Sarkozy vows new EU treaty to restore budget discipline

1st December 2011, Comments 0 comments

President Nicolas Sarkozy declared on Thursday that France and Germany would push to give the European Union a new treaty to restore tough budgetary discipline on the debt-ravaged eurozone.

In a landmark address in front of 5,000 supporters, Sarkozy said he would meet his German counterpart Chancellor Angela Merkel on Monday to agree upon and announce a joint plan to take to the EU summit on December 8 and 9.

The French leader warned the developed world was entering a "new economic cycle" dominated by debt reduction, and thus of tough times ahead.

"Europe will have to make crucial choices in the weeks to come," he warned in the southern port city of Toulon, adding: "Europe is not a choice, it is a necessity, but it needs to be rethought, refounded."

"We must confront those who doubt the stability of the euro and speculate on its break-up with total solidarity. France is fighting so that Europe can still make it voice heard in the world of tomorrow," he declared.

"France is fighting with Germany for a new treaty. More discipline, more solidarity, more responsibility ... true economic government" he said, urging members to adopt a "Golden Rule" obliging them to balance their budgets.

The stability of the European economy has been rocked by a sovereign debt crisis spreading from the eurozone's highly indebted peripheral states like Greece and Ireland towards major economies such as Spain and Italy.

France has also seen borrowing costs rise, and ratings agencies have warned that its prized Triple-A status is at risk -- a potential humiliation for Sarkozy six months before he is due to seek re-election.

European leaders have struggled to convince markets that they will be able to stave off the risk of a massive default that could bring down banks, cause a global credit crunch and bring down their single currency.

Next week's Brussels summit is now seen as key to halting the crisis, but there have been reports that the eurozone's two biggest players -- France and Germany -- are at odds over which course to take.

French officials have been pushing for the European Central Bank to become the eurozone's lender of last resort -- effectively permitting it to print money in order to buy up member states' debt and relieve fiscal pressure.

But this is anathema to Germany, which nurses grim memories of inter-war hyperinflation and insists the ECB should stick to its price stability mandate.

Sarkozy appeared to partially concede this point, saying the bank should remain "independent" but added that he was sure that it would act.

"It is for it to decide how and with what means. That's its responsibility. No-one doubts that it will meet it, and I welcome what it has begun to do," Sarkozy said, in comments that observers said risked riling Berlin.

ECB chief Mario Draghi had already warned Thursday the central bank cannot act beyond its mandate -- although he left the door open to a more activist role if states agreed tougher fiscal rules of the kind Merkel wants.

"When Germany and France are united, it's all of Europe that is united and strong," Sarkozy insisted, arguing that the European Union had been a guarantor of peace in a continent formerly prey to centuries of bloody conflict.

Some EU members have opposed the idea of a new treaty, which would take time to agree and might trigger referendums in some countries -- votes that governments would struggle to win against a backdrop of economic austerity.

On Friday, Sarkozy will have a working lunch with Prime Minister David Cameron of Britain, a eurosceptic who in the past has said he would seize upon any change to EU treaties to repatriate powers to Westminster.

Sarkozy said the existing Maastricht Treaty had proved "imperfect" as it allowed states with lax budget discipline to escape punishment. Germany is pressing for automatic sanctions to be imposed on backsliders.

The French leader is trailing his Socialist rival Francois Hollande in opinion polls, unemployment is rising and consumer confidence in low, just six months before he is due to seek election to a second five-year term.

Opponents were quick to mock Sarkozy's speech, with Socialist leader Martine Aubry saying he did not have "the stature" to handle the crisis and the party tweeting: "Mrs Merkel will decide, Sarkozy will follow orders."

© 2011 AFP

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