Germany Pushes for Euro Without Losing Sovereignty: The Ticker

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By David Henry

More euro, but only a bit more Europe. That's the message from Germany's political leaders during the weekend while finance ministers and central bankers met in Washington to discuss issues of global concern, including Europe's debt crisis.

The German ``Eiertanz,'' or dancing on eggshells, is still in full swing when it comes to finding a solution to the euro's woes. But it is now becoming clearer just how long the Germans are prepared to keep dancing to save the region's highly indebted nations. Forget euro bonds, a transfer union and a single European government -- Germany doesn't want any of them.

In an interview with Tagesspiegel newspaper, Labor Minister Ursula von der Leyen, a member of Chancellor Angela Merkel's Christian Democratic Union, ruled out a common European government that surrenders national sovereignty to a central authority. ``I don't want a centralized European superstate, either. I think Europe should retain its diversity of regional characteristics. Every country and region should be able to do what it wants with its budget independently.'' Von der Leyen could conceive of a regional policeman of sorts to enforce the rules if a euro member breaks them: ``A central European entity must intervene if a member country doesn't stick to the common rules.''

Sounds a bit like the Maastricht Treaty, although who will enforce it? One would assume that such intervention would lead to the loss of economic sovereignty for recidivist states, rather than financial penalties that only add to the existing debt.

Proponents of a fiscal and political union who are looking for a breakup of the federal government's coalition of Christian Democrats and Free Democrats to get what they want might be disappointed. If an election were to be forced before the scheduled date of 2013, we might see a government of Social Democrats and Greens, both of whom have supported the idea of euro bonds in the past. Even they may be losing their enthusiasm for what Germans commonly refer to as ``a liability union.'' In an interview with the mass-circulation Bild newspaper yesterday, Social Democratic Party Chairman Sigmar Gabriel, the likely Social Democratic candidate in the next federal election, recommended holding a referendum on Europe's future.

``The people should decide directly on fundamental questions about European policy,'' he said. ``Such referendums are difficult and are certainly not always successful, but they force the political and economic elites of Europe to explain the European project again, to make an effort and to promote it.'' The SPD is now being careful when it comes to proposals before consulting with the electorate.

So what do the people actually want? The latest Allensbach Institute poll published by the Frankfurter Allgemeine Zeitung on the weekend showed only 17 percent of Germans were in favor of a common government that administers the euro area's economy and 63 percent were against. Most said they supported cooperation with other European countries on financial and economic policies, but not a merging of national authorities. The people have spoken, it seems.

One thing is for sure: The German government is committed to saving the euro and a common-currency region that includes Greece. In an interview with TV host Guenther Jauch on the state channel ARD yesterday, Chancellor Merkel ruled out a Greek exit from the euro and reiterated her support for expanded powers for the European Financial Stability Facility. ``We need the euro,'' she said. ``The euro is good for us.'' Even the opposition parties agree with her on that, so this week's vote on increasing the firepower of the rescue fund is almost certain to gain the legislative approval of the German parliament.

(David Henry is a Bloomberg View editor.)





-0- Sep/26/2011 13:35 GMT