Germany, France plan quick new Stability Pact# Stock
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(Reuters) - German Chancellor Angela Merkel and French President Nicolas
Sarkozy are planning more drastic means - including a quick new Stability
Pact - to fight the euro zone sovereign debt crisis, Welt am Sonntag
reported on Sunday.
The Sunday newspaper reported in an advance before publication that if
necessary Germany and France were ready to join a number of countries in
agreeing to tough budget discipline.
The report, which echoed a Reuters report on Friday from Brussels, quoted
German government sources as saying that the crisis fighting plan could
possibly be announced by Merkel and Sarkozy in the coming week.
The report said that because it would take too long to change existing
European Union treaties, euro zone countries should avoid such delays be
agreeing to a new Stability Pact among themselves - possibly implemented at
the start of 2012.
It could be similar to the Schengen Agreement that allows for uninhibited
cross border travel for citizens in countries that take part. Among the
countries in the Stability Pact there would be a treaty spelling out strict
deficit rules and control rights for national budgets.
The European Central Bank should also emerge more as a crisis fighter in the
euro zone. The ECB is independent and governments cannot tell it what to do
. But the expectations on the ECB are clear, Welt am Sonntag wrote.
"Based upon these measures, there should be a majority within the ECB for a
stronger intervention in capital markets," Welt am Sonntag said. It quotes a
central banker as saying: "If the politicians can agree to a comprehensive
step, the ECB will jump in and help."
In Brussels on Friday, euro zone officials said a push by euro zone
countries toward very close fiscal integration could give the ECB the
necessary room for manoeuvre to scale up euro zone bond purchases and
stabilize markets.
The ECB, which cannot directly finance governments, has been buying Italian
and Spanish bonds on the secondary market since August to try to keep down
borrowing costs for the euro zone's third and fourth largest economies and
contain the spreading of Europe's sovereign debt problem.
Such tight fiscal integration is being considered by France and Germany, the
officials said, with Berlin pushing to change the European Union treaty so
that a country could be sued for breach of EU budget rules in the European
Court of Justice.
The European Commission, the EU executive arm, put forward proposals on
Wednesday to grant it intrusive powers of approval of euro zone budgets
before they are submitted to national parliaments, which, if approved, would
effectively mean ceding some national sovereignty over budgets.
This could lead to joint debt issuance for the euro zone, where countries
would be liable for each others' debts.
Germany strongly opposes the joint issuance idea fearing spendthrift
countries would piggyback on its low borrowing costs - meaning no gain for
the virtuous and no pain for the sinners.
Sarkozy are planning more drastic means - including a quick new Stability
Pact - to fight the euro zone sovereign debt crisis, Welt am Sonntag
reported on Sunday.
The Sunday newspaper reported in an advance before publication that if
necessary Germany and France were ready to join a number of countries in
agreeing to tough budget discipline.
The report, which echoed a Reuters report on Friday from Brussels, quoted
German government sources as saying that the crisis fighting plan could
possibly be announced by Merkel and Sarkozy in the coming week.
The report said that because it would take too long to change existing
European Union treaties, euro zone countries should avoid such delays be
agreeing to a new Stability Pact among themselves - possibly implemented at
the start of 2012.
It could be similar to the Schengen Agreement that allows for uninhibited
cross border travel for citizens in countries that take part. Among the
countries in the Stability Pact there would be a treaty spelling out strict
deficit rules and control rights for national budgets.
The European Central Bank should also emerge more as a crisis fighter in the
euro zone. The ECB is independent and governments cannot tell it what to do
. But the expectations on the ECB are clear, Welt am Sonntag wrote.
"Based upon these measures, there should be a majority within the ECB for a
stronger intervention in capital markets," Welt am Sonntag said. It quotes a
central banker as saying: "If the politicians can agree to a comprehensive
step, the ECB will jump in and help."
In Brussels on Friday, euro zone officials said a push by euro zone
countries toward very close fiscal integration could give the ECB the
necessary room for manoeuvre to scale up euro zone bond purchases and
stabilize markets.
The ECB, which cannot directly finance governments, has been buying Italian
and Spanish bonds on the secondary market since August to try to keep down
borrowing costs for the euro zone's third and fourth largest economies and
contain the spreading of Europe's sovereign debt problem.
Such tight fiscal integration is being considered by France and Germany, the
officials said, with Berlin pushing to change the European Union treaty so
that a country could be sued for breach of EU budget rules in the European
Court of Justice.
The European Commission, the EU executive arm, put forward proposals on
Wednesday to grant it intrusive powers of approval of euro zone budgets
before they are submitted to national parliaments, which, if approved, would
effectively mean ceding some national sovereignty over budgets.
This could lead to joint debt issuance for the euro zone, where countries
would be liable for each others' debts.
Germany strongly opposes the joint issuance idea fearing spendthrift
countries would piggyback on its low borrowing costs - meaning no gain for
the virtuous and no pain for the sinners.