Franco-German proposals for resolving the eurozone debt crisis are steps in the right direction but France should first curb its excessive public deficit, Luxembourg’s Finance Minister said yesterday.
Ideas floated by President Nicolas Sarkozy and Chancellor Angela Merkel this week go “in the right direction” but fundamentally there was “nothing new,” Luc Frieden told the German radio Deutschlandfunk.
Ms Merkel and Mr Sarkozy said member states should be held to a tougher fiscal standard, including a commitment to balanced budgets along the lines of one contained in the German constitution, and new cross-border controls should be put in place.
“I think we would do better to concentrate our energy on the application of (existing) commitments,” he added, noting in particular that France has a “great need to catch up” with a public deficit that is “far too large.”
The French deficit stood at 7.1 per cent of gross domestic product at the end of 2010, far above the theoretical European Union ceiling of three per cent.
Although Paris says it will cut that to 5.7 per cent this year and to three per cent by 2013, Mr Frieden pointed out the France constitution places no limit on the amount of the country’s debt.
Meanwhile, Mr Frieden downplayed the need to give the 17-nation eurozone an economic government headed by Belgian Herman Van Rompuy, now the EU president, another idea suggested by Ms Merkel and Mr Sarkozy.
“I think the Eurogroup (of eurozone finance ministers headed by Luxembourg Prime Minister Jean-Claude Juncker) already works relatively well,” Mr Frieden said.
“The most important thing for me and for many other finance ministers is to apply what has already been decided,” including the EU Stability Pact that fixes limits on debt and deficits, and the EU agenda for economic reforms, he added.
Former French and German leaders were instrumental in gutting the original stability pact and the countries have thus been told they share part of the blame for the current crisis.
Finally, common eurobonds, and idea conspicuously not backed by Ms Merkel and Mr Sarkozy, are a “good idea” but the current economic context is not appropriate, Mr Frieden said.
The French and German leaders said more progress would have to be made in ensuring a coherent economic governance for the eurozone before they would back a common issuance of bonds for its members.