In a sensational literary outpouring in the FT this morning, German Finance Minister Wolfgang Schauble insisted that nothing was sacrosanct in the EU.
In a paragraph seen in some quarters as aimed at the next UK Budget from Alistair Darling on March 24th, Schauble writes:
‘Grave structural weaknesses have been revealed in some Euro area states – weaknesses that have to be addressed by a long, painful process of adjustment. Economic and fiscal policy surveillance in the Eurozone was insufficient to prevent undesirable trends in a timely manner. We must therefore make more decisive use of the instruments available. From now on, a member state with an excessive deficit should not receive EU cohesion funds if it is not making sufficient savings.’
Herr Schauble also insisted there must be “prohibitive” sanctions – including expulsion from the Eurozone as the ultimate deterrent against countries that repeatedly ignore EU rules on deficits. Interestingly, the German Minister went out of his way to stress this was NOT aimed at Greece. In Paris (see yesterday’s Slog piece) it was again seen also as a veiled attack on France’s abysmal deficit record.
This is the first time a senior European politician has openly suggested the Eurozone could easily shrink – and perhaps even lead to an eventual breakup of the currency. But in the face of his boss Frau Merkel’s resistance, Schauble supported the idea of an ‘EMF’ to aid members in especially dire straits. The conditions for help, however, would effectively be a dictation of financial terms to that Sovereign State.
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