Brussels, 23/11/2011 (Agence Europe) - France is ready for the ambitious reform of the European treaties, that Germany has been calling for over the last few weeks, to increase budgetary and economic surveillance in the countries of the eurozone. “We, along with Ms Merkel, will shortly bring forward proposals on amendment of the treaties to prevent budgetary, economic or taxation divergences among countries”, French President Nicolas Sarkozy told the Boao Forum for Asia, an Asian discussion group on cooperation between Asia and Europe, on the evening of Tuesday 22 November. “There has to be convergence in the economic policies” of the 17 countries of the eurozone -“that means convergence of fiscal policies”, he said.
European Council President Herman Van Rompuy has been asked to bring forward interim proposals at the European Council in December aiming to strengthen economic governance in the eurozone. Addressing MEPs, Van Rompuy listed three lines for consideration: convergence in some sectors of activity; strengthening budgetary discipline; and deepening the economic and monetary union (EUROPE 10496). Some proposals will require treaty change, even though “a lot can be done within the framework of the existing treaties”, he suggested.
Under pressure from Berlin, the European Council mandate to begin discussion of limited amendment of the treaty is beginning to change, a European source says. Germany is now talking about a more ambitious revision of the treaties than what had initially been considered, and within a relatively tight timetable. With the support of countries like the Netherlands, Germany wants any country which breaks the rules of the stability pact to face automatic sanctions, and even be put under the supervision of the European institutions. According to German Finance Minister Wolfgang Schäuble, it is possible that EU leaders might come to decisions in principle as early as Friday 9 December. Far from slackening with ever higher refinancing costs for Spain and Italy, the sovereign debt crisis is accelerating. And all this is taking place against a background of fears among countries which are not part of the eurozone of a two-speed Europe.
ECB. Beefing up budgetary discipline and implementing structural reforms will take time. In the current situation, only the European Central Bank (ECB) would appear able to restore market confidence. France continues to take the view that the ECB can play a decisive role. On Tuesday, Sarkozy expressed his delight that the Bank was buying sovereign debt on the secondary market “so that the transmission channels of monetary policy in the eurozone can work properly”. Since May 2010, the ECB has purchased almost €190 billion worth of debt bonds of countries in difficulty.
Referring to the treaties which enshrine the independence of the ECB and task it with controlling inflation, Germany continues fiercely to oppose any massive intervention by the Bank (EUROPE 10497). That “will not happen, at any rate, not long-term”, German Chancellor Angela Merkel said yet again on Tuesday. It would be a “serious mistake” which would further underline confidence, said Governor of the Bundesbank Jens Weidmann.
There is a distinction between involving the ECB in one way or another and making it the lender of last resort, suggests a European source. There is also the option of granting a banking licence to the European bail-out fund, the EFSF, so that it would have access to the ECB's unlimited liquidity. This approach would create strong leverage which would hugely increase firepower without putting the ECB in the front line. For the moment, there is no agreement between France and Germany on this issue. (MB/LC/transl.rt)