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Germany - Protecting the euro to preserve the European vision
Chancellor Angela Merkel has described the stabilisation
of the euro as critical for the fate of Europe. What is at
stake is, "more than a currency. We are called on to preserve the European vision," said
Angela Merkel in her government statement.
"If the euro fails, then Europe too will fail. But if we manage to avert the danger, the euro and Europe will emerge stronger than before," the Chancellor stressed, speaking in the German Bundestag to justify the 750 billion euro rescue package for the common currency.
Culture of stability for Europe – not a union for transfer payments
The Chancellor roundly rejected the vision of a union for transfer payments as a model for the financial future of the European Union. That would, she said be "politically irresponsible". She outlined what is needed now in the form of three goals – a new culture of stability with stable budgets, rigorous measures to regulate financial markets and the ruthless identification and remedying of all structural weaknesses.
The German government will be pushing tenaciously for a sustainable solution to stabilise the euro. She countered rash criticism. "The German government is perfectly willing to be thought hesitant it that means that at the end of the day the right decisions are made."
Aid with strings attached – no automatic entitlement to assistance
As she explained the 750 billion euro package, Angela Merkel underscored that the assistance would only be made available provided certain conditions are met. These include the recipient countries making their own savings, and also accepting strict monitoring by the International Monetary Fund (IMF).
The Chancellor declared that there is no automatic entitlement to loans. "No cash will be transferred before the purpose is clearly stipulated and agreed," she said. Parliamentary control will remain unaffected. "The right of the German Bundestag to accept or reject the budget has been taken into account in full." The independent role of the European Central Bank (ECB) too, as custodian of the common currency and price stability, remains untouched.
A return to sound budgets
In her impassioned call for sound budget policy, and criticism of mounting public debts the Chancellor did not shy away from a look at her own house. We Germans too have incurred "debts". "We too are living on credit," she pointed out.
That makes the German provisions to limit the total permissible level of new indebtedness indispensable. Germany too must make savings, "intelligently, so as to generate growth at the same time”.
Tough penalties for notorious deficit states if necessary
At European level the Chancellor qualified the watering down of the 2004 Stability and Growth Pact as a "major mistake". This must now be remedied. She made a number of proposals in order to guarantee savings and consolidation measures in the euro-zone states.
If necessary, she stated, it ought to be possible to impose penalties on states that fail to tackle their budget deficit. These could mean that the states lose their voting rights in Europe for a period of time. Properly organised insolvency proceedings for states should also be an option. Although the path to recovery might be long and hard, "this cannot be taken as a reason for failing to do the right thing".
2020 strategy for growth
The 2020 strategy for growth is enormously important for the EU. It is important to push ahead with economic union, stated Angela Merkel. Currency union and economic union must be better dovetailed. Brussels should concentrate on key strategic aspects of future economic policy.
Rigorous monitoring of markets
On the international financial markets the "primacy of politics" must be restored. The laws of the market alone are not in a position to correct the faults on the money markets. Equally though, it would be wrong to attribute the entire blame for the crisis to the financial markets, she said. The markets had, however, blown up the problems.
In her calls for stricter regulation of the financial markets, the Chancellor was once again unwilling to accept any compromises. Germany demands effective measures, within the scope of the G20 or within Europe, she declared.
If necessary, she said, Germany could go it alone with regulation, provided the country was not thus disadvantaged. She gave the example of the ban issued by the Federal Financial Supervisory Authority BaFin on naked short selling for certain financial products, government bonds and credit default swaps (CDS).
The costs of the crisis must be spread equitably
The German government continues to defend the principles of the social market economy. At international level it will be pushing for an international financial activities tax or a financial market transaction tax. The financial markets must bear their share of the costs of weathering the crisis. The people are, she said, entitled to expect an equitable distribution of the follow-on costs.
The German government believes that there is no alternative to the course taken to ensure the sustainable stabilisation of the euro. "The option of pulling out of Europe is no option in this era of globalisation," underscored the Chancellor.
In an unprecedented move, the European Union, the European Central Bank and the IMF have put together a package to stabilise the euro. The package will cost the European side 500 billion euros. This sum will be supplemented by a contribution of the IMF. Of the 500 billion euros, 60 billion will be provided by an EU emergency fund, while the other 440 billion euros will take the form of loan guarantees issued by member states through a special purpose society. Germany’s share will be 28 percent. The IMF contribution will bring the value of the package to a total of 750 billion euros.
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