German Chancellor Angela Merkel gestures during her speech at the German Federal Parliament, Bundestag, in Berlin, Germany, Friday, Dec. 2, 2011. (AP Photo/Michael Sohn)
German Chancellor Angela Merkel gestures during her speech at the German Federal Parliament, Bundestag, in Berlin, Germany, Friday, Dec. 2, 2011. (AP Photo/Michael Sohn)
German Chancellor Angela Merkel gestures during her speech at the German Federal Parliament, Bundestag, in Berlin, Germany, Friday, Dec. 2, 2011. (AP Photo/Michael Sohn)
German Chancellor Angela Merkel attends a meeting of the German Federal Parliament, Bundestag, in Berlin, Germany, Friday, Dec. 2, 2011. (AP Photo/Michael Sohn)
BERLIN (AP) ? German Chancellor Angela Merkel pushed forward Friday with what markets see as an emerging plan for more effective action to contain the European financial crisis, urging tougher rules against government overspending.
She said next week's European Union summit would take up ways to enforce compliance and write those changes into EU treaties ? a drawn-out process.
"The European crisis will not be solved in one fell swoop," Merkel said. "It's a process, and this process will take years."
The push by Merkel on debt rules ? a day after French President Nicolas Sarkozy made the same case ? is being seen as one half of a fresh approach by European leaders to finally get a grip on the crisis more than two years after it started in Greece.
The other half could be more short-term help for heavily indebted governments from the European Central Bank. Bank President Mario Draghi on Thursday appeared to dangle such an offer if political leaders at the Dec. 9 summit can come together on the kinds of spending rules that Merkel and Sarkozy are advocating.
"Other elements might follow," Draghi said, fueling speculation that the bank could step up its so-far limited program to buy government bonds issued by struggling countries such as Italy and Spain. The program helps keep their borrowing costs down.
Draghi stressed the bond buys "can only be limited." That has left analysts speculating he might have other forms of support in mind. Those could include extending credit to banks that are having trouble borrowing money from each other because of market fears they may suffer losses on government bonds they hold. Banks borrow vast sums of money from each other on a daily basis to fund their operations, but if they fear another bank could go bust, that credit market dries up quickly.
European stocks and bonds have rallied this week on hopes that governments will agree to tougher spending controls, potentially paving the way for the ECB to more aggressively support financially weak states.
Stocks rose in Asia, Europe and the United States, while the yield on Italian 10-year bonds ? indicative of the rate it would pay to raise money ? fell to 6.48 percent on Friday from over 7 percent the day before.
Markets have repeatedly risen on anticipation of more aggressive action by governments ? only to fall when summits result only in statements of intent or proposals that lack detail.
Analyst at Credit Agricole said markets appear to expect a pact to control spending would be delivered that would allow the ECB to increase its bond purchases. They noted, however, that the optimism may be overdone.
"This is not the first time that great expectations are building ahead of EU summits," the analysts wrote in a note to clients.
Italy, whose financial stability is considered vital to the survival of the eurozone, was readying new action ahead of the summit. New Prime Minister Mario Monti has pledged to unveil new austerity measures and structural reforms at a Cabinet meeting on Monday.
Rising borrowing costs fed by fears of default led to Greece, Ireland and Portugal seeking bailout loans from other eurozone governments and the International Monetary Fund. Similar fears are afflicting Italy and Spain, which are too large to bail out. That's inflaming worries of a globally contagious financial crisis that could push the U.S. and other major economies back into recession.
Though France and Germany haven't publicly spelled out specifics, the broad outline would be for national budgets to undergo close monitoring, and for countries to face legal action if they break borrowing limits.
When it was launched in 1999, the euro came with a set of rules limiting debt to 60 percent of gross domestic output and deficits to 3 percent of GDP. But they were never seriously enforced and have been broken 60 times over the past decades by a number of countries, including Germany.
Joerg Kraemer, chief economist at Commerzbank, said countries would not agree to direct intervention in their budgets or to be ordered on whether to reduce spending or raise taxes. He said anything more than a binding ceiling on debt was "not realistic."
Though the summit was unlikely to bring a breakthrough toward centralized control of government finances, it could take the initial steps in that direction.
To toughen enforcement, Germany is pushing for the right to take countries in violation before the European Court of Justice. Significantly, Merkel said that the new rules would do no more than enforce what is already in the EU treaty ? and therefore would not require referendums to take effect.
Merkel and Sarkozy are to meet Monday to talk about their joint strategy ahead of next week's EU summit.
On Thursday, Sarkozy said that without some new "convergence" among European countries, the continent's crushing debts could destroy the euro.
Merkel reiterated her objection to so-called eurobonds guaranteed jointly by all EU nations. German has objected on grounds the idea would lessen incentives for fiscal discipline, since profligate countries could still borrow by relying on the good credit of ones with solid finances.
Still, eurobonds are favored by a number of other governments and some observers think Germany realizes it may have to yield on that issue ? and so is pushing hard for tougher budget safeguards first.
Merkel also rejected an idea floated last week that the 17 eurozone countries would seek a new agreement among themselves instead of among the full 27-member EU. The idea of a eurozone-only deal had raised concerns among non-euro countries such as Britain.
British Prime Minister David Cameron insisted that Britain would take a role in helping to solve Europe's crisis, even though it won't become involved in moves toward closer fiscal integration.
"We are one of Europe's major economies, we are a big player in the single market. We want growth on the European continent to help the British economy," Cameron said after meeting with Sarkozy in Paris. "We want to drive change in the single market to get that and we want to help resolve the crisis in the eurozone."
__
McHugh reported from Frankfurt, Germany. Associated Press Writers David Rising and Kirsten Grieshaber in Berlin contributed to this report.
Associated Presschronicle baked alaska baked alaska battlefield 3 release battlefield 3 release battle field 3 battle field 3
কোন মন্তব্য নেই:
একটি মন্তব্য পোস্ট করুন