Tuesday 28 March 2017

A smaller euro bloc is not our aim -- Merkel

Currency controversy

Emmet Oliver

German Chancellor Angela Merkel has rejected the idea that her government favours a smaller eurozone, saying her only goal since the beginning of the debt crisis has been to stabilise the bloc in its current form.

News agency Reuters stunned markets on Wednesday night with suggestions that some French and German officials were thinking about proceeding with closer economic integration even if that meant doing so with a smaller group of core eurozone countries.

Ireland has declined to comment on the idea of a so-called two-speed Europe, where a group of "core'' countries move on with their own currency bloc, leaving debt-ravaged countries out in the cold. These countries would presumably have to return to their national currencies, although this is not clear.

"For months, since the very beginning of the euro debt crisis, Germany has had only one goal, that is to bring about a stabilisation of the eurozone in its current form, to make it more competitive, to consolidate budgets," Ms Merkel said.

"And we firmly believe that this common euro area is capable of winning back full credibility, including every single country."

Political turmoil and unsustainable borrowing rates in Italy and Greece have raised fears that the currency bloc that was founded in 1999 and enjoyed success in its first decade could break apart, with one or more countries returning to their national currencies.

At a Group of 20 meeting in Cannes last week, Ms Merkel and French President Nicolas Sarkozy broke the eurozone's most sacred taboo and said for the first time that the bloc was prepared to move forward without Greece, if that country put the stability of the broader bloc in danger.

Squabbling

Anger at squabbling politicians in Rome and Athens is building in Germany which, as Europe's largest economy, has shouldered the biggest share of bailouts for Greece, Ireland and Portugal.

A resolution prepared by Ms Merkel's Christian Democrats (CDU) for a party congress in Leipzig next week is expected to state explicitly that members of the eurozone can leave the bloc if they choose to.

"If a member state is consistently unwilling or unable to stick to the rules that come with a common currency, it can voluntarily leave the eurozone without leaving the European Union," a passage in the resolution reads.

The CDU leadership rejected pressure from some members to include a line saying euro member states that violated EU rules could be kicked out.

After surprise announcements by Bundesbank chief Axel Weber and European Central Bank (ECB) board member Juergen Stark earlier this year that they were stepping down over concerns about the central bank's crisis-fighting policies, Ms Merkel's allies are looking to increase German influence amid fears of a southern European takeover of the ECB.

A separate part of the party resolution that will be unveiled in Leipzig recommends weighting the votes of national central bankers on the ECB's 23-member governing council according to the size of the economies they represent.

Since the birth of the euro, the bank has operated on a one-seat, one-vote basis, a system that gives tiny countries like Malta and Cyprus the same weight as Germany.

At her news conference, Ms Merkel said "time was of the essence" in getting political clarity in Italy, where Prime Minister Silvio Berlusconi has vowed to step down.

She also said Germany stood ready to work with Lucas Papademos, the former ECB vice-president who was named yesterday to head a crisis government in Greece.

Romanian president Traian Basescu has reaffirmed his country's desire to enter the eurozone despite the turmoil.

He said he expected Romania to fulfill the criteria for euro entry by 2015. "We don't believe in a fragmented Europe," Mr Basescu said.

"Germany might survive on its own, but probably no other EU country would make it."

Irish Independent

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