Monday 19 February 2018

Debt Crisis: Taoiseach Kenny clashes with Merkel and top minister in Berlin

Enda Kenny and German Chancellor Angela Merkel chat upon the Taoiseach's arrival at the Chancellery. Photo: Getty Images
Enda Kenny and Angela Merkel listen to their countries' national anthems. Photo: Getty Images reporters

TAOISEACH Enda Kenny has clashed with both German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble on his first official trip to the eurozone’s biggest economy.

Mr Kenny said the European Central Bank should be the lender of last resort in a bid to resolve the debt crisis, clashing with Mr Schaeuble in the process.

Earlier he disagreed with Ms Merkel who said the treaty should be changed so countries not abiding by stability and growth rules could be fined.

The Taoiseach made the suggestion about the ECB at a discussion at the Konrad Adenauer Foundation in Berlin but Mr Schaueble knocked it on the head, unsurprisingly.

Officials from that country have ruled out such a move despite growing pressure on the German bank to play a bigger role in solving the debt crisis.

"The ECB should be the ultimate firepower," Mr. Kenny said.

"I know the chancellor disagrees with this ... but what we've been concerned about is contagion" – a reference to the growing number of eurozone countries that are having to pay increasingly higher rates of interest to borrow on open markets including France and Spain.

"A US Federal Reserve model will not work" in the eurozone,” Mr Schaeuble said.

Earlier the Taoiseach said he had had "frank" discussions with Ms Merkel and admitted that any changes to the treaty would be "challenging".

He also said countries should use existing schemes to deal with the debt crisis clashing with Ms Merkel’s more radical plans for treaty changes that would include reviews of national budgets, although some flexibility for individual country strategies.

“We need to deal with the crisis with the tools we have now,” he said, speaking at a joint press conference in Berlin after their meeting.

“I don’t want to get into a position where you have major a major competency change that would open the door to many countries wanting treaty change from their own point of view.

“That would be a long situation.”

But Ms Merkel pointed out that counties which breach the stability and growth pact rules, governing their budget deficits, should be punished and that Berlin would push for such proposals.

“We are of the opinion that member states should be able to be taken before the European Court (of Justice) for not adhering to the terms of the Stability and Growth Pact,” she said.

“This is possible for all other EU legislation but not for the stability and growth pact.”

And Ms Merkel added that she would be willing to give up sovereignty to achieve closer European economic and political ties.

Mr Kenny highlighted that Ireland is already sticking to the budget deficit guidelines as part of the €67.5bn EU/IMF/ECB bailout loan rules.

At his first official meeting in the eurozone biggest economy, he said he hoped Ireland can return to the bond markets next year and made the case for a reduction in our €116.5bn debt burden.

He also said that both sides are committed to the strength of the region, despite the challenges.

Despite, the difference of opinion, Ms Merkel praised Ireland’s attempts to boost the economy and said the country was “an outstanding example” of how a bailout programme can help solve a debt crisis.

She also said that despite the ongoing Greek crisis, Ireland is proof that bailout programmes are not always a case of throwing good money after bad.

While there is yet no evidence of what better terms on our bailout conditions could be, it is understood that lower interest payments in relation to the recapitalisation of the now nationalised Anglo Irish Bank are likely.

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business