EU summit: Merkel agenda for euro reform riles France

French President Francois Hollande and German Chancellor Angela Merkel arriving at EU summit in Brussels, 18 Oct 12 The smiles could not conceal Franco-German tensions over EU integration

The German chancellor has called for the EU to be given the power to veto member states' budgets, as leaders meet in Brussels for a summit.

Angela Merkel said the EU economics commissioner should be given clear rights to intervene when national budgets violated the bloc's rules.

But French President Francois Hollande said the summit must keep focused on plans for a banking union.

He wants action to revive growth, while Germany stresses budget discipline.

"The topic of this summit is not the fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year and especially the banking supervision. The other topic is not on the agenda," Mr Hollande said.

The banking union plan is fraught with legal complications, as it would give more powers to the European Central Bank (ECB) and possibly weaken those of national regulators. There is speculation that it could lead to treaty changes - something that has caused big headaches for the EU in the past.

The aim is to agree first on joint banking supervision, with the ECB playing the lead role. But the UK - the EU's main financial centre - wants safeguards to protect the powers of the Bank of England.

The UK and some of the other nine non-euro states are also concerned about voting rights in the proposed banking union.

Banking union - Brussels' 3-stage plan

  • Single supervisory mechanism (SSM)
  • Joint resolution scheme to wind down failing banks
  • Joint deposit guarantee scheme

France and Germany differ over the timetable for such a union, with Berlin advocating caution.

Germany is also at odds with the European Commission over the scope of the proposed ECB supervision. Under the plan, all 6,000 banks in the 17-nation eurozone would be included, but Germany wants it limited to the biggest, "systemic" banks.

As the summit got under way its chairman, European Council President Herman Van Rompuy, invited all 27 leaders to attend the Nobel Peace Prize ceremony in Norway. The EU was awarded the prize last week.

"To mark this joyful occasion I hope all EU Heads of State or Government will be able to join celebrations in Oslo in December," he said on Twitter.

But Greece, the eurozone state worst hit by the debt crisis, was gripped by another 24-hour general strike on Thursday, with at least 20,000 protesters thronging central Athens, amid clashes between demonstrators and police.

'Quality before speed'

Addressing the German parliament in Berlin on Thursday morning, Mrs Merkel said the EU should have "real rights to intervene in national budgets" that breached the limits of the EU's growth and stability pact.

The EU's economics commissioner, she suggested, should have the authority to send a budget back to a national parliament.

The BBC's Mark Lowen says petrol bombs were thrown, with Greeks feeling "pushed to breaking point"

Unfortunately, Mrs Merkel said, some EU member states were not ready for such a step.

"I am astonished that, no sooner does someone make a progressive proposal... the cry immediately comes that this won't work, Germany is isolated, we can't do it," she added.

"This is not how we build a credible Europe."

On the banking union Mrs Merkel has repeatedly stressed that "quality must trump speed".

Prime Minister Fredrik Reinfeldt of Sweden, one of the 10 EU countries outside the euro, echoed her stance, saying "there are a lot of questions that need to be answered legally" and "it's better to get things right than to rush things".

The idea is that the ECB would be able to intervene early on to prevent a systemically dangerous accumulation of debt on a bank's balance sheets.

Once the legal framework is in place the new permanent rescue fund, the European Stability Mechanism (ESM), will be able to recapitalise struggling banks directly, without adding to a country's sovereign debt pile.

The prize is a system that avoids huge taxpayer-funded bailouts like those arranged for Greece, the Republic of Ireland and Portugal.

UK 'pulling away'

The summit is taking place amid calmer European stock markets than at previous meetings and with less immediate concern over the debt crises in Spain and Greece, analysts say.

UK Prime Minister David Cameron made it clear that improving the EU single market was his priority at the summit.

He said that in the "global race" there was a risk of the EU falling behind.

The EU single market "still isn't finished, in digital, in services, in energy, and that is the agenda I'll be pushing very hard at this council", he said.

Later Finland's Europe Minister, Alex Stubb, said the UK was looking increasingly isolated and the summit appeared to be "26 plus one".

"I think Britain is right now, voluntarily, by its own will, putting itself in the margins," he told Reuters news agency.

"It's almost as if the boat is pulling away and one of our best friends is somehow saying 'bye bye' and there's not really that much we can do about it."


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  • rate this

    Comment number 657.

    649. Knut Largerson
    I really don't think a Referendum would do it.

    I have no doubt at all that a UK referendum on membership of the EU would attract a vast turnout. Far bigger than on any other topic.

    I would further venture, it would be a huge majority to leave. If I were a betting man I would put a tenner on it being 75%.

    That's why we will never be asked.

  • rate this

    Comment number 656.

    Germany is not trying to "dominate" anything. Frau Merkel simply wants some sort of safeguard that the money she's about to lend to a confirmed alcoholic won't be spent on (yet) more drink.

  • rate this

    Comment number 655.

    If Scotland has to apply for EU membership while the UK remains in, will the UK veto her entry?
    I wonder as well. Why would they though? Out of spite? I think you will have to substantiate your veto.

