European banking system needs redesign to prevent another crisis
There is widespread anxiety about the true condition of German banking, writes Colm McCarthy
Published 13/02/2011 | 05:00
The new government will take office on March 9 (Ash Wednesday, as it happens) and will face immediately the task of forging a response to the Franco-German plan to resolve the Eurozone crisis unveiled at the Brussels summit last Friday week.
It calls, as these documents invariably do, for greater integration of European economic policy. The main proposals are for closer harmonisation of tax and spending policies, including constitutional limits on borrowing, a common approach to corporation tax, higher retirement ages in state pension systems and an end to wage indexation. The theme is a more competitive Europe with better fiscal discipline.
The plan has already received a frosty welcome. Everyone is in favour of better fiscal discipline, preferably at some distant future date, but states which have wage indexation want to keep it, higher retirement ages are unpopular in countries where the current figure is low and member states with attractive rates of corporation tax (Ireland is not the only one) want to keep them. There is a far better reason to resist the proposals, however. Europe is facing a serious financial crisis and the Franco-German programme looks like another integrationist push rather than a serious attempt either to resolve the continuing crisis or to prevent the next one.