Tuesday 26 September 2017

Merkel not for turning ahead of summit

Angela Merkel. Photo: Reuters
Angela Merkel. Photo: Reuters
Thomas Molloy

Thomas Molloy

RELATIONS between Germany and many of the eurozone's leading members showed signs of intense strain yesterday ahead of the two-day summit which begins today.

German Chancellor Angela Merkel challenged other European leaders to agree to fundamental reforms to enforce the rules of the eurozone, and once again rejected any form of joint liability for eurozone debt.

Her comments came as leaders from Dublin to Madrid called for the chancellor to alter her position. Taoiseach Enda Kenny told the Dail that the country won't default after earlier reiterating his view that Ireland's bank debt burden should be shared at a European level.

Spanish Prime Minister Mariano Rajoy made a plea for help from today's summit and said he will fight so that rescue loans "aren't superior to the rights of other creditors of public debt".

Germany, Finland and the Netherlands want official loans to Spain to be repaid first in the event of default, undermining the interests of existing bondholders. That makes investors reluctant to buy Spanish bonds.

Like Mr Kenny, Mr Rajoy also backs a so-called banking union, which he says includes joint deposit-guarantee funds and would allow Europe's rescue funds to recapitalise banks directly without going via the government. German officials have rejected those proposals.

Speaking three hours after Mr Rajoy's plea, Mrs Merkel told parliament that she feared "that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures".

Spain

Rajoy told his parliament that Spain can't go on financing itself at current borrowing rates for long.

"The most important thing today is being able to finance ourselves in the markets, that's the main issue," Rajoy said in parliament in Madrid. "And on that point, Spain, Italy and other countries are going to push for reasonable decisions to be made," using the "available instruments."

EU leaders meeting in Brussels today are due to discuss a plan for closer European integration spearheaded by EU President Herman Van Rompuy that centres on common banking supervision and deposit insurance, along with a "criteria-based and phased" move toward joint debt issuance.

The blueprint also suggests that the EU could impose limits on annual budgets and debt levels of nations using the euro.

While Mrs Merkel said that she welcomed the Van Rompuy proposals and agreed with his four building blocks toward integration, she rebuffed any notion that Germany should shoulder the cost. "I decisively reject the presumption in this report that the principle of collectivisation takes priority," Mrs Merkel added.

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