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Subscribe to RSSFrance's Nicolas Sarkozy and Germany's Angela Merkel have set out plans for a new European treaty that will mean stricter controls on each nation's budget -- and harsh punishments for those that don't stick to them. ITN's James Mates reports.
Updated 2:40p.m. ET
PARIS -- The leaders of France and Germany agreed a master plan on Monday for imposing budget discipline across the euro zone, saying the EU's basic treaty will need to be changed in the search for a sweeping solution to its debt crisis.
President Nicolas Sarkozy and Chancellor Angela Merkel said their proposal included automatic penalties for governments that fail to keep their deficits under control, and an early launch of a permanent bailout fund for euro states in distress.
They said they wanted treaty change to be agreed in March and ratified after France wraps up presidential and legislative elections in June. "We need to go fast," Sarkozy said.
Italy, the biggest euro zone nation in trouble, offered a glimmer of hope that the bloc could halt a crisis that is threatening the survival of the common currency. Its borrowing costs tumbled after its new technocrat government announced an austerity programme.
"What we want, with the (German) chancellor, is to tell the world that in Europe the rule is that we pay back our debts, reduce our deficits, restore growth," Sarkozy told a joint news conference after about two hours of talks in Paris.
Merkel added: "This package shows that we are absolutely determined to keep the euro as a stable currency and as an important contributor to European stability."
Confidence that European leaders will come up with a credible plan to lead the region out of its debt crisis at Friday's summit lifted world stocks on Monday, with European shares hitting a five-week high.
Investors and policymakers hope a summit deal on closer euro zone integration, combined with strict deficit reduction measures by heavily indebted states, will induce the European Central Bank to act decisively to stop bond market turbulence spreading.
"This agreement probably will give the ECB the political cover for intervening more actively on a temporary basis," said Uri Dadush, senior associate at the Carnegie Endowment for International Peace's International Economics Program in Washington
"The bad news is that this is all temporary. It is difficult to see how a deal like this hangs together without a quid pro quo in terms of some movement towards euro bonds or some form of long-term fiscal support for the countries in trouble."
Merkel and Sarkozy had already both wanted a system of more coercive discipline for euro zone governments that fail to keep down their budget deficits.
But they had been under unprecedented pressure to see eye to eye in a crisis that has split them on issues such as the role of the European Central Bank in lending to troubled states, and whether the bloc should issue jointly guaranteed euro bonds.
Sarkozy and Merkel said they would send off their plan on Wednesday, in time for a make-or-break European Union summit on Friday, and made clear their determination to drive through an EU treaty change despite objections from some member states.
If countries such as euro outsider Britain blocked a treaty change for the 27 EU members, the euro zone would proceed with an agreement among its 17 states, open to all who wanted to join, they said.
Never again
Sarkozy said the economic policy mistakes that led to the euro zone crisis must never happen again, accepting that France and Germany, the euro zone's two biggest economies, bore the biggest responsibility for finding a solution.
"In this extremely worrying period and serious crisis, France believes that the alliance and understanding with Germany are of strategic importance," he said. "Risking a disagreement would be risking the euro zone exploding."
Several governments, notably Britain, Ireland and the Netherlands, oppose treaty change because it might not win public backing in a referendum.
The British government said the changes proposed by Sarkozy and Merkel did not mean a significant transfer of power to Brussels and would therefore not require a referendum in Britain, which does not use the single currency.
The revised treaty would permit automatic sanctions against states that breach an existing deficit limit of no more than 3 percent of total economic output, unless a "supermajority" of states voted against the penalty.
That would reverse the current system where a majority of states must vote to launch disciplinary procedure.
It would also enshrine a budget-balancing rule in national constitutions across the euro zone, although they gave no detail of the proposed wording.
In deference to French concerns about sovereignty, they agreed the European Court of Justice could rule on whether euro zone states had implemented the fiscal rule properly in national law, but would not be able to reject national budgets.
Merkel appeared to have prevailed in her opposition to the issuing of bonds in theory guaranteed jointly by all euro zone countries, but in practice by the bloc's strongest member, Germany. "We reject the idea of euro bonds," she said.
Sarkozy rallied behind her, saying it would be absurd for France and Germany to cover the debts of countries on whose debt issuance they had no control.
