Finance minister calls for European solidarity to tackle debt crisis | Europe| News and current affairs from around the continent | DW | 14.08.2011
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Finance minister calls for European solidarity to tackle debt crisis

German Finance Minister Wolfgang Schäuble said the eurozone's growing debt problems can only be solved "step by step" and has urged increased European political cooperation to carry out reforms.

An assistant holds up two bags with a euro symbol during a meeting of eurogroup finance ministers at the EU Council building in Brussels, Monday, Jan. 17, 2011

Germany wants tough action but has struggled to speak with one voice

In an interview on Saturday, Germany's Finance Minister Wolfgang Schäuble called for European solidarity to get to grips with the eurozone's mounting debt crisis.

"We are going to reinforce the stability pact," Schäuble told German weekly Der Spiegel, referring to the 1997 Stability and Growth Pact among the 17 nations in the eurozone.

German Finance Minister Wolfgang Schäuble

Schäuble says European nations need to be unified to tackle the crisis

"But though we would like to strengthen European institutions straight away, we can only do it step by step," Schäuble said.

The minister stressed that it was important for leaders to get European public opinion on their side for any rescue plan.

"We must have Europe's citizens with us," he added. "When we created the euro we were not able to simultaneously create a political union, people were not ready.

"In the intervening time, the willingness to go in this direction has increased," Schäuble said.

Germany divided over rescue methods

Schäuble's remarks came ahead of an emergency meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy on Tuesday.

The two leaders are to discuss new rules for the eurozone and try to dispel fears that France and Germany could lose their own top credit ratings, as happened to the United States.

Germany is demanding strict budgetary discipline from eurozone nations and sanctions for countries that mismanage their finances.

Overall confidence in the 17-member single currency bloc has been weakened of late, with its periphery economies - Greece, Ireland and Portugal - all straining under unsustainable levels of debt. Italy's debt overshadows all other eurozone partners.

But Berlin has struggled to speak with a unified voice on the economic crisis plaguing Europe.

Schäuble and Merkel face a revolt among members of their own conservative Christian Democratic Party (CDU) and the Free Democratic Party, the junior partner in the ruling coalition, over a deal they agreed last month with their 16 eurozone partners in Brussels.

No eurobonds

The main sticking points are increasing the size of the 440 billion euro European Stability Fund and introducing eurozone bonds.

Italian Prime Minister, Silvio Berlusconi (R), with Italian Economy Minister Giulio Tremonti

Italy is the latest eurozone country to struggle with huge debt

Germany has rejected using the bonds, which are issued and traded outside the country whose currency they are denominated in, until European nations have their budgets under control, Schäuble said.

Eurobonds, which Italy would like to use to alleviate its own debt crisis, should stay off the table until eurozone nations have put their economies in order, according to Schäuble.

Germany's opposition Social Democrats have, however, argued in favor of the eurozone bonds, saying it would ensure easier borrowing for the most debt-strapped eurozone member states.

Minister wants wider ban on short-selling

In a further sign of division between Germany's ruling coalition partners, German Economy Minister Philipp Rösler said he supports a short-selling ban across the Group of 7 industrialized nations, going further than Schäuble who has backed such a ban only in Europe.

"It is good and proper that other European countries have now banned short-selling," Rösler said in an interview with the Welt am Sonntag newspaper.

"But that is not enough," he added. "It's necessary that highly speculative financial transactions be banned not only in Europe, but at the level of the G7 states."

He said the issue should be "on the agenda at the next G7 summit."

On Friday, Germany called for a European ban on some short-selling of shares after four of its EU partners banned the speculative practice for two weeks to combat uncertainty rocking financial markets.

Author: Stuart Tiffen (AFP, dpa)

Editor: Sonia Phalnikar

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