Euro Update (6): Is the SPD signalling its availability for constitutional reform?

The FT seems to have become the channel of preference for European leaders to debate and lobby each other. After Jean-Claude Juncker and GiulioTremonti advanced the idea for common EU bonds(“E-bonds would end the crisis“), now the two top voices of the SPD (German Social Democrats), Frank-Walter Steinmeier (previously Foreign Minister) and Peer Steinbrück (previously Finance Minister), are supporting the idea (“Germany must lead fightback“). They propose “a combination of a haircut for debt holders, debt guarantees for stable countries and the limited introduction of European-wide bonds in the medium term, accompanied by more aligned fiscal policies.” Not only that, but they guarantee the support of the SPD in the Bundestag for an appropriate type of European solution to this problem that might require further European integration. “If Angela Merkel is ready for a European solution, she can be assured of broad support, in the Bundestag and beyond, for the sake of our common currency and our common destiny.” This is relevant because any permanent solution faces the threat of being considered unconstitutional by Germany’s Supreme Court, so Germany might require a constitutional amendment or two in order to allow for things to move on. Moreover, no one has promised a referendum, so asides from Ireland who would benefit from it, no one must have one. Everything can be dealt as expediently as possible through normal representative democratic institutions (parliament).
This could be a bit embarrassing for Merkel, as she rejected this idea and the one about increasing the EFSF outright. However there’s a way out for her. She did not categorically reject these ideas. She said that “for the time being” she saw no need for them. As the markets start zeroing-in on Spain, Belgium and even potentially France, Germany is able to argue that that that time has passed and that it is now necessary to take stronger steps in the direction of EU fiscal integration in order to sort things out. The SPD may have just given Merkel’s government the assurance it needs to pursue a pro-European agenda, but if Merkel chooses to do so, she will incur the discontent of the fiscally conservative FDP, who will ask for a lot in return for such a reform or threat to leave the government.
All this is posturing for the Council that starts tomorrow and goes on until tomorrow (detailed schedule here) and during which the leaders of the EU have scheduled to discuss the permanent shape of the EFSF and European Economic Governance as well as foreign affairs (see detailed agenda here). Hopefully something good will come out of all this. Otherwise, Germany and the ECB will continue to play this game of chicken, as Buiter says.

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This entry was posted in A € for your Thoughts, Euro-zone Update, European National Politics and tagged , , , , , , . Bookmark the permalink.

One Response to Euro Update (6): Is the SPD signalling its availability for constitutional reform?

  1. Pingback: Euro Update (11)- Expanding the EFSF, Inflation and Berlusconi | Place du Luxembourg

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