In return, Merkel gave ground on the rules of a future permanent rescue fund for the euro zone, the European Stability Mechanism, which have been cited as a deterrent to investors.
Germany had insisted that explicit clauses be included in all bonds issued from mid-2013 stipulating that private bondholders may have to share the burden of future bailouts.
Instead, the rules will say the ESM will respect standard International Monetary Fund principles and procedures, and that the write-down taken by Greek bondholders is a unique case.
"We interpret this as an important step in the direction of more joint liability," Barclays Capital analyst Thomas Harjes wrote in a note to investors.
Copyright 2013 Thomson Reuters. Click for restrictions.
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LOL...the trouble with the EU is that there are to many small countries and thanks to short-sighted Allied thinking after WWII the economic engine of Europe...Germany... has been deprived of a third of its territory!! We must now live with the legacy of all the foolish decisions made since 1917...
NO FREE TRADE WITHOUT FULL EMPLOYMENT!!!
Take your Metamucil. You seem to have a major brain constipation here..... What does the loss of territory has to do with the current crisis? In case you haven't noticed Germany is doing pretty good right now.
"Never happens again,,,,,,,,,"????? What the hell are they talking about?
"Never happens again" when they have done nothing to solve the current crisis.
So far the only difference is the "Fed" is printing money at an even more insane rate , giving out 16 TRILLION IN SECRET LOANS, and making loans cheaper/easier to prop up Euro banks from collapsing and infecting major banks U.S. that are exposed to any potential default.
They haven't solved anything, only postponed the inevitable.
people with nothing to offer always resort to personal attacks...Germany is expected to "carry" Greece.Spain,Italy and any of the new mini-states created by "thinkers" in London and Washington DC..I don't see Poland which occupies 3 German provinces..or the Czech republic which occupies one..."rescuing" Europe's economy!!!
The Germans are not about to pony up another penny period !!! That is the heart of the matter . France is begging for money from any one and everyone so they can keep theirs . France talks a good fight but won't put the gloves on ( no more money from them either) . The EU also knows better than go to the IMF or the World Bank for more money . As a result they come begging to us . Big BEN better say NO NO NO !!!!! this time . Let the EU collapse and start all over again .
bob
For got to mention :
All country's own GOLD . But not a one has sold any ( even at today's prices ) to pay off or pay down their debt . I wounder why that is ??? Could something else be afoot ???
bob
And you have something to offer? No you don't! You don't even have to fact straight! What province? Are you referring to the Eastern Prussia? Which was an independent province until it was annexed by Bismark and the Pole population treated like 2nd class citizen? Or the Sudetes? Which were NEVER part of Germany.
I hope you are not referring to Alsace / Lorraine? That would be funny...
Yeah be that as it may depriving Germany of one third of its territory is the price you pay for the millions of lives lost on a world war to defeat facism and genocide. Frankly, this crisis would have come a lot sooner as a lot of Americans wanted to make Germeny one of the largest parking lots in the world after WWII.
Rich: Germany is down 4 territories? Next time don't start two World Wars. (So much for European unity!)
odd, seeing as one of the more widely-praised post-WWII actions was how the allied powers made efforts to not repeat the mistakes of WWI and help Germany retain its economy. And a third of its territory? Because having Prussia will somehow make Germany a richer country?
The trouble with the EU is that they want to be the USA
Call it Peni$ envy or whatever, but that was the original intent, to be a trading block "the Common Market" great idea except it HAD to have a common currency to work, that was in the 1960's. Here we are 50 years later the EU is the biggest gravy train out there, it is still riddled with petty national squabbles, a defeated military power that still want to rule, an agricultural based country that always bows to its farmers and demands huge subsidies and a poor little island off the coast that still thinks its a "World Power" and the EU still doesn't have a stable common currency.
"it is still riddled with petty national squabbles"
Just like us the good ol' USofA: where Texas think it's a world power and should lead the pack, California a world leader and should lead the pack, Kansas a theocracy and should lead our mind....
What agricultural based country are you talking about: France? Less than 12% of their economy is "produce based". 41% is industry (and shrinking) and the rest is service.
The Euro came to be because Europeans wanted to be able to control their international trade currency. The Euro is now the primary quotation currency for a lot of commodities including oil.
A defeated military power that is #2 in Exports? Which country is the "agricultural based country?" and a poor little Island? You are mad. The Euro is a stable commone currency.