  • rate this

    Comment number 654.

    "Then please consider whether such a position is at all compatible with your stated goal of having "free trade".

    Because trade was invented by the EU? (eyeroll)

  • rate this

    Comment number 653.

    643. krokodil
    So we remain with membership, but constrained by public opinion. If the public ever get asked, we are out.
    I want in, but I do want a referendum to sort this out once and for all. Assuming the outcome were yes, just out of curiosity, what would that mean for you? Would you accpet it?

  • rate this

    Comment number 652.

    #640 - Ted..... you died.

    Surely, if Scotland must re-apply for membership, then so too must England, Wales and NI. That is the logical and stoic logic. It is a far better thing Scotland does, than any yet realise.

    If Scotland must re-apply for Union, so also must the remainder of the UK. That l believe is a principle worth fighting for.

  • rate this

    Comment number 651.

    @636. David Gussie "It seems as if the EU and Germany are becoming one and the same."

    Yes. The old totalitarian East Germany, in fact.

  • rate this

    Comment number 650.

    Banking & fiscal union are necessary elements of a currency union. What's more, institutionalised trans-national cooperation such as the EU is entirely necessary since the truth of the matter, whether liked or not, is that we now live in a trans-national world. Economically, politically, culturally. The only choice is to embrace it and democratize it as much as possible. Look at the long game.

  • rate this

    Comment number 649.

    I really don't think a Referendum would do it.

    On a straight Vote even if "No" to Europe got say 51%, (hey they might), if turnout was low the result could be discounted as it was in the Scottish Devolution Vote of 1979, which had a high turnout of 60%.

    So if you do get a Referendum check the small print. It just might be impossible to win.

  • rate this

    Comment number 648.

    612.Shoogly Peg

    "When the Scottish have the Euro, all oil and gas revenues will stop at the border and England will go cold and hungry."

    Swap you oil and gas for RBS.
    Oil and gas will run out one day. RBS debt will continue for ever.

  • rate this

    Comment number 647.

    "Andy The Thinker
    NO outside interfering in our Soveriegn laws and regulation."

    So you want no implementation of any EU laws, regulations and standards in the UK. Please confirm whether that is what you mean by not having "Brussels" control our lives? Then please consider whether such a position is at all compatible with your stated goal of having "free trade".

  • rate this

    Comment number 646.

    If Scotland has to apply for EU membership while the UK remains in, will the UK veto her entry?

  • rate this

    Comment number 645.

    612.Shoogly Peg
    12 Minutes ago
    When the Scottish have the Euro, all oil and gas revenues will stop at the border and England will go cold and hungry.'

    So you want us to die of starvation and freeze to death, and the Scots who contributed to the 'drought' blog in February wanted us all to die of thirst.

    'Go on, surprise yourself, visit Scotland'. Where they all want you dead.

  • rate this

    Comment number 644.

    How on earth anyone in the EU could have expected total harmony between so many countries beats me.
    Well, there is relative harmony, isn't there? No more disharmony than let's say between Oklahoma and NY, or Appenzell and Basel-Stadt.

  • rate this

    Comment number 643.

    Mind you, we won't get a referendum. No chance. Why?

    Any PM who goes for it will have to campaign for a yes vote. They would lose badly. (read Blair's book, he admits it. At the height of his popularity he knew he would not win.). So then you face a vote of no confidence, and your out.

    So we remain with membership, but constrained by public opinion. If the public ever get asked, we are out.

  • rate this

    Comment number 642.

    #627 - Sid, some of us love the Scots, in spite of themselves.
    #628 - VD - l believe the correct term is nine, arrange your own vowels.

    The EU is a Franco-German pact that benefits each.
    When that ceases, for what ever reason, there will war again.

    Quite frankly, bring it on. I'm just about to old to be called up.

  • rate this

    Comment number 641.

    Germany just hasn't got over its desire to dominate has it.

    From two disastrous world wars, they still appear to have the same desire to dominate and control. It's almost like Germany has a complete intolerance for any other country that isn't so well behaved or "regimented".

    It looks like the "stability" in Europe for the last 60 years is running out fast - this time, can we NOT get involved !

  • rate this

    Comment number 640.

    Its not a question of being opposed to Scottish membership,its a question of having to apply again for membership
    Yes it is. If they have to apply again, they can be veto'd, although that is unlikely to happen. Well, Spain could veto it.

  • rate this

    Comment number 639.

    612 Shoolypeg Don't think so mate I live in Lincolnshire most of the UK gas is off our coast and we have the most fertile farmland in the uk . If anywhere ought to be thinking of going it alone it should be the old anglo saxon kingdom of Lindsey the gas would last our small pop for centuries and we could just export foodstuffs. fact.

  • rate this

    Comment number 638.

    620 Rich
    “there are some in this country who fear that in going into Europe we shall in some way sacrifice independence and sovereignty. These fears, I need hardly say, are completely unjustified”. Edward Heath Conservative Prime Minister. Ring any bells?

    Yes. Alarm Bells.


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