USA Today, December 9, 2011
By Mark Latham and Sumi Somaskanda, Special for USA TODAY.
Contributing: Jason Walsh, The Associated Press.
BRUSSELS—France and Germany’s leaders early today praised a move to change an intergovernmental treaty to make it easier to force governments to balance their budgets and trigger automatic sanctions if they don’t.
French President Nicolas Sarkozy and German Chancellor Angela Merkel, here for a summit on the European financial crisis, had wanted a more imposing treaty including the entire European Union.
They said they hope the new treaty will get investors and perhaps EU institutions to open up credit to debtor nations.
“The longer we wait, the more expensive and less effective the solution will be,” said Sarkozy at a meeting of European Union conservatives in Marseilles, France, earlier Thursday. He described the situation as “dangerous,” adding that time was of the essence.
Early today, European Council President Herman Van Rompuy said the new intergovernmental treaty meant to save the euro currency will include the 17 eurozone states plus six other European Union countries — but not all 27 EU members.
“I have always said, the 17 states of the Eurogroup have to regain credibility,” Merkel said. “And I believe with today’s decisions this can and will be achieved.”
Merkel and Sarkozy have ratcheted up pressure on their European counterparts in recent days to agree on closer fiscal integration, a move that could include a centralized European authority implementing strict budget oversight on member countries.
But analysts say tougher fiscal discipline and tighter integration do not address the currency union’s underlying problems. Targets alone will only tide over markets in the short-term, they say.
“I would find it surprising if they are not going to offer any more than this,” said Simon Tilford, chief economist at the Center for European Reform. “If this is all that is on the table then the future for the euro is very, very bleak indeed.”
Ray Kinsella, professor of economics at University College Dublin, said there is “almost visceral” opposition to any changes to the treaty that would strengthen Europe’s powers over Ireland.
“The dash for political union without democratic legitimation is in danger of Balkanizing the EU. We’re putting European solidarity at risk,” he said.
Jean-Claude Juncker, chief of the EU finance minister panel known as Eurogroup, gave his support for fiscal integration. He said the currency bloc would need an automatic mechanism to punish member-states that step out of line.
“The world has to be convinced that budget discipline is a permanent mission in all eurozone countries, and we have to write that into our rules,” said Juncker in an interview with Germany’s Süddeutsche Zeitung newspaper.
The EU treaties have often been difficult to ratify and amend over the past decades. Some political leaders have complained that Germany is pushing a solution suitable to its goals but not others. Poland, the United Kingdom, Sweden, Romania and Finland do not support a treaty change.
Debt-ridden nations such as Italy and Spain are being forced into ever-higher interest rates on their debts because of their shaky finances and investor concerns that the EU cannot rescue them. The Merkel-Sarkozy proposal is intended to reassure investors.
The summit’s aim is to find permanent ways to assist, such as forcing eurozone countries to change budgets and lower spending, offer methods to guarantee their debts or even create a new European bond.
Prior to the summit’s start, the European Central Bank cut interest rates to help revive the slowing European economy and added new credit for banks struggling in the continent’s debt crisis.
Secretary of State Hillary Rodham Clinton, who was in Brussels, said the U.S. was willing to help.