Germany presses for transfer of fiscal powers to EU
GERMANY IS pushing to intensify the transfer of national fiscal powers to Europe in return for measures to develop a “banking union” in the euro zone.
Although Berlin remains opposed to any mutualisation of banking or sovereign debt, it is supporting measures to create a tougher pan-European regulator to oversee the financial sector.
As part of this effort, it wants other countries to go much further than foreseen in the fiscal treaty to deepen their involvement in each other’s financial affairs.
One idea is for each government to present an annual plan in Brussels explaining how they will reduce their national debt and setting out the specific tax streams from which the money will be generated. Any country which fails to realise its objective would have to find new ways of raising the money.
Although German chancellor Angela Merkel failed in the negotiation of the treaty to secure an oversight role on debt reduction for the European Court of Justice, this idea has been raised again.
Discussion of such measures comes as the European Commission advances plans for a “banking union” involving a common European deposit guarantee and stronger regulation.
In the European Parliament yesterday, commission president José Manuel Barroso said this would include provisions “to introduce solidarity via obligatory mutual lending” between national resolution funds.
Germany favours the creation of such funds – into which banks would pay mandatory levies – but not the pooling of their resources.
In a speech, Mr Barroso said the immediate step towards a banking union should build on the co-ordination of economic policy.
Other options for deeper fiscal integration and a refining of Europe’s bailout funds should be explored, he added. He also called for serious discussion on jointly issued debt, an idea Germany continues to resist.
Berlin denied reports yesterday that Greece would need a third bailout after Sunday’s election, but conceded that reform slippage raised the prospect of Athens being cut off from its EU-IMF funding next month.
Fresh speculation over Greece came amid pleas from the leaders of Spain and Italy for EU leaders to step up their response to the crisis and for the ECB to buy more debt from struggling countries.
German finance minister Wolfgang Schäuble told a meeting of deputies from his Christian Democratic Union party that a political standstill since the May election had left Greece far short of its reform targets. This would be the verdict of the next EU-IMF report, he said, meaning no immediate payout from bailout funds.
CDU officials confirmed the remarks but declined to comment further. “Mr Schäuble’s remarks on Greece were about calming MPs’ concerns about transferring more money to Athens without reform targets being met,” said one meeting attendee.
The finance ministry denied he had any strategy beyond stating the obvious. “He’s saying things are going to be tricky with Greece,” said a ministry official, citing some 70 measures that must be implemented by the end of this month.
“Is there a single person in the euro zone who thinks any reforms have happened in Greece in the last weeks?”
The ministry dismissed a claim in the Die Zeit weekly that a third bailout programme was being considered to cover a fresh shortfall in Greek finances.
Mr Schäuble told Stern magazine that Greeks were “free to vote for whom they chose” but said this would not change a crisis caused by decades of economic mismanagement. “I have great sympathy with the man in the street, it is not easy to cut the minimum wage when you think of the yacht owners,” he said.
Separately, Spanish prime minister Mariano Rajoy called on the ECB to buy up debt from struggling countries.
“That is the battle we have to wage in Europe, I am waging it,” he told MPs in Madrid.
Italian technocrat premier Mario Monti said the EU had run out of time to allow austerity plans to drive down borrowing costs and demanded firm action to support economic growth.
“Austerity as such is not sustainable if it is not accompanied by growth policies,” he said in Berlin after talks with Mr Schäuble.
“We need to have fiscal discipline and growth policies, for fiscal discipline to be sustainable in the long term.”