Germany slams EU debt-sharing plan

European proposals to reshape the crisis-struck euro area ran into immediate criticism from Germany for putting too much emphasis on debt sharing and too little on controlling national budgets.

The 10-year roadmap, released Tuesday by four officials led by European Union President Herman Van Rompuy, centered on common banking supervision and deposit insurance and a “criteria-based and phased” move toward joint debt issuance. It also suggests that the EU could impose upper limits on annual budgets and debt levels of nations that use the euro.

 “Parts of it read like a wish list,” German Deputy Foreign Minister Michael Link told reporters in Luxembourg. The proposals lean “toward various models for mutualizing debt. What comes up short is improved controls,” he said.

Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that Europe would not have shared total debt liability “as long as I live.”

The chancellor said there would be no shared liability of debt in Germany either — after her government agreed plans with federal states to issue joint “Deutschland bonds” — in comments reported by participants in a meeting with the Free Democrats (FDP), junior partners in her centre-right coalition.

Germany’s instant opposition lessened the chances that a June 28-29 summit — the 19th since the debt crisis broke out in early 2010 — will point the way out of the turmoil that threatens to splinter the euro currency.

Van Rompuy collaborated on the proposals with European Central Bank President Mario Draghi, European Commission President Jose Barroso and Luxembourg Prime Minister Jean-Claude Juncker, who manages meetings of euro finance ministers.

Asad Khan
Financial Analyst  (CFB)
050-8774861
asad@cfb.ae