Tags: Germany | Rescue | Euro | eu | merkel

Germany: Let’s Make a Deal to Rescue Euro

Friday, 04 Feb 2011 08:07 AM

After months of foot-dragging, Germany appears ready to expand the euro-rescue fund — at a price.

Expanding the $608 billion rescue fund has been part of the conversation for weeks, but now Germany and France aim to tie more cash to deep reform. German Chancellor Angela Merkel and French President Nicolas Sarkozy prepare to pitch deeper economic union at a meeting today in Brussels, reports The New York Times.

Among the proposed changes are measures that would force countries using the currency to harmonize wages and corporate tax rates; get pension systems in line; agree to common education standards; and create new ways regulate banks and sovereign debt across borders.

It’s a huge turnaround for European’s biggest economy and the de facto savior of debt basket cases Ireland, Greece, and Portugal. Spain, a much larger economy, has struggled to convinced bondholders it can manage its troubled banks alone.

If the plan is approved, countries would be monitored by the European Commission, a huge concession to centralized planning and the near-creation of an economic United States of Europe.

Merkel has been traveling a tough road politically. Supporting the weak Southern European economies has come at her own cost.

In a December poll by the newspaper Bild, nearly half of Germans would end use of the euro and return to the mark. Sixty-four percent opposed aiding indebted eurozone nations.

Now, after nearly a year of shaking her head “no” to more German help, she appears to be ready to use the euro’s problems to exact conditions that she can sell at home.

Another concession she might seek: Naming a German to head the European Central Bank. Merkel might nominate Bundesbank President Axel Weber — a strong inflation hawk — to take the seat of outgoing ECB chief Jean-Claude Trichet, reports Bloomberg News.

Nevertheless, Merkel has been busy selling a deeper euro rescue to German voters in preparation.

“If the euro fails, then Europe fails, the European ideal of common values and unity will fail,” Merkel said in November, speaking to members of her own political party.

“This ideal has always given us strength in the face of wars and destruction in Europe for the past centuries — to fight for peace, for prosperity and for freedom on our continent.”

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After months of foot-dragging, Germany appears ready to expand the euro-rescue fund at a price. Expanding the $608 billion rescue fund has been part of the conversation for weeks, but now Germany and France aim to tie more cash to deep reform. German Chancellor Angela...
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2011-07-04
Friday, 04 Feb 2011 08:07 AM
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