The World from Berlin 'Merkel-Sarkozy Plan Already on Shaky Footing'

Earlier this week, Angela Merkel and Nicolas Sarkozy proposed yet another set of measures for containing Europe's debt crisis and taming the markets. They were meant to be big and bold. Two days on, German commentators are still in the dark on details -- and doubts over the plan persist.
Do the new proposals to stabilize the euro really go far enough?

Do the new proposals to stabilize the euro really go far enough?


Two days after German Chancellor Angela Merkel and French President Nicolas Sarkozy proposed new measures aimed at containing the euro crisis, German commentators seem unclear on what they mean and whether they could really help.

Though presented with few details, the proposed measures include: the creation of "a true economic government" to coordinate economic and finance policies in the euro zone; having all of the euro-zone's 17 member countries anchor balanced-budget provisions -- so-called "debt brakes" -- into their constitutions and take European Commission concerns into account when setting their national budget plans; and levying a tax on financial transactions, a sort of Tobin tax.

In the meantime, though, the two leaders are rejecting demands for two other proposed measures, including increasing the volume of the €440 billion ($634 billion) euro rescue fund and issuing so-called "euro bonds" common to all euro-zone countries. The latter is viewed with particular disfavor by Germany's Free Democratic Party (FDP), which governs together with Merkel's Christian Democratic Union (CDU), and its Bavarian sister party, the Christian Social Union (CSU).

While most German commentators on Thursday are quick to dismiss the proposals as either wishful thinking or window dressing, others view them as at least a step in the right direction. For many, the real issue hinges on whether the Lisbon Treaty can be amended to give real teeth to efforts at fostering stability through deeper fiscal coordination.

The center-left Süddeutsche Zeitung writes:

"Merkel and Sarkozy have … marked out the limit of what is currently possible in the European Union without violating (the Lisbon Treaty). … But even the proposed economic government doesn't really offer much -- just as has happened with all the previous efforts aimed at coordinating the economic policies of (EU) member states. That's because it is non-binding, and that hasn't worked yet."

"Whoever wants more than the emergency aid provided by the bailout funds, stricter stability policies and voluntary agreements on economic policies in the EU has to amend the EU treaties. … Getting there will require reform; there is no alternative. … What's needed now is political courage to (do so). Otherwise, the danger arises that Germany's Constitutional Court (at the latest) could throw stones in the path of EU policies. What's more, the EU derives its popular legitimacy from the fact that there are treaties that clearly regulate matters between peoples and states and the fact that people can trust they will be upheld. If this trust is damaged, the EU will loose popular support -- and the ground beneath its feet."

"France and Germany can only really help Europe by pushing for a reform of the reform. The crisis has laid bare the weaknesses of the Lisbon Treaty: It is not equipped to meet the challenges it faces as an economic and currency union. Instead of continuing to oppose euro bonds, Angela Merkel should get out in front of the debate and use it to reform Europe. By doing so, Germany and France could give Europe the catalyst the EU has been waiting for since the crisis began."

The center-right Frankfurter Allgemeine Zeitung writes:

"Problems in the European Economic Community (EEC), the European Community (EC) and the EU have regularly been solved with German money, and German politicians still have problems freeing themselves from this model. But the current crisis is too big for that. It is assuming dimensions that overtax the solidarity and surpass the abilities of those nations that -- in no small part owing to their own diligence -- know how to how to take advantage of the common market better than others. The feeling that part of a community has been living a life -- and not a bad one at that -- on the dime of another part has already exploded states much stabler than the EU …"

"Still, Merkel and Sarkozy's plan to bring about deeper EU integration is already standing on shaky footing. It is unclear whether and how much the other member states will follow the wishes of the German-French directorate and the 'fetish' of budgetary discipline (as one French paper put it). The 'harmonization' of economic, tax and social policies requires Europeans to yield sovereignty -- and decide what kind of EU they really want. What's more, it will take a long time to feel the effects of this kind of communitization. But the crisis won't wait for long. Instead, before that happens, it will call on Europeans to make fresh avowals of just how dear and expensive their union is. And politicians need to finally open the books and take a look and see if the assets and liabilities of the euro zone compute -- e.g. can they afford it?"

