Mr Sarkozy and Chancellor Angela Merkel presented joint proposals for further reforms and euro zone integration after meeting in Paris yesterday, calling them essential steps to end ongoing instability.
“To strengthen the euro as our common currency, it is clear that we will need a closer interlocking of economic and financial policies in the euro zone,” said Dr Merkel.
“Germany and France see the need to demonstrate this by being at the forefront.” As well as a proposal to co-ordinate corporate tax in France and Germany, the two leaders called for agreement within a year on budget debt ceilings to be anchored in national constitutions. The two leaders proposed an EU financial transaction tax and twice-yearly meetings of a new body supervising euro zone economic governance.
“This governing body should meet twice a year – more regularly if necessary,” said Mr Sarkozy, proposing European Council president Herman Van Rompuy as its first head.
The French and German leaders dismissed talk of a common eurobond, though the French leader left the door open for later. “Perhaps we can talk about eurobonds at the end of European integration but not at the beginning,” said Mr Sarkozy. [added emphasis]
Well, it’s one answer to “the political trilemma.” But one which fails to address the “shrinking of the democratic space at national level”.
Karl Whelan assesses the proposals here
The proposals for constitutional debt and deficit limits do little to address the current debt crisis and store up many future problems.
And as BBC Europe editor Gavin Hewitt notes
Fiscal union – the coordination of tax and spending – has not yet arrived but it has moved a giant step closer.
Sure it was just a proposal but there was plenty of detail. This new government, according to President Nicolas Sarkozy, “will be made up of heads of state and government that will meet twice a year and more often if necessary. It will elect a stable president for two and a half years.” The eurozone and the EU can still give the appearance that it is a Franco-German enterprise.
As he goes on to point out [added quote]
Again it is all about showing that France and Germany are prepared to work together to protect the euro.
But fierce resistance will lie ahead, particularly from financial institutions which are lined up to take a hit on their lending to Greece. The City of London, which is Europe’s main financial centre, will be particularly wary. Ireland will insist that any new financial transaction tax applies to all 27 members of the European Union. The UK will oppose this.
What was on offer yesterday was a long-term political plan intended to show closer integration of the eurozone. What it did not do was to address the current debt crisis that so unnerves investors.
From a comment piece by Derek Scally in the Irish Times
Now some want to have another go in the euro zone at automatic sanctions for breaches of the stability pact, rather than leaving them to the political discretion of European Council leaders.
Yesterday’s proposal for a deficit ceiling and pan-EU debt brake will go some way to satisfying those demands.
The second point was equally clear: yesterday’s Franco-German proposals are, as Sarkozy put it, a programme to “break with old habits” of deficit spending that have crippled the euro zone.
To do that, France and Germany believe it will be necessary for euro zone members to break with other cherished European habits: fiscal and budgetary sovereignty.
So how much influence will yesterday’s Franco-German proposals have over any future EU-wide agreement?
“With Italy and Spain under the microscope now,” said one senior government official in Berlin, “we feel we have the negotiating advantage on our side this time.”
But as Kevin O’Rourke asks at The Irish Economy blog
As per Derek Scally in the Irish Times, is this a taste of things to come, or much ado about nothing?
What are the chances of the Irish government winning such a referendum?
[Europe is still sexy! – Ed] Of course it is.