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UPDATE 1-German govt wants fiscal pact approved by summer
March 28, 2012 / 2:35 PM / 5 years ago

UPDATE 1-German govt wants fiscal pact approved by summer

* Merkel wants to approve new fiscal rules by June

* Opposition sees no need to rush, signals tougher stance

* Opposition demands financial tax, growth-boosting measures

By Markus Wacket and Gareth Jones

BERLIN, March 28 (Reuters) - The German government dug in its heels on Wednesday over the timing of a parliamentary vote on a new fiscal discipline pact for Europe, saying it wanted the legislation approved by the summer despite rising calls from opposition parties for a delay.

The pact, which aims to enshrine German-style fiscal rules across 25 EU countries, requires a two-thirds majority in parliament to pass, meaning Chancellor Angela Merkel is dependent on the opposition.

The Social Democrats (SPD) and Greens, with an eye to national elections next year, want to complement the pact with new growth-boosting policies to help struggling countries such as Greece out of deep recession.

On Wednesday, the head of the SPD, Sigmar Gabriel, suggested that the vote on the fiscal pact could be delayed until September, when French lawmakers are expected to endorse it.

But Merkel’s centre-right coalition wants to complete ratification of the pact in tandem with Europe’s new bailout facility, the European Stability Mechanism (ESM), in June and rejected talk of a delay.

“In the view of the government, the fiscal pact and the ESM will be decided before the summer break,” government spokesman Steffen Seibert told a regular news briefing.

The SPD’s refusal to tow Merkel’s line may herald a more assertive approach in the run-up to two key state elections in May and the federal vote next year, in which Merkel is widely expected to seek a third term.

Francois Hollande, Socialist frontrunner in France’s presidential election race, has vowed to renegotiate the fiscal pact if he defeats President Nicolas Sarkozy in the two-round vote in April and May.

He has echoed the SPD calls for greater focus on policies to kickstart economic growth in Europe and the German party may feel that its leverage will rise if Hollande wins the vote.

“We have no time pressure (for approving the fiscal pact),” Gabriel said.

The pact has to be approved by the end of the year but Merkel wants Germany to set a good example by approving it sooner after insisting so heavily that its partners adopt the measures, which include a German-style “debt brake”.

Merkel may be hoping to minimise a divisive political debate by pushing for the fiscal pact and the ESM to be approved simultaneously.

Both the SPD and the Greens were angered this week by the government’s decision to shelve a mooted financial transactions tax to help finance growth-boosting measures due to a lack of support in the euro zone.

At Wednesday’s news conference, government spokesman Seibert reiterated that there could be no question of Germany moving ahead alone on introducing such a tax, adding that euro zone finance ministers would discuss the issue at a meeting on Friday in Copenhagen.

Seibert also took a swipe at comments from the Organisation for Economic Co-operation and Development (OECD) calling for “the mother of all firewalls” to impress financial markets and put an end to the euro zone’s sovereign debt crisis.

“It is regrettable that in these discussions obviously no figure is high enough... The result of such proposals... is unfortunately that they further unsettle the markets,” he said.

OECD head Angel Gurria repeated his call on Tuesday that the euro bailout fund should total around 1 trillion euros ($1.3 trillion), though the bloc’s finance ministers look more likely to agree to a level nearer 700 billion euros when they meet in Denmark.

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