The Financial Times Deutschland writes:

"The plans (of Merkel and Sarkozy) have much more potential to change things than many observers suspect. First, concerning the suggestion of an EU economic government … the mere fact that an expansion of the political union is being placed on the agenda is worthy of praise. In fact, after a long wait, it is the first serious attempt to correct a birth defect of the monetary union."

"Second, the suggestion of having debt breaks in all euro-zone countries … has the potential to keep (them) all on track. … The suggestion creates a threat that could also get the governments of euro-zone countries to bring some long-term discipline to their budgetary policies. In stronger terms, it could say: If you don't want the pressure, feel free to leave the euro club. Merkel and Sarkozy would have never wanted to say it in those terms. But the fact of the matter is that the taboo phrase 'core Europe' is already in circulation."

The left-leaning Die Tageszeit writes:

"With this agreement, the most important signal Merkel is sending to her nervous CDU/CDU-FDP coalition is: Debt brakes for all euro-zone countries! All political parties in Germany view debt brakes as a kind of miracle for forward-looking budgetary discipline. The chancellor appears to have gotten everything she wanted with this, but the victory is of little value. Even if you put aside the questionable usefulness (of debt brakes) … the idea that you get 17 euro-zone states to write one into their constitutions within a year's time is absurd. …"

"There remains the suspicion that Merkel primary made this agreement for reasons having to do with domestic politics -- and the state of her coalition. The whole affair works like a sedative pill for (it)."

"The FDP is so happy that euro bonds are still being left out that it is suddenly even finds the idea of a tax on financial transactions great. The coalition has convinced itself that the package (of proposed measures) is an important step toward a stable Europe -- but that won't last for long. The main weakness of the resolutions is that they skirt the central problem: None of the measures is suited for helping heavily indebted countries out of their dilemma."

"Merkel has not won a mental victory in the battle against the euro crisis. At most, she has won one in the battle to keep her coalition government from collapsing."

The business daily Handelsblatt writes:

"Merkel and Sarkozy are also drawing national parliaments into their power play. Now they are supposed to unconditionally subject themselves to the cost-cutting dictates in the euro zone. Members of parliament are supposed to oblige themselves to promptly integrate additional savings measures called for by the European Commission into the drafts of national budgets. Looked at in terms of financial policies, this is undoubtedly sensible. …

"But all of this clearly comes at the cost of democratic legitimacy. A parliament shouldn't be easily deprived of its prerogative to make budgetary decisions. When national parliaments are no longer able to perform, the European Parliament needs to step into the breach. But the necessary legal foundation for doing so is absent because the Lisbon Treaty continues to guarantee national sovereignty over financial and economic policies. The solution isn't to be found in taking shortcuts around the Lisbon Treaty. The euro zone needs to anchor its common economic and financial policies in the treaty itself -- and the sooner, the better."

Conservative daily Die Welt writes:

"The fact that the EU is now standing at this crossroads is also good because much needs to change to keep its foundations from crumbling."

"Germany and France … are the original sinners; they were the first to shamelessly violate the rules of the Stability and Growth Pact (the provision in the Maastricht Treaty governing the introduction of the euro stipulating that annual national budget deficits in euro-zone countries may not exceed 3 percent of GDP), and they got away with it scot-free. But now, with their pledge for an economic government and announcement on debt brakes, they want to try to get a new stability pact. … Given the pace of the markets, the former will take an eternity. And since the latter is only voluntary, it will be just another one of the formal compromises you find so often in Europe."

"But, for EU countries, paying down debts is the crucial question. It reveals whether (they) are finally willing to manage their budgets in a sensible and sound way for themselves and under the conditions of shared checks and balances or whether they want to give in to the charms of the transfer union while continuing to make declarations of intent. This means that there will certainly be another crisis summit -- and probably soon."

-- Josh Ward