EuroZone heavyweights proposed euro debt solutions and Germany shoots it down
06/26/2012 3:48 pm EST
Get a meaningful agreement on how to end the euro debt crisis out of the summit of European leaders that begins on Thursday? At this rate, the summit will be lucky if leaders are speaking to each other at the end of the meeting.
The plan came from European Union President Herman Van Rompuy, European Central Bank President Marie Draghi, European Commission President Jose Barroso, and Jean-Claude Juncker, head of the euro finance ministers. It resembled the kind of trade off that I suggested might still be possible in my post http://jubakpicks.com/2012/06/26/the-euro-has-run-out-of-time-the-political-tides-say-its-produce-a-fix-at-this-weeks-summit-or-the-common-currency-is-done/ . In exchange for new joint financial guarantees—such as common European deposit insurance and a phased move toward Eurobonds guaranteed by all EuroZone members—the plan would have given the European Union the power to impose upper limits on annual national budgets and on the debt levels of countries that use the euro.
The German rejection was instantaneous and dismissive. “Parts of it read like a wish list,” German Deputy Foreign Minister Michael Link told reporters. The plan is biased toward the creation of new mutual debt instruments for EuroZone nations but comes up short on improved budget controls, he continued. (From one perspective he’s right to characterize the proposal as a “wish list.” Elements of the plan would require changes in the German constitution.)
According to Reuters today, German Chancellor Angela Merkel has said at a coalition party meeting that Europe will not have shared total liability for debt as long as she lives. The German government hasn’t actually denied that Merkel made that comment, saying instead that the remarks were “off-the-cuff” at a private meeting.
The German reaction is especially disappointing because the plan released today is apparently a watered down 7-page version of an earlier 10-page plan. If Germany rejects even a “pre-compromised” plan, it seems there’s not much room for negotiation.
And, just in case you’re inclined to cast the Germans as the obstacle to a solution, please note that the French weren’t represented in the group that drew up this proposal. On its record, the French government would be likely to oppose any plan that transferred so much national sovereignty to the European Union. (Current French foreign minister Laurent Fabius led the campaign that resulted in a French rejection of a proposed European constitution in 2005.) German Chancellor Merkel is scheduled to talk with French President Francois Hollande in Paris on Wednesday night.
Should be an interesting dinner.
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