Paris and Berlin to detail summit proposals

23rd August 2011, Comments 0 comments

The French and German finance ministers meet on Tuesday to turn broad proposals to solve the eurozone debt crisis made at a summit last week into concrete policies that will reassure both voters and markets.

French Finance Minister Francois Baroin hosts his German counterpart Wolfgang Schaeuble at 0800 GMT to detail proposals made by President Nicolas Sarkozy and Chancellor Angela Merkel on August 16, the French ministry said.

The most urgent item on the agenda is a controversial EU-wide tax on financial transactions.

Merkel and Sarkozy offered few details on what would be taxed, at what rate, when it would be introduced.

Another open question is where the proceeds of the tax would go -- towards deleveraging over-indebted eurozone members, the EU budget or aid programmes to underdeveloped countries.

The two ministers are expected to submit a joint proposal on the transaction tax to their European colleagues at the beginning of next month.

France originally proposed a transaction tax to the Group of 20 nations that it presides over until November, but without offering more details there either.

The ministers must also discuss their leaders' proposal that all 17 countries which share the euro adopt constitutional amendments requiring them to limit public deficits.

That debate is just as political as technical: Germany has its own legislation to stop racking-up deficits that differs from a law proposed in France that will likely never be implemented since Sarkozy's governing party lacks the votes to pass it in parliament.

Other countries, such as Portugal, have expressed their doubts about such a rule.

The characteristics of a "eurozone government" broached last week by Merkel and Sarkozy to satisfy investors frustrated with the political cacophony in dealing with the eurozone crisis, also needs to be hammered out.

Finally, the ministers were expected to begin designing a unified corporate tax for France and Germany. Concrete proposals on that promise are expected by early 2012.

Threats to the global recovery are likely to weigh heavily on the talks Tuesday with growth having slowed to standstill in both France and Germany in the second quarter of this year.

France, the subject of heavy market jitters all throughout August, is more than ever under pressure to reduce its public deficit.

The government is expected to announce Wednesday additional measures to ensure it reduces the deficit to 4.6 percent of annual output in 2012 from 5.7 percent expected this year.

© 2011 AFP

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