• Germany's news in English

Merkel's tough euro plan sparks backlash

The Local · 4 Feb 2011, 16:53

Published: 04 Feb 2011 16:53 GMT+01:00

Facebook Twitter Google+ reddit

In exchange for further aid to partner governments struggling to balance their books, the 17-nation currency area's major powers want common policy goals and restrictions imposed by all, which they say will make the eurozone a more competitive, more efficient economy.

"We want to bring in a competitiveness pact and step by step bring about a more linear shared growth," German Chancellor Angela Merkel said in a joint declaration for the cameras alongside French President Nicolas Sarkozy at a European Union summit otherwise preoccupied with Egypt.

Merkel said they had asked EU president Herman Van Rompuy to consult with other states in order to fix a decision at the next 27-nation EU summit on March 24 and 25, meaning "we would have to reach agreement within the eurozone" first.

Sarkozy underlined that this would mean "a greater integration" than ever before. A special eurozone summit is likely to be needed earlier next month.

However, the much-trailed plan quickly stirred the passions of opponents.

Belgian Prime Minister Yves Leterme said he was "absolutely not in agreement" with the plan's call for inflation index-linked wage rises to be abolished.

His caretaker government is on course for accumulated national debts of almost an entire year's economic output in 2011, but he insisted: "We will not allow our social model to be undone."

As well as labour market reform, France and Germany want convergence in corporation tax regimes.

That would have the effect of rubbing out a competitive advantage secured by Ireland and others - Dublin's low percentage having already come under pressure during negotiations on its December bailout.

Other changes would see retirement ages evened out, qualifications recognised across linguistic borders, to help labour mobility, and a common system for managing banks in trouble.

At a time when one in 10 are unemployed across the eurozone, amid massive cuts in public spending, the head of the European Trades Union Confederation said Germany and France were out to trample over the little guys.

"This is not a competitiveness pact, it's a perverse pact towards lower living standards, greater inequalities and more precarious employment conditions," said John Monks.

According to a French government insider, "Germany is not always the best performer," the source saying the aim was to "identify the key domains" in which concerted action could help and that no reforms would be implemented before 2012.

Support did, however, come from one of the other star eurozone economic performer.

Netherlands Prime Minister Mark Rutte characterised the goal as "not a race to the bottom, but a race to the top."

The debate erupted as leaders move to strengthen a €440 billion rescue fund, with Greece and election-mode Ireland each seeking to renegotiate their bailout terms.

First of all, the EU wants to make the rescue fund, the Luxembourg-based European Financial Stability Facility (EFSF), able to lend its full amount. At present some €200 billion must be kept back as a cash buffer.

Story continues below…

Leaders will also consider letting the EFSF buy bonds from countries struggling to raise funds cheaply on markets, or lend the likes of Greece cash to buy back bonds that have already lost up to 30 percent of their value trading on open markets.

Some leaders also want an early bailout for Portugal or even a sort of overdraft for Spain.

The Merkel-Sarkozy plan envisages partners introducing ceilings on permissible national debts, mirroring a constitutional "brake" in Germany and new plans for France.

Diplomats warned, though, that southern eurozone nations, including Portugal, fear being rail-roaded down an even more painful path of reform.


The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

14:26 February 5, 2011 by Englishted
Two out of twenty seven .

When are you going to put any "plans" to the people ?,

I and many others are sick of Europe riding over plans of elected Governments without standing up to a vote yourselves.

I was not asked on expantion , the Euro, the constitution ,or if to allow Turkey in thus expanding Europe into Asia.

I don't know what the results would be if these questions had or would be asked ,but I think I know ,and this is the reason we will not get the chance to say.

Must we take to the streets like Egypt to see democracy in Europe ?.

Sad days ahead if these two get their way.
Today's headlines
Eurowings braces as cabin crew union proclaims strike
Photo: DPA

A union representing cabin crew for Lufthansa's budget airline Eurowings announced that strikes could take place at any time over the next two weeks, starting on Monday.

Mysterious German U-boat wreckage found off Scotland
Photo: ScottishPower

First World War U-boat "attacked by sea monster” thought to be found off Scottish coast.

Supermarket Edeka warns of exploding apple juice bottles
Photo: DPA

"Risk of injury" from "Gut und Günstig" sparkling apple juice bottles has forced Germany's largest supermarket to recall the product.

By wheelchair from Syria to Germany: teen's story of hope
Nujeen Mustafa. Photo: HarperCollins-William Collins Publicity/Private

She tackled the gruelling 2,000-kilometre migrant trail in a wheelchair, translating along the way for other refugees using English she learned from a US soap opera. Now this teen is living in Germany and hoping to inspire others with a newly published memoir.

Berlin Zoo to have a pair of pandas by next summer
A recently born panda pair at Vienna Zoo. Photo: DPA

The giant bamboo-eating bears will move into a brand new 5,000 square-metre enclosure in the capital's Zoologischer Garten.

Two new spider species discovered in Munich
Zoropsis spinimana. Photo: rankingranqueen / Wikimedia Commons

It's news every arachnophobe in Munich is no doubt thrilled to hear: two types of spider new to the region have been discovered in the Bavarian capital - and one of them bites!

After woman's body found in barrel, husband may walk free
Franziska S., who went missing 24 years ago. Photo: Hanover police.

A woman disappeared in Hanover 24 years ago, but no one reported her missing. Although her husband has now confessed to her murder, he still may not step foot in jail.

Two injured after army tank falls 50 metres in Alps
A Bundeswehr Puma tank. File photo: DPA

A Bundeswehr (German army) soldier has been severely injured after the tank he was riding in crashed 50 metres down an embankment after going off course in bad weather.

Teen girl stands trial for 'Isis' police stabbing in Hanover
Police guard the courthouse in Celle. Photo: DPA

A teenage girl stands trial from Thursday in Germany for stabbing a police officer, an assault allegedly "ordered" by Isis but which was not claimed by the jihadist group.

Merkel threatens Putin with more sanctions on Berlin visit
Angela Merkel and Vladimir Putin in Berlin. Photo: DPA

Chancellor Angela Merkel created a united front with French President Francois Hollande in Berlin on Thursday to denounce Russia’s “war crimes” in Syria.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd