Key European leaders are calling for much tighter central control of spending by the 17 countries that use the euro in the latest effort to resolve the continent’s unrelenting debt crisis.
Four officials produced the plan Tuesday — European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Eurogroup President Jean-Claude Juncker and European Central Bank President Mario Draghi. They described the ability to “correct unsustainable fiscal policies” of the individual eurozone governments as “essential.”
Barroso said fiscal discipline would be mandatory.
“In a more integrated economic and monetary union, sound fiscal positions will not be optional. They will be non-negotiable. We propose to look at further steps that may require changes to the (European Union) treaty. Let me tell you here that fiscal union is about much more than just eurobonds or stability bonds. It also means more coordination in taxation policy and a much stronger European approach to budgetary matters at national and European level.”
The seven-page plan appeared aimed at pushing economic powerhouse Germany toward closer, continent-wide fiscal integration, including the eventual sale of jointly issued eurobonds supported by the currency bloc as a whole, rather than individual governments. But Germany has resisted the creation of eurobonds, fearing its borrowing costs would increase and that debt-ridden countries would have less incentive to resolve their financial problems.
Germany showed no sign of changing its position, with Deputy Foreign Minister Michael Link saying that pooling of debt would lead “toward a dead end.”
The eurozone financial proposals came as the finance ministers of France, Germany, Italy and Spain were set for debt crisis talks Tuesday evening in Paris ahead of other key meetings this week.
The meeting of the finance chiefs is taking place on the eve of joint talks between French President Francois Hollande and German Chancellor Angela Merkel aimed at reaching some sort of accord before a crucial European Union summit begins Thursday in Brussels.
French Finance Minister Pierre Moscovici told a local radio network the eurozone has begun to move away from the idea of austerity as a means of solving the crisis that threatens the existence of the currency union.
“I will start with growth: on this aspect, the election of Francois Hollande really changed things in Europe. A growth pact has already been adopted, with our propositions, which represents 120- to 130-million euros. These are the right steps. There is also a pact that concerns banks: we have to set up mechanisms for bank recapitalization which would allow them to face the difficulties of the banking system. And there is integration, which in the end, in the long term, will lead to euro obligations.”
The Paris meeting is taking place as two more eurozone nations, Spain and Cyprus, sought bailouts for their financially troubled banks.
Spain is asking for up to $125 billion to rescue banks left holding bad real estate loans, while Cyprus says its banks are vulnerable because of their “large exposure” to the economy in nearby debt-ridden Greece. Cypriot-held Greek government bonds were written down in value earlier this year.
In all, five countries have now sought rescue packages, including earlier bailouts for Greece, Ireland and Portugal.
In Washington, the White House says President Barack Obama spoke Monday with new Greek Prime Minister Antonis Samaras and congratulated him on his election. Mr. Obama urged the prime minister to work closely with the European Union and International Monetary Fund in implementing Greece’s economic reforms.
Mr. Samaras says he wants to renegotiate the terms of the two multi-billion-dollar EU and IMF bailouts for Greece, to extend the mandate for a budget surplus by two years to 2016.
He named a new finance minister for his fledgling government, Yannis Stournaras, an economics professor and head of a Greek think tank, after his first choice to be the finance chief resigned for health reasons.
(Photo: Council of the European Union)