GERMANY HAS insisted it is not isolated over the euro zone growth agenda ahead of today’s informal EU summit.
Senior officials denied Berlin was on the policy defensive since the election of French president François Hollande and insisted many countries still backed Berlin’s position.
The message being broadcast: all European leaders, new and old, are bound to existing agreements but not obliged to agree any new measures over dinner this evening.
“France didn’t just step out onto the international parquet. It has worked intensively on all agreements and . . . there is no question over sticking to what was agreed,” said a senior German source, denying Mr Hollande’s win – on a European growth agenda – had changed the nature of the debate over the euro zone crisis.
“As nothing has changed in our analysis of the cause of the crisis in the last 14 days, nothing has changed in the strategy out of the crisis,” the official said. He cited “broad support” for agreed measures pushed by Berlin.
“In that sense, we don’t see where talk of isolation or ‘lonely Germany’ comes from,” remarked the official.
Visits to the German capital from Mr Hollande and his finance minister, promising growth initiatives to complement euro zone austerity measures, have forced a reaction from Berlin.
Germany supports swift implementation of measures already discussed: to tackle youth unemployment and extra loans for businesses via the European Investment Bank.
Before these measures are implemented, however, Berlin is loath to begin talking about new ideas – particularly ones that would increase deficit spending or increase German liability to euro zone neighbours.
Thus it has shot down pre-emptively all measures it anticipates Mr Hollande will mention today: allowing banks apply for direct funding from the European Stability Mechanism bailout and so-called eurobonds. The former would require reopening negotiations on the ESM bailout fund, a can of worms Berlin wants closed.
Issuing joint sovereign bonds, meanwhile, is for Berlin an aspirational project, and one that would be suitable for a euro zone with much closer economic and fiscal integration than is the case today.
“We are not going to mutualise anything until we have guarantees,” said a close Merkel adviser, using Ireland as a reason why pooled sovereign debt is not a runner for Berlin.
“If Ireland were to build up their banking sector again to a level where Ireland alone cannot support it, we would have no input over the support. That’s not going to happen.”
The Merkel administration is facing claims at home that one instrument it does support, so-called “project” bonds, are effectively eurobonds by the back door.
Officials dismiss such talk, saying project bonds would be limited to channelling private capital into public infrastructure projects – not to finance state budgets.
German officials refused to say whether they would support project bonds beyond the current pilot phase.
“It is good to think up new instruments.
“It is even better to come up with projects that can be financed,” said a government official. Pointing to unspent structural funds in EU budgets, the official added: “There is no lack of public funds, mostly a lack of good projects.”