Ruth, Love your response. However your 1st point is invalid as the "good ol' USofA is just that, The United States, unlike Europe which is so dysfunctional it could never (currently) be called united.
Whilst I accept your second point in principal, France has always taken huge rebates for its farmers from the EU and continues to do so & whilst I assume your facts are correct to have nearly 50% of your countries income being service based, from one of the rudest peoples on this planet is interesting, and will probably shrink like their manufacturing base. As long as the continue to produce wine, brandy and such wonderful cheeses it'll work for me.
Point 3 Isnt my statement cause & effect for yours, they wanted to be a world trader from the initial common market, it was obvious to anyone who lived through the formation of the current european structure (as I did) in the late 50's early 60's that formation was a first step to continental integration, which, in the late 50's, was never going to happen due to so much hatred that existed at the time. due to the closeness of the war.
I am/was English by the way (now, a proud US citizen) so I speak from many family gathering in an era where the "despicable Hun" "Damn Nazi" "frightened French" etc. was commonly discussed. I have no doubt that if the people of that era who voted for the common market would reject it today, which is why the UK government who have for multiple elections promised a referendum, have never delivered and never will.
However, I do reject your statement that the Euro as the primary currency of Oil
To Raddave: The defeated military power may be #2 in exports, mainly due to the money and expertise pored into it by the people of USA, who are one of the most generous forgiving peoples I have ever had the good luck of meeting.
Yes England is a poor little country, who thinks its a world power, why do they need a nuclear ballistic missile fleet? why are they building 2 aircraft carriers, but cant afford any aircraft for them? Their welfare system is bankrupting them.
"However, I do reject your statement that the Euro as the primary currency of Oil"
Feel free to reject any "statement" you want, but it is an established fact and since I work in commodity trading I have to deal with it everyday.
From Nymex website: (italics text is mine) I get the stuff out the ground, & we get paid in US$
Trading unit: Crude Oil Futures trade in units of 1,000 U.S. barrels (42,000 gallons). Options: One NYMEX Division light, sweet crude oil futures contract
.
Trading Months: Crude Oil Futures trade 30 consecutive months plus long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery. Additionally, trading can be executed at an average differential to the previous day’s settlement prices for periods of two to 30 consecutive months in a single transaction. These calendar strips are executed during open outcry trading hours. Options: 12 consecutive months, plus three long-dated options at 18, 24, and 36 months out on a June/December cycle.
Price Quotation
Crude Oil Futures are quoted in dollars and cents per barrel.
Minimum Price Fluctuation: $0.01 (1¢) per barrel ($10 per contract).
Its "Dumb and Dumber" still trying to figure out how to balance the check book. Its a 24/7 work week for these losers trying to figure out a way to live on someone else's money.
What are you babbling about?
Control the money and you control not only countries.....BUT THE INHABITANTS.
It would be best if the countries (some "journalists" called them STATES) pulled out of the U.N., it's tenacles (G-7, G-8, and G-20), and the IMF which have doctrines on sharing the World's wealth. The Euro PIIgs union is nothing more than that....share the wealth.....and here they are wanting to "rewrite" the "Euro Treaty" for MORE CONTROL whether the smaller countries want it or not.
Given the history of Europe over the last 120 years (going back to Bismarck's treaties and the two world wars that followed) can there be much hope that good will come of this?
Are "Dumb" America and "Dumber" Europe or vice-versa? Those sillies were paid to prevent this BS from going on, instead they've let it happen, milked it and now they're trying to "fix it" without taking responsibility for their fiduciary failure. What would be the point of getting political or high finance education if it wasn't to screw the system? So good to see the bright minds doing us all a favor!
The bright minds are not the only ones responsible by far of course, everybody got greedy and entitled. That might be the magic that will allow them to pin the tails on the donkeys: us. I'm sure they are working on it.
The Euro was a natural step towards a single world currency. It might take another 100 years but it's not only inevitable, it's the only thing that makes sense.
The US should sign the Treaty! That would crimp the wild spending Democrats!
Don't know how or when but the American tax payer will be pulling more from our butts.
WE are so far in the sh*t hole, but with Germany NOT digging themselves into a bigger hole, somehow we the American tax payer is going to be made the butt of this Euro joke.
It's called "foreign aid". Billions upon billions of our hard earned dollars going to other countries and what is Obama and Congress doing? Getting fill in from China and printing more green backs without the metal reserve to back it.
Well, I'm not expecting this to be resolved any time soon - Merkel has too much to gain from prolonging the crisis: The PIGS are more likely to behave themselves while under pressure. I just hope that she steps in before things get out of control - they're all basically brawling on the edge of a cliff.
. . .Anyway, got a funny site for you all to check out about this debt crisis situation: www.debtcock.com
-its a little bit crude, but hilarious. Check out the Wall of Shame!
The United States is in line to get our country foreclosed upon, just like what’s happening to the European countries. If you didn’t notice, the American and European banks just got bailed out again. The house of cards is collapsing. America is the largest debtor in the history of the world (15.1 trillion and counting).
I think most people have figured out that Wall Street is one of the most corrupt and ethically deprived institutions on our planet. I think most people also know the media is bought and sold just like most politicians. We also know that Wall Street is one of many tools of the elite but not the main tool. What is very clear is that our financial system has an architect and carefully designed plan that is playing itself out in Europe.
“Money” is derived from debt. The U.S requests Federal Reserve notes (debt) from the Federal Reserve (which is neither federal nor a reserve) by giving paper Treasury Bonds (debt) to the Federal Reserve in exchange. As a result, a concept is agreed upon, debt for debt, not anything tangible is agreed upon. Monopoly money is then authorized (created but not minted, that is done by Federal mints) by a consortium of mostly European banksters with the Rothschild’s at its head is also created out of thin air. Tack on Interest to that debt now owed to a foreign entity and you have a perfect storm for taking over and controlling economies and nations. The pool of debt money (exchange of Treasury Bonds for Federal Reserve notes) put in the system is now always there and can be replenished by borrowing more (exchanging more bonds for more notes) but the interest added to the debt is never put into the system and therefore can never be paid back. If there were no debts owed in our money system (money put in to the system and then paid back) there wouldn’t be any “money”, but because there is interest attached we will always have a negative balance by always having to borrow to pay the interest that is attached to every dollar borrowed. The interest is exponential and we can never break even again with the Federal Reserve and will always be in debt to them. “Money” isn’t designed to represent the value of the goods and services in any economy, it is merely used as an exchange for the goods and services, it is designed to put you into debt. The concept of interest owed and attached to loans will always exceed the money in circulation. So the big pool of money owed is bigger than the pool we as laborers actually have to draw on to pay our bills. It’s like musical chairs we are always competing for the small pool of money and there have to be winners and losers in this system. That’s why inflation is a constant and new money is always needed to cover the interest. Interest (usury) is the bullet in the Federal Reserve’s weapon of mass destruction. Without a country controlling and managing their own currency they are then relegated to economic slavery. I will try and explain as I go along, please pardon the redundancies.
The dominoes are beginning to fall in what is an orchestrated attempt by the banksters (Federal Reserve and its subsidiaries) to consolidate Europe and eventually the rest of the world’s economies under one umbrella that is to be controlled by those that have always controlled currency and money. The most egregious aspect of this contrived extortion is that they are blaming the people who are the backbone of any economy instead of their greedy corrupt political and business leaders.
George Papandreou was pressured to quit because he lapsed into a morally and ethical responsible position by trying to give the people of Greece a say in their economic future through a referendum. This vote would have given the Greek people the choice to stay in the Euro zone and allow their country to be foreclosed upon by the banksters or leave the Euro regain their sovereignty and coin their own currency once again. The IMF bullied the smallest country as a litmus test for what is going to be a much more challenging foreclosure process when it comes to the larger economies. Italy is now in the cross hairs. This dilemma you are watching unfold goes to the core of the rotten apple that is the world’s financial system.
Folks, you are witnessing the death throes of a corrupt financial system where the stock markets and the fractional reserve banking system are at its core. In the United States, It doesn’t matter who’s in office. Our political system has turned into a two headed one party system with both parties serving their masters, Wall Street and the banksters/Federal Reserve. The stock market is just another ponzi scheme whose intent is to fleece the gullible at the bottom of the pyramid. The stock market is a rogue element of a financial system that is meant to funnel the wealth to the elite/banksters who soicopathically control our financial lives. The stock market isn’t the main problem; it’s the fractional reserve banking system that has set the foundation for outright theft. We are experiencing the biggest bank and investment robbery in history and the banks and financial institutions are doing the robbing. When you blame one political party or another they have you right where they want you, in fear, divided and distracted to the theft that is going on right in front of your eyes each and every second of the day.
