16th Jul 2019

Franco-German 'Pact for Competitiveness' hits immediate opposition

  • Sealed with a kiss: the far-reaching financial proposals were prepared by France and Germany and dished up to other EU states on Friday (Photo: consilium.europa.eu)

The abolition of salary indexation systems, greater harmonisation of member state corporate tax rates and an overhaul of national pension systems are among the measures contained in a Franco-Geman 'Pact for Competitiveness' for the eurozone, put forward at the EU summit on Friday (4 February).

Other elements included the insertion of a "debt alert mechanism" into national constitutions, the mutual recognition of educational diplomas and the establishment of national crisis management regimes for banks.

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The six-point plan is outlined in a draft, seen by EUobserver. Over lunch at the leaders' meeting, German Chancellor Angela Merkel and French President Nicolas Sarkozy will attempt to convince their eurozone homologues of the pact's merits.

Details would then be thrashed out at a specially convened summit of eurozone leaders in March, together with an already-scheduled EU summit later in the month.

"We need to increase competitiveness and the yardstick should be the member state that is leading the way," Ms Merkel told journalists immediately prior to the lunch. Suggestions that Germany should increase salaries, potentially harming the country's competitiveness, have irked Berlin in the past.

The German leader indicated that non-eurozone states will also be invited to sign up to the competitiveness pact if they wish.

Mr Sarkozy hailed the initiative as a major step forward. "France and Germany are working hand in glove to defend the euro," he told the joint briefing.

The Franco-German "structural plan" was a way of boosting European competitiveness and ensuring the convergence of member state economies, he added.

The plans for enhanced joint governance of the 17-nation eurozone economy appeared to hit a hurdle almost immediately however, with Belgian Prime Minister Yves Leterme blasting them as being overly constrictive.

"There must be more economic cooperation, but member states must be left the room to carry out their own policies," Mr Leterme said on arriving at the one-day summit, originally scheduled to discuss energy issues.

"Each member state has its own accents, its own traditions. We will not allow our social model to be undone," he added.

Critics also hit out at the pact's intergovernmental nature, with little role for the EU's institutions envisaged.

"We welcome the move towards greater economic governance as step in the right direction. However, the method being proposed will not provide the required result as it is purely intergovernmental," said the leader of the European Parliament's Liberal group, Guy Verhofstadt.

"The only effective way of ensuring the discipline and objectiveness that is required, is through the Community method and with the empowerment of the Commission to act and set real sanctions."

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