Merkel’s Christian Democrats May Adopt Euro Exit Clause in Party Platform

German Chancellor Angela Merkel’s Christian Democratic Union may adopt a motion at an annual party congress next week to allow euro members to exit the currency area, a senior CDU lawmaker said.

If passed by CDU delegates, the proposal would still have to be agreed by all three parties in Merkel’s coalition before becoming government policy. Germany would then need to persuade its European Union partners to agree to changes to the bloc’s guiding treaty to allow a country to leave the euro.

The motion proposes allowing a euro member that doesn’t want to or is unable to comply with the common currency rules to leave the euro without losing EU membership, Norbert Barthle, the ranking CDU member of parliament’s budget committee said by phone. It has been approved for debate by CDU delegates meeting Nov. 13-15 in the eastern German city of Leipzig, he said.

“This motion will go through; I am sure of it,” Barthle said late yesterday. “It will become part of our party platform for future policy with regard to amending the framework treaties of the euro,” he said. “Any country that wants to leave the euro on its own should not be prevented from doing so.”

Greek Ultimatum

Merkel and French President Nicolas Sarkozy first raised the prospect of a member state leaving the euro last week, an event that is not envisaged under current euro rules. After Greece announced a referendum on the terms of its bailout, Merkel and Sarkozy withheld international aid and said the vote would be an in-or-out ballot on euro membership. Greek Prime Minister George Papandreou later scrapped plans for the vote.

With the prospect of a potential euro exit now in the open, French and German officials have stressed that Greece is a special case. A French government official said yesterday that there are no plans to shrink the 17-nation euro region, saying that speculation about such a step is ridiculous. Germany’s Finance Ministry said that while moves to gird the currency region during the debt crisis are being studied, “rumors” of further steps are “unfounded.”

Reuters reported yesterday that discussions among policy makers in Berlin, Paris and Brussels have raised the possibility of one or more country leaving the euro area, citing officials.

‘Raise the Pressure’

“The Germans and the French are now serious about making a push for deeper euro-zone integration,” Jan Techau, director of the Brussels-based European center of the Carnegie Endowment for International Peace, said by phone today. He said the story was an attempt “to raise the pressure on other EU states.”

The German and French stance “is not to scare Greece out of the euro but rather to put fear into the hearts of wavering euro nations so that they get their act together,” he said. “It’s an incentive to reform because otherwise they stand to lose a lot.”

Mario Draghi, in his first week as European Central Bank president, said Nov. 3 that while it’s not illegitimate to question Greece’s place in the euro area, the bloc’s founding treaty doesn’t allow for a country to leave and it would be hard to imagine it happening.

It is “not time for us to subdivide into national categories,” Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro-region finance ministers, told reporters in Lisbon late yesterday.

‘Further Strengthening’

The German Finance Ministry, in an e-mailed statement responding to the Reuters report, said that on Oct. 26, euro leaders asked Juncker, European Union President Herman van Rompuy and European Commission President Jose Barroso to present them with a report at their next meeting in December “including a time frame for the further strengthening of the euro zone.” The interim report should include “the question of possible treaty changes,” the ministry said.

“This discussion is to be continued in March 2012 in a report on how these treaty changes can be implemented,” the ministry said. “This is being worked on. All rumors going beyond this are unfounded and wrong.”

Speaking in Berlin late yesterday, Barroso warned against a fragmentation of the euro area. A monetary union in which members can “opt out” would impinge on the core principles of unity, he said. Rather, the long-term objective of the EU should be to establish a “truly economic union.”

“All the European Union members should have the euro as their currency,” Barroso said. “The idea that we have two unions in Europe means disunion.”

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Rainer Buergin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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