EU FINANCE ministers last night backed calls for tougher sanctions against countries which repeatedly flout the union’s fiscal rules, but played down German demands for debt restructuring and changes to the EU treaties.
As the German parliament approved Berlin’s participation in the €750 billion EU/IMF safety net for distressed euro members, however, European Central Bank (ECB) chief Jean-Claude Trichet sought to calm jittery markets by saying the euro was not in danger.
"Let us be clear, it is not the euro that is in danger, but the fiscal policy of some countries that has to be, and is being, addressed," Mr Trichet told the Frankfurter Allgemeine Zeitung.
His remarks came two days after German chancellor Angela Merkel prompted acute market anxiety by saying the single currency was endangered by an “existential” crisis.
Although Dr Merkel’s ban on speculative stock market dealing angered many of her counterparts, EU ministers sought to present a united front in their effort to dampen the debt crisis in the euro zone after they discussed ways of imposing greater budgetary discipline in the euro zone at a meeting in Brussels yesterday.
The ministers’ aim is to adopt measures that would avert any repeat of the Greek debt crisis, which has prompted exceptional pressure on the euro and fiscally weak countries such as Spain and Portugal.
European Council president Herman Van Rompuy emphasised their common resolve to give teeth to measures to punish governments with poor public finances. These would include financial and non-financial measures, he said, indicating that the European authorities may for the first time deploy powers already in the EU rulebook to impose fines on countries which repeatedly break the union’s fiscal rules.
Also on the table is the withdrawal of EU structural funds and the suspension of voting rights when ministers meet, something that would require a change to the EU treaties.
Mr Van Rompuy did not rule that out, but said ministers were focused on measures which could be introduced in the short term. This reflects resistance to any treaty change in numerous other EU countries.
His remarks were similar on debt restructuring as part of an orderly national insolvency process, as mooted by Germany. This was on the table for the long term, but not in the context of the Greek rescue or in relation to the €750 billion EU/IMF loan guarantee scheme.
There was little appetite at the meeting to give the European Commission and other EU countries the right to examine draft budgets from member states before they go to national parliaments.
Parliaments have an important role in member states’ budgetary process, said Minister for Finance Brian Lenihan. “Any framework that is decided has to acknowledge that.”
While Mr Van Rompuy said all euro countries have agreed to accelerate their efforts to bring budget deficits and high-indebtedness to heel, Mr Lenihan said he was not under any pressure from economics commissioner Olli Rehn to take new measures. “We’re in the vanguard here,” the Minister told reporters.
“President Van Rompuy, when he talks about the acceleration of consolidation measures, is drawing attention to the fact that some states have done nothing at all to date.”