TAOISEACH ENDA Kenny has expressed doubts about Germany’s plan to tackle the euro zone crisis by treaty change and called instead for the European Central Bank to act as an “ultimate fire wall” to calm markets.
After talks with Chancellor Angela Merkel in Berlin, Mr Kenny expressed his thanks for German financial support through the EU-International Monetary Fund programme and its recognition of the progress Ireland was making. Dr Merkel said Germany was “very impressed” with Ireland’s reform efforts. “We can imagine what it means for the people in Ireland to take this tough programme upon them and respect even more that it is succeeding,” she said.
However, the two leaders expressed differing views on the next best step to restore confidence in the euro zone: Dr Merkel wants treaty change to allow binding EU oversight of budgets; Mr Kenny backs swift action by the ECB amid outstanding reform of the European Financial Stability Facility bailout fund.
“We need to keep our eye on the target and get stability back into the euro zone,” said Mr Kenny, warning that Ireland remained “absolutely vulnerable” to international instability. “In the current environment, only the ECB has the capacity to provide the necessary unlimited fire wall against financial market panic.”
Earlier, Dr Merkel repeated Germany’s view that ECB intervention on monetary markets was no substitute for austerity measures, fiscal reform and agreement on binding, EU budgetary oversight. “I want to be very clear: our reading of the treaties is that the ECB does not have the ability to solve these problems,” she said.
On the issue of treaty change, Dr Merkel said Berlin was not looking for total EU oversight of every detail of national budgets, but to give EU institutions the legal right to intervene if a national budget breached the “overall pact framework”. “The stability and growth pact must have the same opportunity that exists with all other EU guidelines, namely that the commission or member states can sue before the European Court member states that do not meet the terms of the pact.”
Mr Kenny said he was aware of what Dr Merkel was asking, but that Ireland would wait for next month’s proposals of European Council president Herman van Rompuy. He said Ireland was anxious for the EU to address the current crisis and avoid getting lost in a lengthy treaty change debate.
“We need to deal with this crisis with the tools we have now,” he said, “I would like to see the flexibilities that currently exist pushed to the limits to see what extra governance that puts in place . . . I would like an EU where where you are free to express your individual country personality, to create employment and opportunities.”
As a bailout country, Mr Kenny said Ireland recognised the need for budgetary discipline and fiscal responsibility and would introduce legislation for a “debt brake”.
Later, Mr Kenny held talks with finance minister Wolfgang Schäuble followed by a speech at the Konrad Adenauer Foundation. Mr Schäuble said he disagreed with Mr Kenny’s assessment that the ECB had “unlimited fire-power” to deal with the current difficulties. “That would be the wrong solution that would only win a little time for which, at the end, we would pay a higher price,” he said. “The fundamental problem, besides the lack of financial regulation in financial markets, is how to reduce exorbitant state deficits.”
Mr Kenny acknowledged the next step in the crisis would need to be a compromise between two positions. “While the ECB for us is the ultimate fire wall, you need to be able to associate any credible fire wall with a set of conditions that are enforceable,” he said.
The Taoiseach said Ireland did not support the idea of “inner circles or faster or slower stream” in the EU and that Ireland remained a proponent of the “community method”. “We are a union and our strength is in what we do together,” he said.
A day after her Christian Democratic Union (CDU) agreed a resolution placing the EU’s “community method” of decision-making above inter-governmental deals, Dr Merkel said she found the debate “artificial”. “I wouldn’t set one method against the other,” she said. “If we want to work together (here) in Europe we cannot use the community method, rather use an inter-governmental method which, by the way, is also a very European approach if not as integrated.”
The full text of Enda Kennys speech to the Konrad Adenauer Foundation is available at irishtimes.com/indepth