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Stop cooking the books

Gavin Hewitt | 12:29 UK time, Thursday, 25 March 2010

Chancellor Merkel addressing Bundestag, 25 Mar 10It is a tradition before a European summit that the German chancellor briefs the Bundestag before heading for the talks. Today Angela Merkel's words were pored over by European officials more than usual. The EU is facing its severest crisis for at least a decade and Germany is at the heart of it.

A former Belgian Prime Minister, Guy Verhofstadt, said yesterday, "incredibly, the public statements of some EU leaders have fuelled more anti-European sentiment in four days than all the Eurosceptics have achieved together in four years."

The pressure on Germany is to ride to the aid of Greece in a gesture of European solidarity. Germany is signalling that it will defend its interests.

Angela Merkel laid it on the line today: "cooking the books must be stopped," she said. There is no alternative to solid finances, she lectured the EU. "There can be no tricks," she said to applause. "All member states must go that way." She went on to remind her critics outside Germany that "the German people gave up a stable currency. Their trust can't be deceived."

What the German chancellor seems to be after is a new set of rules to govern the eurozone that will be enforced with much tougher sanctions. She said today that she would push for treaty changes. That is an indication of how serious she is. After eight years scrapping over the Lisbon Treaty there is no appetite for a new round of haggling over rules. Mrs Merkel knows that as well as anyone, but she believes the current system is not working and it has to be changed for the stability of the currency.

She took on her critics, who have been appealing to her to demonstrate she is a committed European. "A good European," she said, "is not one who takes spur of the moment decisions, but one who looks for long-term stability."

However, she did spell out in what circumstances Greece might be helped. If the stability of the eurozone was threatened and a state exhausted its ability to borrow then she conceded "we must act". But it would be as a last resort. In those circumstances she envisages bilateral loans from eurozone members combining with aid from the IMF. So that is the German position. They want the IMF involved plus bilateral loans from Europe.

The IMF involvement will be contentious. Only today officials were saying that calling on the IMF would "damage the single currency". The answer might lie in where the majority of the funds came from, the eurozone or the IMF?

Mrs Merkel pledged to work closely with France, but there are now deep rifts between the eurozone's key players.

What seems to be emerging is that Germany wants to use the crisis with Greece to bend the eurozone more to its own image, to ensure that, in future, it is a club that plays by the rules. Some are suggesting that Germany wants the club to play by its rules.


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