France and Germany ‘want new Euro treaty’
After key talks with German Chancellor Angela Merkel, France’s President Nicolas Sarkozy says Europe needs a new treaty – as six Euro countries face credit downgrade.
France and Germany have agreed on a series of reforms to address the eurozone’s sovereign debt crisis – on the day the FT reported that the Standard & Poor’s credit ratings agency has warned six European countries, including Germany and France, they could be downgraded from their triple A status.
They will be presented to EU President Herman Van Rompuy on Wednesday, President Sarkozy said after a meeting Chancellor Merkel at the Elysee Palace in Paris.
“We want to make sure that the imbalances which led to the situation in the eurozone today cannot happen again,” Sarkozy told a news conference.
“Therefore we want a new treaty, to make clear to the peoples of Europe, members of Europe and members of the eurozone, that things cannot continue as they are,” he added.
Mr Sarkozy said that the new proposals would include a modified EU treaty, ideally for all 27 EU members, but that they were also ready to draw up a treaty for the 17 eurozone members though this would be open to others.
This treaty would include automatic sanctions for states who fail to meet the three per cent deficit rule, as well as a budget-balancing rule across the eurozone.
Read more: New treaty to prop up eurozone?
Italian Prime Minister Mario Monti said that his country would have collapsed without the austerity measures his government had agreed.
The package, which includes tax rises and changing the retirement age, took its toll on Welfare Minister Elsa Fornero, who broke down in tears on Sunday as she was explaining the measures.
She said Italy was paying a psychological price for the reforms and started crying while attempting to use the word sacrifice. Mr Monti came to her aid. "I believe she was about to say sacrifice, as you have probably understood," he told journalists.
Ireland
Irish Prime Minister Enda Kenny made the first television address by a taoiseach since 1986 as he told the Irish people that everyone would be affected by the government’s measures to balance the budget. They include include spending cuts of 2.2bn euros, public sector job losses and a two per cent rise in VAT.
Brendan Howlin, Ireland’s public spending minister, said: “Twelve months ago we were Europe’s problem. Now problems in the European and global economy threaten our recovery.”
Financial markets rallied last week after central banks took action to provide funding for European banks and on hopes of a Franco-German masterplan. European Central Bank chief Mario Draghi signalled that a eurozone “fiscal compact” could nudge the bank to act more decisively to fight the crisis.
Treaty change
Prime Minister David Cameron said following talks with Mr Sarkozy in Paris last week that he was not convinced treaty change was needed and that if the EU’s founding charter was reviewed, he would ensure Britain’s interests were protected.
And Deputy Prime Minister Nick Clegg delivered a warning that the eurozone was skating on “very thin ice”, suggesting the “whole edifice” could collapse.
He said failure to strike at least an outline deal for reforms at an EU summit on Friday would be “extraordinarily grave”.
However, he insisted that the fundamental reforms needed would apply to the 17 member states rather than the full EU – and a referendum would not be needed in Britain.
“I don’t think there needs to be a referendum on Europe,” Mr Clegg said.
“The referendum will only take place if there was an additional surrender of sovereignty from us to the European Union.
“The test which we have legislated on is if we, the UK, give up more sovereignty in a significant way to the EU.”
Mr Clegg’s comments contrasted sharply with those from Work and Pensions Secretary Iain Duncan Smith. The eurosceptic appeared to align himself with many on the Tory right by suggesting that the impact from any treaty change would demand a national vote.