Germans say no deal agreed on Irish debt

 

GERMAN OFFICIALS have said they are not responsible for “illusions” created in Ireland after last June’s summit that EU leaders would expedite the resolution of its banking debt issue.

Senior advisers to Chancellor Angela Merkel said yesterday that the two-day meeting of the European People’s Party congress, beginning today, was an “important lap” in discussing the eurozone crisis, but that no decisions were likely to be made.

Dr Merkel will push for a wide-ranging discussion on measures for further integration of economic and finance policy. Germany is pushing for far-reaching measures, even those that would require treaty change; many of Berlin’s neighbours would prefer to avoid this step.

One of Dr Merkel’s senior officials insisted yesterday it was “perfectly clear” what the European council of EU leaders agreed at their last summit in June, and insisted this did not involve a deadline for Irish debt relief or even the nature of any possible relief.

“If others interpret the [June statement] differently, that is not our problem,” said the official. “The text says that the [European] commission will make suggestions, which the council will discuss as a matter of urgency. Nowhere does it say that the council would agree anything by the end of the year.”

Germany’s interpretation of the June agreement is that progress on Ireland’s bank debt can only come after a European banking regulator is operating effectively, and after EU leaders have agreed rules for banking recapitalisation by the ESM bailout fund.

Germany has said it is unlikely the regulator will be operational in 2013. Leaders were unlikely to spend much time discussing this today, Berlin officials said, with technical talks still continuing at the level of finance ministers.

“With respect to Irish banks, the problems occurred in a time when they were overseen at national level and thus the responsibility is at national level,” said a senior German official in Berlin.

“It is simply not on that everyone tries to slip out of their responsibilities that they carried in the past.”

German officials said it was not their problem if Dublin had created expectations regarding the speed at which the banking problem could be resolved and they noted that the June agreement contained no deadline.

“There’s nothing in there about agreeing anything to the end of the year,” an official said of the June statement. If anyone feels the need to read this into the statement, they face the problem of explaining why they have created illusions not contained in the text they signed.”

At tomorrow’s meeting the German leader will call on her European partners to debate further proposals for fiscal and economic integration to stabilise the eurozone – and not just measures that are politically palatable.

“It’s likely that what we want will only allow implementation in terms of treaty change, but these questions aren’t for today,” said a senior German official.

German officials are anxious to move on from the fiscal treaty to even closer regulation of national budgets. This week German finance minister Wolfgang Schäuble called for an EU currency commissioner with greater powers to intervene in national budgetary procedures. The commissioner would be able to demand binding changes to national budgets to bring them into line with European fiscal rules.

“If everyone had implemented the [commission’s existing] non-binding recommendations since 2000, we wouldn’t be in the situation we’re in now,” said a close Merkel aide.

Germany is anxious to use the relative lull in the eurozone crisis to promote debate once more on measures to boost the competitiveness of European economies. Berlin will suggest a system of financial incentives to catalyse reform. These could be financed with the proceeds of a tax on financial transactions, officials said. The funds could, for example, be used by states to encourage labour market reform or vocational training programmes.