CHANCELLOR Angela Merkel was in fighting form yesterday as she prepared for the showdown on stability pact reform in Brussels.
The German leader insisted last week’s deal with French president Nicolas Sarkozy is the basis for summit talks, despite claims she was outsmarted in Deauville into dropping her demand for automatic sanctions for debt breaches.
“It’s true that a Franco-German agreement isn’t everything, but without a Franco-German agreement, all is nothing,” she told the Bundestag in Berlin.
She warned that it was “not yet certain” whether Europe would emerge stronger from this crisis and that a deal now was better than waiting until “the water is once more up to our necks”.
Then she presented her ultimatum: a new sanctions regime has to be in place by the summer of 2013 – even it requires a treaty change – because Germany will not agree to extend beyond then the life of the rescue fund (EFSF) established after the Greek crisis.
In the countdown to the summit, senior Berlin officials said they were aware of the unhappiness – particularly among smaller states – about treaty change plans.
The German leader left for Brussels knowing she is under pressure to return with a win for Germany – or at least something that looks like one. Agreeing to bail out Greece earlier this year annoyed many Germans; Dr Merkel placated them with the promise of new automatic sanctions instead of the existing political fudge to deal with what Germans like to call “debt sinners”.
When Deauville knocked automatic sanctions off the table, Berlin’s claims it was never interested in anything of the sort prompted snorts of derision in the German press. After that PR disaster, the hard-nosed approach on sanctions this week seems to follow a Wildean logic: to be bamboozled once is a misfortune, to be bamboozled twice looks like carelessness.
Yesterday, Dr Merkel’s foot soldiers started the spin cycle on its two key demands. Firstly, a leading official said it was incorrect to say Berlin was pushing to for a mechanism to suspend voting rights. Removing council voting rights would only ever be a “last resort” if a country “breached deficit rules for the umpteenth time”.
Secondly Berlin wants to minimise the future burden on euro zone member states by allowing private creditors on the list of parties to be included in future bail-outs of euro zone members.
That requires treaty change, something Berlin acknowledges as tricky for countries like Ireland. But, overall, German officials are unmoved by special pleading and insist that agreeing to the changes is a matter of “political will”.
Even in Berlin, though, Dr Merkel’s officials have struggled to convince all about their negotiating line. Would their threat to allow the rescue fund wind down in 2013 as planned not, in the case of another Greek-style euro zone crisis a year later, leave Germany digging the deepest again?
Dr Merkel’s team refused to be drawn on this point yesterday insisting that, when it comes to tougher euro zone sanctions, the lady is not for turning.