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25 October 2013

EUobserver: Germany gets its way on reform 'contracts'


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German Chancellor Angela Merkel said that fellow EU leaders during a summit in Brussels had "accepted the principle" of binding reform contracts that will transfer further sovereignty from a national level to the European Commission.


Merkel was cautious not to make "false promises" that a deal on this extra level of EU scrutiny will be achieved already in December, as details still need to be ironed out. "But there is a clear commitment that we want to go beyond the current procedures in the European Semester", she said, in reference to current recommendations the European Commission is issuing for each country about their labour markets, pension systems and the like, but which are hardly ever implemented. Merkel said the binding contracts would increase the level of "ownership" of reforms at national level, which tend to become sluggish once the economy picks up.

‘Salami Tactics’

A deal may be reached at the next EU summit in December, in return for Germany agreeing to the contested "single resolution mechanism" for failing banks. Merkel has patented this tit-for-tat policy at EU level, also dubbed "salami tactics" in German media.

She agreed to the setting up of a eurozone bailout fund only when countries signed up to a "fiscal compact" enshrining a deficit ceiling in national constitutions. She said Yes to banks being directly propped by this fund only when a single supervisor for eurozone's largest banks would be created. Now, a fund for failing banks and ultimately more bills for taxpayers will only get the green light if countries sign up to these binding contracts.

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