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Some in EU Object to German-French Debt Plan


German Chancellor Angela Merkel and French President Nicolas Sarkozy in a joint news conference in Brussels, February 04, 2011

German Chancellor Angela Merkel and French President Nicolas Sarkozy in a joint news conference in Brussels, February 04, 2011

A storm is brewing in Europe over a German-French plan that would impose stricter, uniform economic rules on the 17 nations that use the euro currency.

German Chancellor Angela Merkel and French President Nicolas Sarkozy proposed the plan last week. It called for the debt limits of each country to be written into their national constitutions, a common European corporate tax, higher retirement ages for workers and other measures. In exchange, Germany and France would agree to bolster the continent's bailout fund, even as they seek to prevent the need for more international assistance deals like the ones that Greece and Ireland were forced to accept last year.

The austerity measures proposed by Europe's two strongest economies are already drawing complaints from their less prosperous European neighbors, who fear a loss of autonomy for their individual governments.

Italy is seeking to block rules that would penalize high-debt countries for failing to meet deficit reduction targets. Belgium, Luxembourg, Spain and others are opposed to an end to index-linked wage increases, while Austria and others oppose regulating the retirement age. Ireland does not want to give up its low corporate tax rate. Greece opposes a requirement to make constitutional changes.

The common euro currency has now been in effect for 12 years, but the fortunes of the countries that employ it have varied widely after the 2008 worldwide recession. Those on the geographic periphery – Greece, Ireland, Spain and Portugal – have fared worse than Germany and France and others in the center of Europe.

Whether Germany and France can impose new economic rules on their neighbors is an open question. But the continent's economic officials are discussing the various proposals and have scheduled more meetings on them in early and late March.

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