GERMAN CHANCELLOR Angela Merkel is intensifying her drive for changes to the Lisbon Treaty as part of a comprehensive deal to assert control over the expanding euro zone debt crisis.
The chancellor rallied support for her initiative last night from French president Nicolas Sarkozy, giving fresh momentum to an emergent proposal which may require a referendum in Ireland.
Her alliance on this front with the French leader is likely to create political difficulty for Taoiseach Enda Kenny, who has made it clear in recent days that he does not want to reopen the pact.
“We will make proposals in a comprehensive package that will enable closer co-operation between euro zone countries that will include changes to treaties,” Dr Merkel told reporters before a meeting with Mr Sarkozy over dinner in Berlin last night.
She and Mr Sarkozy said they had reached agreement on a plan to recapitalise the weakest euro zone banks and they set their fellow- leaders a four-week deadline to forge ahead with a package of measures to escalate the campaign against the crisis.
Amid anxiety about mounting disruption in the banking sector, France and Germany want to unveil the plan before G-20 leaders meet in Cannes early next month.
Talks between the European powers are to intensify in the coming days as they seek to settle a series of knotty problems which are hampering moves to escalate their campaign against the crisis.
Dr Merkel has not specified what measures she wants to enshrine in the Lisbon treaty.
However, officials expect that any such move would be designed to make it easier for the European authorities to impose their will on the economic policy of countries which consistently breach EU budget rules.
Any substantive change would necessitate a referendum in Ireland, something Dublin views with apprehension given the rejection of the Nice and Lisbon treaties when they were first put to a vote.
Mr Kenny set out his opposition to treaty change within the last fortnight, saying that Europe should “get on with what we have now”.
While any move to change the treaty could take years to agree, Mr Sarkozy said Europe must “take decisions now” to gain the initiative in the crisis.
“We need to deliver a response that is sustainable and comprehensive. We have decided to provide this response by the end of the month because Europe must solve its problems by the G-20 summit,” he said.
The two leaders provided little clear information about their initiative. However, their united front comes in spite of clear differences over the use of Europe’s bailout fund to recapitalise euro zone banks.
The drive to boost the capital of the most vulnerable banks – which may cost euro zone governments as much as €200 billion – is a key element in the latest phase of the campaign to deal with the crisis.
Europe’s leaders are also discussing the possibility that private Greek bondholders might be asked to take a larger than anticipated “voluntary” loss on their investment agreed as part of that country’s second bailout.
The Merkel-Sarkozy meeting was their eighth since last year and was seen as a bid to give fresh impetus to the effort to tame the crisis.
As has become customary in the debt debacle, the talks are designed to pave the way for the leaders of the 25 other EU countries in advance of a key summit next Monday in Brussels.
Dr Merkel said that EU leaders would do “everything necessary” to ensure banks are strengthened. Although Mr Sarkozy said he and the chancellor were in “total agreement” on recapitalisation, senior officials have been pointing out for days that the two leaders are far apart on that question.
Dr Merkel argues that the bailout fund should be deployed to recapitalise banks only as a last resort, when the supply of private capital and state aid runs out.
Mr Sarkozy, who fears that a big state recapitalisation of French banks would compromise his country’s triple-A credit rating, has been pressing for leeway to use the fund much earlier in the recapitalisation process.
