Debt crisis: Sarkozy and Merkel ready to make euro treaty changes
Ireland likely to back German and French demands for legal action against states failing budget controls
French President Nicolas Sarkozy said France and Germany will make a joint proposal in the coming days to modify European treaties to tighten economic management of the euro area.
Mr Sarkozy said Paris and Berlin will circulate the proposals before a December 9 EU summit for treaty amendments to entrench tougher budget discipline in the 17-nation euro area.
A spokesman for the coalition here at home said Ireland had not ruled out the need for treaty changes, but wants to see radical measures that have already been agreed at a series of recent summits being put to use.
These include boosting the size and flexibility of the European rescue funds.
He said the coalition favours many of the proposals now under discussion -- and accepts the logic that greater oversight of national budgets is needed to restore confidence in the euro.
The German government has not yet presented any concrete proposals on the changes it wants, but it's thought the plans will include tighter supervision of national budgets and harsh penalties for countries that fail to maintain solvency.
Those kinds of measures would require substantial changes to the Lisbon Treaty that currently set how Europe is run.
In most countries governments could approve the changes, but in Ireland they would have to be put to the people through a referendum. In the current climate few see that as an easy process.
Even so the Irish government spokesman said Ireland is not ruling out the kind of treaty changes that Germany has demanded.
The German desire to see such changes could even be played to Ireland's advantage.
"If more can be done by Europe to assist Ireland, then treaty changes would be more likely to be passed," the government spokesperson said.
Yesterday, German Chancellor Angela Merkel said the proposals for more intrusive powers to enforce EU budget rules, including the right to take delinquent governments to the European Court of Justice, were a first step toward deeper fiscal union.
But she said they would not modify the statute and mission of the central bank, nor soften her opposition to issuing joint eurozone bonds, except perhaps at the end of a long process of fiscal integration.
Some French and EU officials hoped Berlin would soften its resistance to a bigger crisis-fighting role for the ECB after Germany itself suffered a failed bond auction on Wednesday.
Mr Sarkozy took a step toward Ms Merkel this week by agreeing to amend the treaty to insert powers to override national budgets in euro area states that go off the rails. But there was no sign of a German concession on eurozone bonds or the ECB's role.
"This is not about give and take," Ms Merkel said.
Only when European countries reformed their economies and cut their deficits would borrowing costs converge. "To try to achieve this by compulsion would weaken us all."
Meanwhile, France has nominated Treasury chief economist Benoit Coeure as a candidate for the executive board of the ECB to replace outgoing board member Lorenzo Bini Smaghi, the finance ministry said yesterday. (Additional reporting Reuters)