German Chancellor Angela Merkel has said that the answer to resolving the eurozone’s debt crisis is to form a closer “fiscal union.” She told the Bundestag in Berlin that a new EU treaty was needed, in order to promote such a union and strict adherence to financial discipline.
Tackling the crisis
Merkel is set to meet the French President, Nicolas Sarkozy, on Monday. He has also called for treaty chances to the EU.
Merkel says that the EU needs to “change the treaties or create new treaties,” because the debt crisis has shown that the eurozone needs “budget discipline and effective crisis management mechanism.”
This looks to be Berlin and Paris’ answer to the increasing pressure and calls for leaders to step in and tackle the crisis lest the eurozone fall apart.
Unlike Sarkozy, however, Merkel is pushing for rules that would allow national budgets that did not conform to eurozone rules to be vetoed. Sarkozy said that such a move would endanger France’s sovereignty and that he does not support veto powers from Brussels over national budgets.
However, Merkel calls this part of “a new phase in European integration,” and says that the process would take years, with the veto being put in place over the long term.
Sarkozy has also lauded the importance of “a zone of stability” unified under converging economic policy, and said in an important speech on Thursday that Germany and France need to work together to stay at the heart of it.
Merkel has also reiterated her stance against the European Central Bank’s issuing of “eurobonds,” or stability bonds, which would be backed by all eurozone members.
“Joint liability for others’ debts is not acceptable,” she said, though many analysts criticise this, as eurozone members such as Germany have long been contributing to the bailouts of other countries’ debts.
Eurobonds are viewed by some to be the first concrete, viable solution to the debt crisis, but Berlin is opposed to the bonds which would have Germany shouldering much of the burden of debt.
The matter also seems to be political and of principle, as Merkel continues to speak about “national responsibility,” which she says serves “European solidarity.” National responsibility is a key issue, because the chief German argument against eurobonds is that they would reduce incentive for highly indebted countries to reform and take responsibility for their actions.
The eurobond issue is sure to appear on the minutes of the meeting between Sarkozy and Merkel in Paris on Monday. The two are set to hash out plans for a new European Treaty, to be proposed at a meeting of European leaders next week.