Both leaders have attempted to defuse tensions over reform of the euro zone, writes DEREK SCALLYin Berlin
BRITAIN AND Germany have moved to defuse tensions over euro zone reform ahead of a meeting between German chancellor Angela Merkel and British prime minister David Cameron today.
Mr Cameron indicated yesterday that he would support a proposal for limited treaty change if provision could be made to prevent “discriminatory behaviour” towards the City of London.
This follow’s concerns expressed by Taoiseach Enda Kenny in Berlin on Wednesday that treaty change involving a broad competence shift to Brussels would be “challenging” for Ireland.
Dr Merkel responded by talking about “limited treaty change”, allowing EU oversight of budgetary framework but not the details, and for rule breaches to be pursued in the European Court of Justice. Yesterday she appeared to qualify her call further.
“We can limit this to the euro zone members. We can do it in the form of a protocol that we already have in some cases for euro-zone members,” she said. “We’re talking about a very limited treaty change.”
Mr Cameron’s call for a provision to protect the City of London may increase pressure on Berlin to drop its proposal for an EU-wide financial transaction tax. The British government believes such a levy would hurt the City of London as a financial hub.
If no agreement is possible among all EU members, Germany has expressed its determination to introduce the tax in the euro zone.
Mr Kenny opposes such a move, however, saying in Berlin that a euro zone financial transaction tax would put the IFSC at a disadvantage to the City.
Today’s visit by Mr Cameron comes at a time of tensions between Berlin and London. On Tuesday Volker Kauder, chief whip of Dr Merkel’s Christian Democratic Union, complained that Britain would “not get away with” blocking the finance tax.
He stoked up emotions further by claiming that “German is now being spoken in Europe”. His qualification – he was referring less to the language than the German economic culture – got lost in translation, prompting furious responses in British newspapers.
German analysts suggest Dr Merkel sees her treaty change demand as a way of solving the short-term euro zone crisis and settling the decades-old integration debate. “Merkel is in a more difficult political position than many people believe: to agree a greater German contribution to the crisis she needs something in return,” said German analyst Jan Techau, head of the Carnegie Europe think tank in Brussels.
Dr Merkel made an interesting modification yesterday to her euro crisis mantra, “if the euro fails, Europe fails”. She said: “If the euro fails, Europe will of course continue to exist as a continent and we won’t start wars against each other, but it will leave behind the most severe marks.”