EU states fret over Franco-German ‘done deal’

BRUSSELS – European Union institutions and smaller EU states voiced frustration on Friday over a Franco-German ‘fait accompli’ on beefing up the euro zone economy, suggesting it rode roughshod over the bloc’s guiding principles.

Paris and Berlin jointly proposed a competitiveness pact for European governments, including debt rules in national constitutions, higher retirement ages, a minimum corporate tax and the abolition of wage indexation, among other ideas.It was the second time in recent summits that France and Germany – the bloc’s biggest and most influential economies – have agreed a joint position ahead of the meeting, expecting the rest of the euro zone and wider EU to tag along.’A lot of countries have very big difficulties with the proposals,’ said a diplomat from a smaller euro zone state. ‘But we cannot now say that we are against the Franco-German proposal because that would send the wrong signal to markets.’Several east European and peripheral euro zone states quietly expressed their irritation, and the European parliament issued a statement decrying the Franco-German approach.’I found it astounding that two of the most committed and founding members of the European Union are determined on taking this intergovernmental approach to saving the euro,’ Sharon Bowles, the head of the economic and monetary affairs committee of the parliament, said in a statement.’We must ensure that the Commission is at the heart of the system and fully politically accountable to the parliament. Only then will we be able to prevent the political trade-offs and back scratching between member states, which led Europe directly into this crisis in the first place,’ she said.An adviser to French President Nicolas Sarkozy said Paris had every intention of keeping the European Commission, the EU executive, involved in the process.FRANCO-GERMAN DEALThe competitiveness pact is viewed as part of the euro zone’s plan to win back the confidence of markets, and the price Germany wants to extract from others in exchange for agreeing to strengthen the euro zone’s bailout fund, the EFSF.Commission President Jose Manuel Barroso expressed concern that EU institutions were being sidelined in the process even before France and Germany presented their proposal on Friday.’Establishing a system of reinforced economic governance for the EU, and in particular the euro area outside the union framework raises important, and politically very sensitive, questions,’ Barroso told parliament on Wednesday.’We need, and we have been in favour of, more policy coordination, better economic governance, but we have to do it in a way that is coherent and compatible with the treaties and with the community approach,’ he said.Laws in the EU can be proposed by governments, with binding actions agreed on by heads of state and government. The European parliament is consulted in the process in what is called the inter-governmental method.The pact put forward by France and Germany is similar to proposals made by the European Commission in January in its annual growth survey, which is part of the new, tighter budgetary and economic policy coordination process.But instead of developing the Commission proposal, Paris and Berlin chose to submit their own, because a deal between governments may often be readied more quickly.”Merkel and Sarkozy should bear in mind that we are not working to their agenda or proposals but on what comes from the Commission. We will not rubber stamp anything which fails to address the underlying causes of the crisis, namely the weak fiscal discipline of previous years,” Bowles said. – Nampa-Reuters

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