Claims about dominance are absurd, says Merkel

GERMANY:THE GERMAN chancellor has dismissed as "absurd" claims that Berlin is using the euro zone crisis to cement German dominance in a new EU "fiscal union".

A week before a crunch EU summit, however, Angela Merkel’s critics in Germany have begun to circle. Former chancellor Helmut Schmidt yesterday accused her of “isolating” Germany in Europe while Deutsche Bank head Josef Ackermann complained that Europe “lacks the leadership it needs”.

Dr Merkel used a Bundestag address yesterday to argue the case for EU budgetary regulations.

Berlin’s wish was not for “European control over income and expenditure” of member states, but boosting market confidence in the euro zone through “credible, active supervision” by the EU of national budgets, with the ability to intervene when rules are broken.

“The fear and worry one reads or hears about that Germany wants to dominate Europe is absurd,” she said. “We stand for a certain stability and growth culture, but do this in the European spirit of Konrad Adenauer and Helmut Kohl.”

Resisting pressure for a quick solution to the crisis, Dr Merkel said the reform process facing the euro zone was more like a marathon with many years yet to run.

“The one who starts fastest isn’t necessarily the most successful,” she added. “It is the one who is aware of what is involved in lasting the course.”

Dr Merkel said she favoured limited treaty change to allow automatic sanctions “with no ifs or buts” for budgetary rule breaches. If that was not possible in Brussels, “the second-best solution” was an inter-governmental deal.

She denied this would strip national parliaments of their budgetary competence.

“This is about sticking to rules we have already agreed, with automatic sanctions kicking in only when these rules are broken,” she said. “What happens within the agreed European framework will, naturally, remain the business of each member state.”

Dismissing once again the idea of pooled euro zone sovereignty, Dr Merkel said those who called for so-called euro bonds “haven’t understood the nature of the crisis”.

She portrayed the crisis as a twin crisis of sovereign debt and institutional trust, to be resolved respectively by austerity measures to balance budgets and binding budgetary oversight rules to restore market confidence.

Political calls to make the ECB a lender of last resort would compromise the bank’s independence, which she described as “one of the most valuable assets in our democracy”.

Frank-Walter Steinmeier, parliamentary leader of the opposition Social Democrats, said it was a “scandal” how Dr Merkel had hesitated and hung back in the crisis.

He reminded the German leader that the European Commission had proposed binding budgetary rules and automatic sanctions in September 2010.

“You brushed automatic sanctions aside with a wave of your hand during your beach walk in Deauville that irritated everyone. Do you think we have such short memories?” he asked.

Mr Steinmeier said it was inconsistent to oppose pooled sovereign debt and allow the ECB to buy sovereign bonds on secondary markets.

“During the day you criticise those who demand the bank come to the rescue,” he said. “When it gets dark you pray that the ECB keeps buying up bonds.”

As the debate continued in Berlin, former chancellor Helmut Schmidt attacked Dr Merkel at an event in Hamburg for “isolating Germany in Europe”.

“It’s never ended well when Germany was isolated,” the former leader (92) said. “I’m very worried about German delusions about showing off.”

At the same discussion, Mr Ackermann acknowledged that banks had contributed to the euro zone crisis but blamed politicians for “escalating the situation”.

“Europe can no longer avoid the balance of power between member states and Brussels shifting in favour of the latter,” he said.