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 Posted: Wed Jun 02, 2010 10:37 pm Post subject: French bid for Euro Zone "government" gains ground |
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French bid for Euro Zone "government" gains ground
| Quote: | Reuters - Julien Toyer and James Mackenzie - 02/06/2010
French-inspired plans to create an "economic government" for the euro zone took a big step forward on Wednesday when European Council President Herman Van Rompuy threw his weight behind the idea. Skip related content
The move raised pressure on Germany, Europe's biggest economy and chief crusader for tougher budget discipline, to accept a new political forum to coordinate economic policy, made up of leaders of the 16 nations that share the single currency.
"What President Van Rompuy wants is a kind of government at the level of euro zone heads of states and government, where everybody would feel a sense of responsibility. It would be more than a forum. It would entail a euro zone economic government," one EU diplomat said.
France has long pressed for a more formalised system of coordinating economic policy but the idea has been treated with scepticism by some partners, notably Germany. Berlin fears a challenge to the independence of the European Central Bank and is wary of state intervention in the market economy.
However, the global financial crisis has made Germany more supportive of financial market regulation, even moving ahead with a unilateral ban on some kinds of speculative trades without the backing of its EU partners.
German officials were not immediately available for comment.
Several EU diplomatic sources said Van Rompuy wanted to speed up negotiations on reforming euro zone budget rules and economic governance to clinch political agreement on a package deal at an EU summit on June 17.
That would require a consensus on tougher fiscal discipline rules, backed by sanctions, to avoid any repetition of Greece's massive accumulation of deficits and debt, which plunged the whole euro zone into crisis this year.
TRADE-OFF
Diplomats said a trade-off was likely between German demands for stricter enforcement of budget rules, European Commission proposals for prior scrutiny of national budgets before they go to parliament, and French calls for an "economic government."
A deal could also involve an understanding on the successor to ECB President Jean-Claude Trichet, whose term expires in October 2011.
German Bundesbank chief Axel Weber is a leading contender, but he has irked many member governments and central bankers by publicly dissociating himself from the ECB's key decision last month to start buying bonds of troubled euro zone countries.
French Economy Minister Christine Lagarde said on Wednesday that euro zone governments should consider creating a formal decision-making structure to reinforce moves towards closer economic cooperation.
"For a monetary zone to work efficiently, it has to have coordinated economic policies and it has to have authorities which enable these policies to be implemented and respected, so it needs the appropriate decision-making level," she told reporters.
French daily Le Monde reported this week that President Nicolas Sarkozy was pressing for regular meetings of euro zone leaders with a secretariat to act as an economic government for the currency bloc.
German Chancellor Angela Merkel has hitherto argued that all 27 EU member states, including those not in the euro, should be involved in economic governance to avoid opening new divisions.
But Britain's decision not to participate in a $1 trillion (683 billion pounds) EU/IMF emergency mechanism to stabilise the euro, and the new government's opposition to closer integration, have made it more likely that the euro zone will move ahead alone.
An EU diplomat said Van Rompuy did not believe an economic government would need a separate secretariat, since it could use the existing services of the European Council of EU leaders, over which he presides.
European finance ministers meet next Monday in Luxembourg to try to thrash out a reform package based on proposals from both the Commission and Germany for stricter enforcement of fiscal discipline.
At the same time, southern European countries under the fiercest pressure from bond markets are pressing ahead with painful reforms to clean up their public finances, restore lost economic competitiveness and regain investors' confidence.
Spanish Prime Minister Jose Luis Zapatero said on Wednesday his minority Socialist government would present a much-needed reform of the rigid labour market on June 16, with or without a deal in long-running talks with employers and trade unions.
The government would put the politically sensitive reform, designed to help bring down 20 percent unemployment by easing hiring and firing, to a final parliamentary vote without amendments, Zapatero said, setting himself on a potential collision course with the unions.
In Athens, the Greek government outlined plans to sell stakes in state-owned railways, water and real estate companies to help raise billions of euros to reduce its debt mountain.
The euro and European shares were broadly stable on Wednesday after big losses in May, but tensions remained on interbank lending markets and German bonds gained as investors steered clear of more risky peripheral euro zone government debt.
(Additional reporting by Paul Day in Madrid, Lefteris Papadimas and Greg Roumeliotis in Athens, Andreas Rinke in Berlin; writing by Paul Taylor, Editing by Toby Chopra) |
Link: http://uk.news.yahoo.com/22/20100602/tts-uk-eurozone-ca02f96.html |
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