Legal Loopholes: Critics Question Merkel’s Fiscal Pact Proposal

Published on Spiegel Online International, by Carsten Volkery in London, January 27, 2012.

It’s German Chancellor Angela Merkel’s pet project – a new European Union fiscal pact to ensure members’ budgetary discipline through stricter controls. But European legal experts have doubts about its viability, while critics say there are more important issues at hand. The final decision is planned for the next European Union summit on Monday. There leaders from 26 of the 27 member states plan to finalize the new fiscal pact, the agreement pushed hard by Chancellor Angela Merkel requiring signatories to adhere to strict fiscal policy guidelines.   

They are, by all accounts, rules that are long overdue. After all, the original common currency agreement, the Maastricht treaty, was signed 20 years ago. Now, it is to be given teeth. Or is it? … //

… Only a Side Issue:

Apart from that, the European Parliament is “not unhappy” with what has been accomplished, says Elmar Brok, an EU representative for Chancellor Angela Merkel’s conservative Christian Democratic Union (CDU) who is also one of the parliament’s three negotiators. He adds that the parliamentarians’ right to have a voice in the new deficit proceedings has been stipulated as far as possible.

Still, for most observers of the EU summit, the fiscal pact is only interesting as a side issue. In fact, many see it as nothing more than one of Merkel’s pet ideas, and Luxembourg Prime Minister Jean Asselborn even went so far as to tell SPIEGEL ONLINE in a recent interview that it was a “waste of time and energy.” For many, the much more pressing issues are finding a solution to Greece’s problems and bolstering the European Stability Mechanism (ESM), the permanent euro backstop fund set to replace the temporary European Financial Stability Facility on July 1.

The latter camp also includes British Prime Minister David Cameron. During an appearance at the World Economic Forum in Davos on Thursday, Cameron said that the most important thing was finding short-term measures for rescuing Greece and keeping the crisis from spilling over into other countries. “Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it anymore,” Cameron said. Then he added, “This is a time for boldness, not caution,” in what was only a thinly veiled dig at Merkel, who has a reputation outside Germany for being hesitant to act.

In recent days, Merkel’s government has reiterated that it sees no reason to discuss efforts to bolster the ESM fund “at the moment.” It cites a decision that Europe’s leaders made at an EU summit in December stipulating that there would be no scrutiny until March of whether the €500 billion in funding envisioned for the ESM is sufficient. But, in Brussels, many expect that one of these leaders will already bring up the issue for discussion on Monday. (full text).

Links:

Cameron and Sarkozy war of words over financial transaction tax, on The Telegraphe, by Helia Ebrahimi and Bruno Waterfield, January 31, 2012;

Cameron warns France over banks tax, 31 January, 2012;

Thousands of ‘dead end’ courses axed from school tables, January 31, 2012: More than 3,000 “Mickey Mouse” qualifications are being slashed from official league tables to stop schools playing the system to boost rankings, it is announced today;

Mary Dejevsky: Could France show Europe how to move left? January 27, 2012.

Nicolas Sarkozy tells David Cameron: shut up over the euro, on The Guardian, by Allegra Stratton and David Gow in Brussels, October 23, 2011.

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