Sunday

25th Aug 2019

Barroso sides with Merkel over need for treaty change

  • Like Merkel, Barroso feels a EU treaty change would be needed to set up a European Monetary Fund (Photo: ec.europa.eu)

European Commission president Jose Manuel Barroso has said the setting up of a European IMF-style fund to help struggling eurozone countries would most likely require a EU treaty change, echoing comments made by German Chancellor Angela Merkel.

The statement, made in response to a question from a member of the European Parliament in Strasbourg on Tuesday (9 March), is a further stumbling block to the quick establishment of a European fund capable of making loans to struggling euro area governments.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

It "might probably require a change to the treaty," said Mr Barroso when asked to give his opinion on the matter, adding that any European fund would not be ready in time to help Greece with its current difficulties.

Some analysts believe this is not necessarily the case however. "It depends on what conditionality you put in and how you link it to the EU," said College of Europe economics professor Jacques Pelkmans.

"If you have a European Monetary Fund, but with similar conditionality to the International Monetary Fund, you could keep it out of the EU treaties," Mr Pelkmans told EUobserver. Close links between the fund and rules governing the euro area - the Stability and Growth Pact - would however necessitate a treaty change, he added.

Setbacks?

A fierce debate on the implications of a European Monetary Fund has raged in economy circles since German finance minister Wolfgang Schauble announced his intentions on Saturday to "present proposals soon" for a new eurozone funding institution.

The news was quickly followed by comments from the EU's economy commissioner, Olli Rehn, indicating the EU executive body was ready to draft proposals if sufficient eurozone support existed.

But a statement by German Chancellor Angela Merkel later on Monday, stating her belief that a EU treaty change would be needed to set up the fund, has been interpreted as an indication of only lukewarm enthusiasm by some EU officials, with the Lisbon Treaty's lengthy ratification process leaving little appetite for further treaty negotiations in many national capitals.

"She has signaled her support for the project, while quietly kicking it into the long-term," said one EU official who wished to remain anonymous.

Following a meeting with Luxembourgish Prime Minister Jean-Claude Juncker on Tuesday, Ms Merkel insisted that plans for a European Monetary Fund will only work if strengthened "sanctions" are incorporated to penalise wayward spenders.

For her part, French economy minister Christine Lagarde said the setting up of an EMF is an interesting idea but not a priority.

The European Central Bank's chief economist, German citizen Juergen Stark, has come out against the idea of a European fund, saying it could be: "Very expensive, create the wrong incentives and finally, burden countries [that have] more solid public finances."

The mixed feelings within Germany, and across the EU as a whole, are also felt inside the bloc's trade union movement.

Attending a meeting in support of Greek workers in Brussels on Tuesday, the head of the European Trade Union Confederation (ETUC), John Monks, said there were "merits" in the idea, but that it "needs to be worked out carefully".

"Are the rules different to the IMF, is question number one," he said. "Is it a tough-love fund like the IMF or is it something a bit less tough? It would be a bit odd to have soft rules for Europe and hard rules for South Africa for example," he told this website.

Ban on credit default swaps

Speaking to MEPs, Mr Barroso also indicated the commission was ready to act on credit default swaps and other financial derivatives, widely blamed for exacerbating Greece's current difficulties and causing a fall in the euro currency.

Ahead of a draft directive on derivatives in the coming months, the commission president said a: "New 'ad hoc' reflection is needed on credit defaults swaps regarding sovereign debt."

"In this context, the commission will examine closely the relevance of banning purely speculative naked sales on credit default swaps of sovereign debt," he said. Going "naked" refers to the process of trading in CDSs, without ever owning the underlying asset, such as the government bond, that they are intended to insure against default.

Exclusive

Brexit row delays financial products transparency review

A European financial regulatory body set up after the financial crisis is at loggerheads with the European Commission over whether to carry out a transparency review of certain financial products. The reason: Brexit.

Commission defends Mercosur trade deal

EU commissioners defended a far-reaching free trade agreement between the EU and four Latin American countries, against critics who fear it will damage European farmers' livelihoods and the global environment.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

News in Brief

  1. Ocean Viking to disembark in Malta after ordeal
  2. Germany joins France in world outcry on Brazil fires
  3. British people lose faith in Brexit deal
  4. Brexit hardliners want further changes to EU deal
  5. German manufacturers confirm fear of recession
  6. Belgian socialists and liberals scrap over EU post
  7. Fall in EU migration leading to UK skills shortages
  8. Switzerland makes post-Brexit flight preparations

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. Spain heading for yet another general election
  2. EU to discuss Brazil beef ban over Amazon fires
  3. 'Our house is burning,' Macron says on Amazon fires
  4. What happens when trafficking survivors get home
  5. EU states and Russia clash on truth of WW2 pact
  6. EU considers new rules on facial recognition
  7. EU to pledge Africa security funds at G7 summit
  8. Letter from the EESC on per diem article

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Join EUobserver

Support quality EU news

Join us