Eu agrees on austerity pact – trouble for greece

Eu agrees on austerity pact - trouble for greece

Chancellor angela merkel (CDU) was thus able to push through her most important demands. She was heavily criticized for the demand from germany for a "savings commissioner" for greece, but only gave in in her choice of words.

In their intergovernmental fiscal compact, the 25 countries pledge to save money and introduce a debt brake based on the german model. States accept tougher EU budget controls and tougher penalties against defaulters.

According to the current schedule, the treaty is to be signed in march and must then be approved (ratified) in the member states. Germany in particular had insisted on the new pact.

The dispute over greece’s total over-indebtedness put a heavy strain on the special summit. Despite heavy criticism from europe, the federal government stood by its demand for tighter control over the maypole. Merkel made it clear, however, that action must be taken with – and not against – greece.

At the one-day top-level meeting on monday, there were sharp accusations about the berlin proposal to take away the sovereignty of the completely over-indebted greece over its budgetary policy and to transfer it to an EU controller. According to reports, the ideas came from the finance ministry in berlin.

Even merkel’s close ally, france’s president nicolas sarkozy, said at the end of the consultations: "you cannot put any country, no matter which one it is, under tutelage."

After lengthy debates on the fiscal compact, the leaders settled a dispute with poland and other non-euro countries over participation in euro group summits. These countries should be allowed to take part in all discussions on three topics: competitiveness, changes in the global strategy of the euro currency and future reforms of the ground rules for community preservation.

The goal of the fiscal pact is to regain lost confidence in the financial markets. Strict austerity measures should limit government deficits and prevent future traps like greece’s.

In the debate on greece, the head of the euro group, jean-claude juncker, called the berlin proposal for a "savings commissioner" "unacceptable. Such a regulation would only be possible if it existed for all states. Austria’s chancellor werner faymann said: "there is no need to insult anyone in politics."

Merkel did say: "i think we were having a discussion that we shouldn’t be having." She added, however, "the point is: how can europe support that in greece the things that are given as conditions are respected. But all this can only be done if greece and the other countries discuss it with each other."

From afar, even egyptian minister guido westerwelle (FDP) distanced himself: "i am very unhappy about the tone in this debate," he said on a trip to the middle east in cairo. We should have "an encouraging debate, not a discouraging debate.

The leaders also approved the permanent crisis fund for ailing euro countries, the ESM. This is to be implemented on 1. July and will have a volume of 500 billion euros. The ESM is to borrow on the capital market and on-lend this money to bankrupt euro states. Whether the volume of emergency loans is sufficient is to be examined at the next EU summit in march.

The summit also decided to do more for economic growth and especially for jobs for young people. Sweden is the only country not to join the growth initiative for the time being. To this end, existing funds from the EU’s brussels pots, which are worth billions, are to be put to better and faster use. At present, there is still 82 billion euros in the structural funds, which have not yet been earmarked for concrete projects.

The countries in which youth unemployment is at least 30 percent and which can therefore hope for help in finding projects that are worthwhile are estonia, greece, italy, portugal, slovakia, spain, latvia and lithuania.

There is also concern about the highly indebted portugal, which has once again become the target of investors. Yields on government bonds climbed to the highest levels since the introduction of the euro. The almost bankrupt state already receives 78 billion euros in emergency aid from the current bailout fund EFSF.

A strike in belgium against the government’s austerity package hampered the arrival of the summit participants at midday. Merkel and other heads of government landed not as usual at brussel airport, but at an airbase southeast of the capital.