Germany readies plan to avert future debt crises
BERLIN (Reuters) - Germany is drawing up plans to boost the euro and avert future debt crises, a finance ministry spokesman said on Monday, declining to confirm reports Berlin wants a German-style debt brake across the single currency zone.
The Sueddeutsche Zeitung and other newspapers had reported Berlin was pushing the idea of tougher fiscal rules based on a German law to shield the euro zone from excessive debt.
Finance Minister Wolfgang Schaeuble, back at work on Monday after being taken ill just over a week ago, was preparing for a working group of euro zone countries that meets on Friday to discuss ways to help the bloc.
"Behind this is our belief that we cannot have a repeat of the Greece crisis. We think the Stability and Growth Pact (on fiscal standards) has been insufficient," spokesman Michael Offer told a regular news conference.
"Firstly, we want to prevent budget crises, we want better supervision of economic policy and thirdly the introduction of a group to fight euro zone crises," said Offer, declining to give details on individual proposals.
The euro sank to four-year lows versus the dollar on Monday on fears about Europe's debt crisis. A week ago, euro zone countries agreed a 750 billion euro (641.3 billion pound) rescue package, backed by the International Monetary Fund, to help to protect the euro.
Germany passed a debt brake law in 2009 when it pumped billions of euros into the economy through stimulus measures. The law sets a deficit limit of 0.35 percent of gross domestic product (GDP) by 2016 and says it must remain at that level.
The brake is designed to steadily reduce the debt-to-GDP ratio in Europe's biggest economy.
In Brussels, Schaeuble said the Stability and Growth Pact was already a type of tax brake.
Chancellor Angela Merkel sang the praises of Germany's debt rules in a speech on Sunday but stopped short of proposing that the euro zone should adopt a similar model.
"I believe that a brake on debt is the right thing," Merkel said, adding Europe's high debts were an "alarm signal."
It is unclear how much backing such a plan would have in other European capitals.
It received support from outside the euro zone on Monday when Sweden's finance minister said European Union countries must scale back soaring deficits faster than currently targeted in order to soothe markets jarred by the euro zone debt crisis.
"We must establish a more ambitious goal than 3 percent and we must reach it faster than we have previously said," Anders Borg told journalists.
EU TRANSACTION TAX
Merkel's conservatives want the Bundestag lower house of parliament to approve on Friday Berlin's part in the 750 billion euro rescue package, which includes 123 billion euros of German loan guarantees. That vote would come just two weeks after parliament passed a 23 billion euro bailout package for Greece.
It is unclear whether opposition parties will back the new rescue umbrella. Merkel would prefer to have support from the SPD and other parties for the bill but does not need it.
Some parliamentarians could make their support conditional on the government pushing for a financial transaction tax to contribute to covering the costs of the crisis.
Merkel has been cool on the idea of such a tax, saying it would be tough to get agreed internationally, and her Free Democrat allies (FDP) have opposed it.
However, her conservatives are now in favour of a European financial transaction tax, parliamentary sources told Reuters on Monday. Schaeuble would present it at the meeting of EU finance ministers in Brussels on Monday and Tuesday, the sources said. Only Britain and Sweden are expected to oppose such a tax.
It was unclear when the aid bill would go to the Bundesrat upper house, but there was speculation it could be on Friday.
A regional vote last week robbed Merkel of her majority in the Bundesrat but as no coalition in the state of North Rhine-Westphalia has yet been agreed, Merkel should be safe as the house's new composition will not have taken effect.
Merkel cut short her participation in an EU summit with Latin American countries to talk to parliamentary parties on Tuesday to try to convince them of the merits of the plan.
Germans, who argue they have put up with wage restraint and an increase in the retirement age in recent years, are against bailing out Greece and other heavily indebted euro zone states.
A poll conducted by the Allensbach Institute and published in daily Bild showed almost half of Germans want to return to the deutschemark, a symbol of Germany's economic might since World War Two.
(Additional reporting by Erik Kirschbaum, Andreas Rinke and Sarah Marsh, editing by Jon Boyle)
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