Opposition seeks Merkel turnaround on euro debt

GERMANY’S SOCIAL Democrat (SPD) leader, Sigmar Gabriel, has called on Chancellor Angela Merkel to drop her opposition to pooling euro zone debt in exchange for mutual budgetary oversight and joint fiscal policy.

Mr Gabriel vowed yesterday to make his party agree to include in its campaign for next year’s general election a referendum to make such a move possible under the German constitution.

“We need a joint finance and tax policy, then we will be able to hold the euro together,” he said.

The ideas echoes proposals put forward in a weekend essay by German philosopher Prof Jürgen Habermas, in which he urges closer European integration – including common financial liability – as an effective strategy against financial market speculation.

German government officials dismissed Mr Gabriel’s strategy with varying degrees of vehemence yesterday.

A government spokesman reiterated the Berlin position that shared fiscal liability could only come at the end of a process of closer political integration.

“First the EU has to come to an agreement on what it wants and how it will reach a stronger political union,” said a spokesman.

Dr Merkel’s Bavarian allies, the Christian Social Union (CSU), called the proposal an “all-out attack on the German tax kitty”.

Mr Gabriel’s remarks are part of a wider strategy by the SPD leader to turn up the heat on the German leader in euro crisis in the last months of her second term.

Last month Mr Gabriel called for the introduction of a wealth tax in Germany and to make tighter regulation of banks a cornerstone of next year’s SPD election strategy.

There is an element of self-interest in the strategy: to build his profile and gain a strategic lead on two SPD colleagues also hoping to challenge Dr Merkel next year – former finance minister Peer Steinbrück and the party’s Bundestag leader, Frank Walter Steinmeier.

Mr Gabriel’s remarks come amid renewed debate in Germany about its leader’s euro zone strategy – and its long-term consequences.

Yesterday senior Green party politicians accused Dr Merkel of failing to appreciate the bigger picture of perceived German reticence in the crisis.

“Merkel has a difficult job and I don’t want to be a know-it-all but she has to highlight better the global context of individual decisions,” said Winfried Kretschmann, Green minister-president of the southern state of Baden-Württemberg. “I was never a big fan of Helmut Kohl but he had a clear European vision to which he stood, one of his greatest achievements. I miss this clarity today.”

It doesn’t seem as though the German people share his view: a poll last week gave the chancellor of seven years an approval rating of 68 per cent. That support could dwindle quickly in the autumn, when leaders debate further measures to address the ongoing euro zone crisis.

Austrian chancellor Werner Faymann said yesterday he sensed his German counterpart would be ready to back rescue measures, even those unpopular in Germany.

“I reckon the German chancellor will go the next step if it is necessary for the euro,” he told Austria’s Kurier daily, referring to the controversial idea of equipping the ESM bailout fund with a banking licence to tap the ECB for funding.

ECB president Mario Draghi insisted last week that his bank was unable to lend to the ESM in its current form.

Mr Faymann said he would not be surprised if resistance from Berlin to an ESM banking licence softened in the coming months.