11th Jul 2020

Eurozone summit looms amid growing hostility to Franco-German pact

A March date for a rare eurozone leaders' summit is beginning to firm up as hostility grows amongst some member states to a fiercely conservative Franco-German proposal for economic convergence.

On Tuesday (8 February), EU Council President Herman Van Rompuy told MEPs and chiefs of the parliament's political groups that the 17 premiers and presidents of the countries that use the euro are to meet "mid-March", ahead of the normal EU-27 spring summit on 24-25 March.

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  • An extraordinary eurozone summit was already held in Paris in 2008 at the height of the banking crisis (Photo: French EU presidency/Didier Noizet)

Sunday 13 March has been widely touted as the date of the eurozone meeting, with one EU diplomat confirming to EUobserver: "It's a date that was floated", as it fits the schedule of President van Rompuy.

There has been no official confirmation however, and Agence France Presse is reporting that a major member state has ruled out the 3 March date as "impossible" in favour of 11 March instead.

The leaders aim to hold the top-level event to discuss a proposal from Berlin and Paris that would see European states adopt a common corporate tax base, harmonise retirement ages, eliminate indexation of wages to inflation and hardwire limits on government debt via constitutional amendments.

As the March summit looms, opposition to the proposal is growing.

On Tuesday, Italian foreign minister Franco Frattini announced Rome's dissatisfaction with both the ideas in the proposal and their source in the Paris-Berlin duo.

He said that it is premature to be discussion EU level tax harmonisation and constitutional changes.

"There are issues in the pact that Europe is not ripe to solve yet, this includes for example harmonisation of taxes and tax systems," he said during a visit to Prague, according to a Reuters report.

"[Taxes are] probably one of the most sensitive issues. Frankly speaking, I believe it is premature to have even an agreement in principle on harmonising taxation."

"All countries should participate in the discussion, and there should be no groups created leading other countries," he added.

Luxembourg, Belgium, Austria and Spain have also expressed reservations about the proposed "competitiveness pact."

"We will not allow our social model to be undone," Belgian Prime Minister Yves Leterme said on Tuesday. Luxembourg Prime Minister Jean-Claude Juncker, who is also the chairman of the Eurogroup of finance ministers, said he did not think "abolishing the indexation of wages should improve the competitivity of my country or of the euro area."

The European Commission for its part put out two opposing positions on the pact.

EU budget commissioner, Poland's Janusz Lewandowski, in an interview with the UK's Times newspaper, described "nervousness" over the plans.

Developments are being watched with some nervousness in Warsaw and other capitals," he said. "We need a discussion on how to avoid a two-speed Europe."

Meanwhile, economics and monetary affairs commissioner Olli Rehn - one of the key architects of austerity plans imposed on Greece and Ireland in return for EU bail-outs - offered his support to the Franco-German plan.

"The competitiveness pact is broadly in line with proposals in the growth survey," he told a meeting held at the American Chamber of Commerce.

Acknowledging the criticism, French finance minister Christine Lagarde has said rules for different countries need not be identical.

"The Franco-German proposals have been debated and have given rise to some statements, sometimes to some reservations," she said at a debate on the euro in Paris."The goal is not to say, 'in every European Union country everyone will have to retire at the age of 67'."

"Nor are we going to, from one day to the next, fix as an ultimate objective for all the countries in the euro zone to agree on an average [corporate tax] rate of 25 percent," she added.

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