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
    0

    Comment number 1037.

    France does not want talk of fiscal union at this time, especially if it involves outside budgetary regulators. They have a crises of their own, only over shadowed by the so called PIIGS. The new President cannot deliver on his promises, if he is forced to keep the books in balance. All for one & one for one, it's always been this way. Multi culture-ism was always a dream. Free trade should be it

  • rate this
    -1

    Comment number 1036.

    Presumably all of this would be run by the same overpaid bureaucrats who never saw any of this coming, even though millions of others did! Why are we allowing these failures to continue when they have consistently failed to do their jobs? How come there are hundreds of YouTube videos from before 2008 predicting the crisis, and no gov, the IMF, central banks or global economists had such foresight?

  • rate this
    +1

    Comment number 1035.

    1032. Some Lingering Fog

    The opposite of austerity is more debt which you then hope to pay off later on which is what the majority of the West has been doing for the past 30+ years, and they have failed.

    No quick fixes are available.
    +++
    Yes there is, just burn the bonds.

  • rate this
    +2

    Comment number 1034.

    Germany, the destined Masters of Europe.

    - GO Angela!

    Proof that hard work, determination, productivity and industry, WORK!

  • rate this
    +1

    Comment number 1033.

    @ 1030. D Bumstead:
    Greece and Italy agreed to play the EU game. When they completely flouted the rules, to the point where they endangered the EU, they were called to court and given a final warning to get their house in order. Which they did. Perfectly legitimate if you ask me and the EU had been too lenient for far too long. Merkel showed extraordinary leadership. Enviable.

  • rate this
    -1

    Comment number 1032.

    And yet there are still people who think that the opposite of austerity is growth.

    Fools.

    The opposite of austerity is more debt which you then hope to pay off later on which is what the majority of the West has been doing for the past 30+ years, and they have failed.

    No quick fixes are available.

  • rate this
    0

    Comment number 1031.

    1025. D Bumstead
    +++
    I wish Merkal had the power to remove Cameron, I really do.

  • rate this
    -1

    Comment number 1030.

    @1027 Berlusconi (or Papandreou) exiting was no great loss at all- quite the opposite, but that is not the point. The point is that Merkozy meddled in Italian and Greek internal affairs, forcing Papandreou to resign because he dared to call for a referendum which Merkozy did not want. They had no right to do so- whether Pandreou remained as PM was a matter for the Greek parliament, not Merkozy.

  • rate this
    -1

    Comment number 1029.

    @1023. Chris Sheldrake "The problem is that the Eurocrats have been working towards 'ever closer union' by stealth."

    Yes. By acting on the sly like they do, it's obvious that they are doing Bad Things. And - despite whatever lies they must tell themselves - that even they know it.

  • rate this
    +1

    Comment number 1028.

    Yep, facts hurt. Truths are always subjective, but you can't deny facts. Unless you choose to play ostrich.

  • rate this
    0

    Comment number 1027.

    All this talk about Berlusconi being removed by Merkozy is ridiculous. Anyone who watched Berlusiconi's pathetic, denialist speech, which the whole country had been waiting for with bated breath, knows his position had become untenable and the rest were just infighting. Monti was a logical choice, hence the lack of protest.

  • rate this
    +1

    Comment number 1026.

    1025. D Bumstead
    @1019 A few years ago everybody would have considered it inconceivable that Merkozy would engineer the removal from office of TWO legitimate PMs of sovereign EU states.
    //////
    In the case of Berlusconi, it was more like surgically removing a malign growth. As a lover of all things Italian (apart from their football), I'd be grateful if indeed they'd engineered this. They didn't

  • rate this
    +3

    Comment number 1025.

    @1019 A few years ago everybody would have considered it inconceivable that Merkozy would engineer the removal from office of TWO legitimate PMs of sovereign EU states. They got away with it- what guarantees do we have that Merlande won't pull the same stunt again with other nations? What gives France and Germany the right to decide on who should or should not be PM of a sovereign state? Bullies!

  • rate this
    +1

    Comment number 1024.

    At the end of the day, all nations are trying to do 'whats best for them' - so anything you hear from the Germans, the French, or ourselves in these situations is just politicking. Personally, I think we've gone way too far and we'd do well do backtrack a bit.

  • rate this
    +2

    Comment number 1023.

    I think a majority of European citizens, including the British, would support and vote for a single market between nation states without internal borders.
    The problem is that the Eurocrats have been working towards "ever closer union" by stealth. Unless the people are allowed to vote a halt to it, the only possible outcome will be rule from Brussels not Berlin-without us.

    NB not from Berlin.

  • rate this
    0

    Comment number 1022.

    Austerity is a busted flush.Amazed anyone thinks like that any more since it patently doesn't work to get economies moving and thats the only way to earn enough to pay bills,personally and as nations.Still it would be the arch-federalists Germany with a bigger agenda- to make the nation-states subservient to a German-led EU. Whats the politico-economic equivalent of dumping the towels in the pool?

  • rate this
    -2

    Comment number 1021.

    The answer is very simple. Set up a state owned bank in each country that only deals with mortgages, simple savings and paying bills. No overdrafts, no fancy investment rubbish and let the private banks deal with their own mess. Then there is no need to waste money on conferences, summits and pointless posturing by useless Politicians intent on triaging a dead system.

  • rate this
    +2

    Comment number 1020.

    And Rumpy's still going on about that ludicrous propaganda Peace Prize the Eurocrats awarded themselves! LOL

    Everyone's wise to that Herman. Don't be embarrassing.

    A bad insult to *genuine* winners though. Luckily we can spot a LIE when we see it, so it doesn't actually devalue previous awards.

    I hope Dave broke it to them gently that he's got to stay home and wash his hair that night... ;-)

  • rate this
    0

    Comment number 1019.

    1013. D Bumstead
    Will, say, the Dutch or Belgian PM be next to be axed?
    //////
    I'm on. What will you do if that doesn't happen? If I lose, I pledge to sign a petition for a EU referendum.

  • rate this
    +4

    Comment number 1018.

    Nothing like the power of a crisis for indebted countries to be enforced to lose all sovereignty undemocratically.

 

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