30 April 2012

DW: Germany takes new approach to eurozone crisis

Demonstrations against rigorous austerity measures are on the rise in several southern European countries. A government coalition in the Netherlands collapsed because of its austerity budget, while in France, Hollande has even called for a renegotiation of the fiscal charter.

Members of the German opposition, with the exception of the Left Party, have not taken their suggestions that far. Still, the main opposition Social Democrats (SPD) and the Greens are demanding a growth agenda to supplement March's fiscal compact.

The opposition also expects the German government firmly to commit to a financial transaction tax, which has so far failed to find consensus among other EU countries.

Domestic political opposition could turn out to be Merkel's biggest problem. She needs opposition parties' support to secure a legally-required two-thirds majority in both houses of parliament to adopt the fiscal compact. If she does not succeed in ratifying the charter in Germany, she might as well stop making demands on an EU level.

Merkel has said there can be no question of renegotiating the fiscal compact. But she has also conceded that new measures are needed. Speaking last week about a euro agenda to boost growth, she seemed to signal some assent to Hollande's proposals. The gesture might also placate Germany's opposition.

Merkel said she was ready to bolster the European Investment Bank (EIB). However, she did not give any details for the proposal, and it remains unclear how countries can manage the move without burdening their own budgets. The second pillar of Merkel's growth agenda entails using EU infrastructure funds more flexibly to spur economic growth. 

Merkel's proposed growth agenda is not an exclusively German initiative. France, Italy, Austria, Finland, the Netherlands and Sweden have joined forces to figure out the best way to distribute infrastructure funds in the future. Their proposals are expected to be bundled in time for the next regular EU summit on June 28. With the new French president in office by then, the resolution's signatories might well include Hollande.

Full article

© Deutsche Welle