Date: Monday 28 May 2012
German Chancellor Angela Merkel is firing up her own plan to combat French President François Hollande’s own suggestions to achieve growth in the Eurozone.
Merkel has long opposed the idea of the so-called “eurobonds” (jointly issued Eurozone debt) as she feels the effective lowering of credit costs would reduce the urgency for structural reform in peripheral countries, thus only seeking to postpone much-needed measures.
Now as the voices clamouring for “growth” policies are on the rise, the German premier finds herself in a situation where she needs to present an alternative. At last week’s EU informal dinner, her opinion was quite clear: “Eurobonds do not create growth,” she said.
Yet, the German Social Democratic Party (SDP) leader Frank Walter Steinmeier has also increased the pressure on Merkel. “I guarantee you, there will only be a fiscal pact if it includes complementary growth elements. If they aren’t in it, then the SPD will not agree to it”, Steinmeier promised. If Merkel no longer receives the support of the SPD, she would be forced to go to the opposition to get the two-thirds majority to pass measures in the Parliament.
It’s in this context that Merkel is drawing up her own “six-point growth plan”, according to a report by Der Spiegel that cites an internal document at the chancellery. According to the paper, the proposal would include deep-seated structural reforms for Europe, government-owned businesses would be sold off and special economic zones could be created in crisis-plagued peripheral countries where foreign investors would be attracted through tax incentives and looser regulations.
Furthermore, countries would be called on to adopt Germany’s dual education system that combines a standardised practical education at a vocational school with an apprenticeship in the same field at a company in order to combat high levels of youth unemployment. The document also suggests German-style labour reform that loosens provisions making it difficult to fire permanent employees. “In short, the Mediterranean region is to become more like Germany, but with better weather,” Der Spiegel says.
In any case, Merkel is expected to advertise this plan as a growth creation proposal in order to appease those who have criticised Germany’s prior “obsession” with austerity measures. Whether this new plan will be accepted or not is something investors probably won’t know until the next EU summit at the end of June.
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