When you have people on Wall Street day trading and speculating making half a million dollars a year in their twenties betting on people being foreclosed on, you need to ask yourself what is the true purpose of our banking system?. MF Global CEO, ex Goldman Sachs CEO Jim Corzine knows this and knows that nobody with his connections have served any time for stealing the investor’s money (1.2 billion at last count). The financial system’s main mission should be to allocate capital to areas of greatest growth in the real world economy. Yet they allow all kinds of broker speculation and financial gimmicks such as the derivative markets which are based on non-realistic side bets which are now in the quadrillions. The derivatives market was illegal for most of the 20th century.
The European banking crisis is a prime example of what is going to happen to all economies associated with stock market fraud and the Federal Reserve banking system. The financial strife in Greece is the model that will befall most countries. Greece is but a symptom of a cancer that has attached itself to the world’s economies. The Federal Reserve (which is neither federal nor a reserve) has been creating money (monopoly money) out of thin air and charging interest on it insuring a debtor economy for anyone who chooses or is forced to get involved with the Federal Reserve and their fractional reserve banking system. That is why this whole European or any countries current debt crisis will never be resolved and will be preyed upon by the stock market vultures. The Federal Reserve System is designed to cause economies to fail.
If someone loans you two dollars to run your economy and expects three back for the loan and interest how are you going to pay the third back? You can’t unless you borrow more dollars which puts you in perpetual debt and in a constant borrowing cycle to pay off the debt. This is designed not accidental.
Here’s the kicker, once the Federal Reserve/banksters have you struggling to pay off your interest, they send in their loan sharks the International Monetary Fund (IMF). The IMF will loan you money to cover your ever burdening interest payments but they attach a provision that if you default, you will have to give them your assets in what they call privatization (foreclosure).
Banks, Central banks, World Bank, IMF = Federal Reserve = Debtor economies (slaves, economic slaves).
This new Euro-plan is a very bad, twisted joke and it demonstrates how messed up the situation is. All such a centralized oversight in the current credit-based system would do is to insure that the lower level countries would remain undeveloped. The only way a country can develop in a credit-based system is to borrow more than it can ever pay back. The development can never overreach the debt. And since debt is the way the lenders maintain their own progressive profits, the debt always eventually overwhelms the developing country. The development itself is always relative, limited, temporary. Though it would be rough at first, the best thing that the lower level countries of Euro-union could do is to drop out of the union and entirely re-orient and re-organize their economies. It is very unlikely they would decide to do that, but the alternative is this descending deeper and deeper into illusion and confusion and unhappiness until the unhappiness becomes utter misery. Then what?
I feel like I live in a civilization/society that is a mixture of a high school and an insane asylum. All the real teachers and doctors have been murdered and replaced by the strongest students and patients.
One of the primary problems here is that both the capitalist and socialist systems have been radically corrupted by corrupt people who are very good at acquiring and maintain tyrranical power. This is not to say that either of these systems is originally free of corruption. Both systems have innate elements that immediately lend themselves to the nurturing of corruption. There is no pure capitalism or pure socialism. So the solution is not a retreat into some imaginary economic Eden. The human race has to finally grow up or go down in darkness. This will call for an unprecedented level of ethics and creativity. We will not muddle through this one. The question is: Do we have it in us? And it won't be long before the answer starts to emerge.
RicibCT; I think you need to get a new history book and put Goebbels' version to rest. Your statement about Poland and the Czech Republic occupying German provinces is completely out of touch with reality. Of course, irredentists like yourself seize the luxury of going back in history only to the point where it satisfies their dissonant perception of the facts.
Though this maybe hard for you to swallow Frtiz; know that a country is only as good as its last war, and Germany is 0 and 2 after the two big ones of the 20th century. They got screwed in the Treaty of Versailles following WWII, but that was no excuse for what they did later. By the way, I have never heard the Germans apologize to or voluntarily return territory they occupied when the were a colonial power in Africa and parts of the Pacific.