German chancellor Angela Merkel has called for "limited" treaty change to ensure euro zone members stick to their commitments under the Stability and Growth Pact.
Speaking to reporters following talks with British prime minister David Cameron in Berlin this afternoon, Dr Merkel said Germany is hoping that the upcoming summit of the European Council on December 9th will agree measures to amend EU treaties.
Mr Cameron is wary of any treaty change because he knows it will ignite back-bench Conservative demands for a referendum on Britain’s relationship with the EU.
The pact, which was intended to prevent single currency members from running up unsustainable debts, has been breached more than 60 times since its introduction, Dr Merkel said
“We feel it is crucial... that we develop more of a possibility of enforcing the rules of the European institutions so that national governments do abide by their commitments," she said. “A limited treaty change, only for the members of the euro zone, is of the essence.
“The UK has made it clear to us that they have a few difficulties here and there with certain legal provisions of the EU and also have their own ideas on how to boost competitiveness," she said. “We both have interests, but we also have strong bonds of friendship and these strong bonds of friendship bring us to say we will work together closely in the period leading up to December 9th because we absolutely understand each other’s viewpoints.”
Both leaders insisted that Britain and Germany will work together in a spirit of “strong friendship” and outlined areas of agreement such as measures to improve competitiveness in Europe economies, holding down the EU budget and encouraging member states to deal with their debts and deficits.
However, the pair left no doubt that they have not papered the cracks over Germany’s demand for treaty change to prevent a repeat of the sovereign debt crisis in the euro zone and European Commission calls for a financial transaction tax, which Britain opposes.
Mr Cameron said: “It is obvious that we don’t agree on every aspect of European policy, but I am clear that we can address and accommodate and deal with those differences.”
Neither Mr Cameron nor the German chancellor directly addressed the contentious issue of whether the European Central Bank (ECB) should act as a lender of last resort by printing more money to assist single currency members in economic difficulties.
But Mr Cameron left no doubt that he remains convinced the ECB should get involved, despite German concerns that this would risk triggering inflation.
“All the institutions of the euro zone have to stand behind and back and do what is necessary to defend it," he said.
“It’s obviously a difficult time, we can see that in the markets, but I don’t underestimate for a minute the commitment of countries like Germany and those in the euro zone to make their currency work. That is what is in Britain’s interests and that is what we would like to see happen.”
Both Germany and Britain have a shared interest in an effective single market, said Dr Merkel, adding: “The UK has a great interest, and very sensibly so, in seeing the euro area being strong.”