Institutional Affairs

Germany softens stance on EU treaty change

07.05.13 @ 14:04

  1. By Valentina Pop
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Berlin - The eurozone's planned banking union is "urgent" and should be created within the current EU treaties, German finance minister Wolfgang Schaeuble said on Tuesday (7 May) after previously suggesting a treaty change was needed.

  • Schaeuble: 'Where it cannot be done within the current legal framework, we will do on an inter-governmental or bilateral level' (Photo: consilium.europa.eu)

"Banking union is a central project, we need institutional changes but we cannot wait for a treaty change. We need to work with what we have," Schaeuble said during a debate with his French counterpart Pierre Moscovici at the Berlin Free University.

He explained that after the Cyprus bailout negotiations - which involved imposing losses on depositors - it is "urgent to have unified rules" on how to deal with failings banks in the eurozone.

"Where it cannot be done within the current legal framework, we will do on an inter-governmental or bilateral level," Schaeuble added.

The German minister last month suggested a treaty change was needed to complete the banking union - a step which would require years of horse trading among member states.

Both the legal services of the European Commission and the European Council disagreed with him on whether a treaty change is needed.

The German shift on treaty change on Tuesday was accompanied by a somewhat softer stance on deficit reduction, after the EU commission last week gave France two extra years to meet its deficit target.

Schaeuble said his government shares Brussels' view that France is committed to structural reforms and that sometimes countries have to be given more time to meet targets.

He was less forthcoming when it comes to Germany showing more "solidarity" - meaning picking up the tab for failing banks in other countries - as France is asking for, however.

"We would never vote for each other's party," the centre-right German politician said about Moscovici, who is from the Socialist camp.

"But we have a common task and conviction that France and Germany have a special responsibility for Europe. Now, of course, we still have to discuss the right balance between mutualisation of risks and responsibilities," Schaeuble noted.

For his part, Moscovici said Paris would never agree to ceding more sovereignty to Brussels - a German demand - unless the eurozone manages to transform itself into an area where young people find jobs.

"Europe is not just about common discipline, but also a project of more employment and democratic scrutiny," Moscovici said.

He repeated the idea of having a eurozone-only budget helping to level out macro-economic imbalances and said that in the medium term there should be a eurozone economics minister who should be supervised by the European Parliament.

Moscovici also spoke of the need for more harmonised interest rates for small and medium enterprises (SMEs).

"SMEs in Italy don't have the same chances as SMEs in Germany because they do not have the same financing conditions. We'll work on this together, I know what the German limits are concerning the institutional framework. But we need more solidarity, it is still underdeveloped," Moscovici said.

Schaeuble retorted that SMEs get higher interest rates on loss in Italy compared to Germany in part because business conditions there still need reform, for example, to have more quickly responsive courts.

Responding to a question from the audience, Schaeuble said he is "worried" about Germany's image abroad, about a German Europe.

"We have to take it seriously and Franco-German relations are important in countering it," he said.

He also noted that while being criticised abroad for pushing for too much austerity, within Germany government critics often say Germany is not doing enough to save money.

For his part, Moscovici said Germany is about more than just austerity.

"We need to stay away from caricature. Although I admit some of my friends do it too," the French Socialist said, in reference to a recent position drafted paper by his party which blamed Chancellor Angela Merkel for being "selfish" on EU financing.

"Of course, traditionally, Germany focuses greatly on rules. It also needs to be flexible, to understand how things work. There is no one-size-fits-all rule. But overall, we have good Franco-German relations," Moscovici said.

He added, jokingly, that one irritant may be the fact that German football teams are "winning too much lately."

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