Brussels — The prevailing narrative for the past two and a half years has been that the euro zone’s debt crisis was made worse by German Chancellor Angela Merkel’s refusal to dig deeper into her pockets.
If only she had not waited months before green-lighting the first rescue of Greece, or the creation of euro zone rescue funds, the currency bloc’s problems could have been tackled much earlier at a fraction of the cost, critics say.
Now Merkel is being pressed to allow the use of euro funds to lower the cost of Spanish and Italian debt and backstop Spanish banks, and enter into far more extensive initiatives such as the joint issuance of public debt through euro bonds.
The German leader reacted this month by signalling that Berlin was prepared to open up its wallet, but only in the long term, and in exchange for a “political union” that would give Brussels the power to police national behaviour within the euro zone.
“We don’t just need a monetary union. We also need a so-called fiscal union, that is to say, more budget policymaking together,” Merkel said on ARD public television.
“As time goes on, we must, step by step, give up powers to Europe and grant Europe capacities of supervision,” she added.
The head of the German central bank, the Bundesbank, drove the point home in an interview with French newspaper Le Monde.
“You don’t give your credit card to someone if you can’t control their spending,” said Jens Weidmann, who was previously Merkel’s top economics adviser.
With Berlin having named the price for its solidarity — a complex political initiative that would likely require EU treaty changes and constitutional reforms in Germany and elsewhere — it is now up to others to say whether they are prepared to accept it. France’s position is especially problematic. Historically, the heavily centralised nation has been reluctant to cede too many powers to Brussels.
Last year, the previous government led by centre-right president Nicolas Sarkozy initially put up strong resistance to provisions that make it easier to impose EU sanctions on euro zone overspenders.
France’s new socialist leader Francois Hollande is thought to be less opposed to the idea of a federal Europe than Sarkozy, but that may change once the European Commission starts pressing him on the need to trim the deficit.
Hollande was elected on promises to hire 60,000 new teachers and partially roll back a pension reform that has raised the retirement age from 60 to 62. If Merkel’s “political union” were enforced, the EU would probably be given the power to stop him.
Brussels can already poke its nose in national policies thanks to the ‘six-pack’ of tighter spending and economic co-ordination rules that were approved last year with the aim of preventing future euro zone debt crises.
That has already made some waves: when EU Economy Commissioner Olli Rehn told the Belgian government in January that it had to adopt extra austerity measures to escape the threat of budget sanctions, socialist minister Paul Magnette revolted.
“Who knows Olli Rehn? Who has ever seen Olli Rehn’s face? Who knows where he comes from and what he has done? Nobody. Yet he tells us how we should conduct economic policy. Europe has no democratic legitimacy to do this,” he told the De Morgen newspaper.
Rehn seems to have indirectly acknowledged the problem, as he stressed in a speech last week that any attempts to shore up the euro zone through the pooling of national sovereignties cannot sidestep the public.
He called for “a genuine political process to give democratic legitimacy and accountability to further (integration) moves.” With eurosceptic parties on the rise in countries including France, Finland, the Netherlands and Italy, convincing European voters of the merits of giving yet more powers to Brussels to solve their economic woes is likely to be a tall order. — dpa