Euro crisis: Frau Bundeskanzlerin answers history’s knock

History has been knocking for some time…  and, for good or ill, Angela Merkel “is perceived to set policy, pace and tone at every turn.”  But has the public been softened up sufficiently for historic change?

In the Irish Times Derek Scally reports from Berlin

In recent off-the-record briefings, the German leader has shown an unusual determination for the task she has set herself.

She wants “real harmonisation”, not just “closer co-ordination”. After months of silent backing for her euro zone strategy, leaders in Scandinavia and the Benelux countries can expect phone calls from the German leader in the coming weeks calling for public support for her plan.

The Stern interview has kicked off Dr Merkel’s campaign to win the backing of German voters, who increasingly see the EU as a black hole for their taxes.

Ahead of seven state elections this year, the chancellor is confident voters will back her if, as the price for Berlin’s contributions to euro zone bailout funds, she can deliver a euro zone 2.0 along clearly German lines.

The chancellery paper contains measures German voters will already recognise, such as an EU-wide version of Germany’s “debt brake” which would legally hinder parliaments’ ability to run up budget deficits.

Berlin’s draft paper touches on an Irish hot-button issue, too: harmonisation of corporate tax. It also makes proposals to end discrepancies in retirement ages across Europe.

Asked whether they expect much resistance to the plan among Germany’s EU partners, one senior Merkel official replied: “No, because they need our money.”

Read the whole thing.

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  • “no because they need our money”

    The Germans want their “full monty” package of harmonisation proposals to be agreed before they commit themselves to increasing the bailout fund. There is not much mentioned about that side of the negotiations in the Irish Times article but this article from der Spiegel covers it.,1518,740113,00.html

    indicates that the Germans are softening on their initial resistance to the expansion of the bailout found.

    Does anybody really believe, however, that tax harmonisation is only about the Eurozone countries?

    Britain will resist any attempt to force them into that position. Make no mistake about that. That being the case, how is Frau Merkel going to sell the package to her own people?

    The Germans may be the richest and least indebted nation in Europe but their need to retain the Euro is just as obvious. They actually can not afford to let it collapse. For that reason, their position is not as strong as is being made out.

    Lets suppose, however, that the negotiations conclued with fiscal harmonisation in the Eurozone and an expanded bailout fund agreed. Does anybody really believe that the Euro will be permanently out of trouble?

    The next problem would be a political one. What is in it for Ireland and the Club Med countries? They will have nothing to gain from it if it means that they are going to have to suffer from less than adequate public services because of their debt mountain.

    If the Germans started talking about “public spending harmonisation with budget surpluses used to pay off sovereign indebtedness, then you would be talking real turkey. At the moment, politically, we are nowhere near that point. The question is, can the markets wait?

    A general election has now been announced for March in Ireland. It will be interesting to see if politicians in Ireland get to grips with this problem during the election campaign