationary policies means that our debt will become unsustainable.”

On this, Mr Begg said he is “on the same page” as other union leaders attending the talks, from Belgium, Sweden, France, Greece, Italy and the Czech Republic.

They will also meet Frank-Walter Steinmeier, parliamentary leader of the opposition Social Democrats (SPD).

The SPD has backed calls from outside Germany for Berlin to support greater economic stimulus measures. At the same time they have promised their parliamentary backing when the fiscal treaty, to limit EU deficit spending and force balanced budgets, is tabled for parliamentary ratification.

Mr Begg said he agreed with Germany’s analysis of the crisis, that incomplete fiscal and monetary union now required a renewed integration push, but it required a “complete adjustment” that required budgetary stimulus measures and pooled sovereign debt.

At present, he said, Berlin was giving no sign that it would concede to the latter after securing the former.

“We want to see European integration moving in the direction of certain things happening at once, otherwise we are buying a pig in a poke,” he said.

Berlin is trying to “eliminate one way of thinking from the economic toolbox”, he said, namely anti-cyclical Keynesian stimulus measures.

The Ictu official expressed optimism that he could use the one-hour meeting to raise Ireland’s bank debt burden – in particular the Anglo promissory notes.

“It is possible to adjust it without infringing any principles,” he said. Slowing down repayments would reduce the immediate debt burden and help restore “economic equilibrium”.

Meanwhile, German foreign minister Guido Westerwelle hosted eight European counterparts in Berlin last night for the inaugural meeting of a “Future Group” to discuss the post-crisis EU.

Foreign ministry officials insisted the informal gathering was “not a closed shop” but an attempt to trigger a wider debate among all EU members.

There was no official agenda for the meeting, being held outside Berlin, but ministers were expected to discuss measures to increase democratic participation and greater harmonisation of economic and fiscal affairs.

Ahead of ratification of the inter-governmental fiscal treaty, Berlin officials say there can be no “taboos” over the need for further EU treaty change.