Merkel brushes aside EU unease over treaty changes

9:41am EDT

By Dave Graham

BERLIN (Reuters) - German Chancellor Angela Merkel said on Wednesday there could be no guarantee of stability in the euro zone without changes to the European Union treaty, brushing aside European Commission criticism of her plans.

Merkel, whose deal with French President Nicolas Sarkozy to press for changes to the bloc's treaty to enforce tougher budgetary rules was branded "completely irresponsible" by a senior EU commissioner, struck a defiant tone in parliament ahead of an EU summit.

She told the Bundestag lower house that a task force headed by European Council President Herman van Rompuy had drawn up important reforms to improve financial stability, but that they did not go far enough to safeguard the euro.

"Even with the toughest stability sanctions, we cannot rule out 100 percent that we will one day face an extreme crisis again that threatens the overall stability of the euro zone," Merkel said in a government declaration.

Only with a "robust" new rescue mechanism could the bloc safeguard the stability of the euro zone.

"The new rescue mechanism has to be legally sound. This will only succeed if there is a change in the EU treaties."

Merkel and Sarkozy last week agreed on changes to enable the suspension of voting rights of member states that seriously violate the principles of Economic and Monetary Union (EMU).

Other heads of government were not happy with the arrangement.

Jean-Claude Juncker, the Luxembourg prime minister who also chairs the Eurogroup panel of euro zone finance ministers, told daily Die Welt that he would oppose any freeze on voting rights.

"To spell it out clearly: withdrawing voting rights from budgetary sinners is not a feasible path, and I rule out any change in the EU treaty on this issue," he said.

However, a permanent rescue mechanism for the euro zone was needed and the EU treaty should be changed as "quickly as possible" if it proved necessary to achieve this.

NEW RESCUE PLAN

The limited EU treaty amendment Merkel and Sarkozy suggested would also provide for a permanent resolution mechanism for euro zone countries that ran into financial difficulty.

EU Justice Commissioner Viviane Reding told Die Welt the Franco-German plan for legal changes was not realistic.

"Coming up with illusions of new treaties looks completely irresponsible to me," she said. "Haven't they both understood that it took us 10 years to wrap up the Treaty of Lisbon?"

Merkel also said there was no time to lose in setting up a rescue mechanism to replace the 750 billion euro vehicle that the bloc set up at the height of the sovereign debt crisis in May.

The financial backstop is due to expire in mid-2013 and Merkel underlined that Germany would not permit any "simple extension" because it "sent out the wrong signals to the markets."

"The current rescue shield cannot be our frame of reference for the future," Merkel said, repeating her insistence that voting rights should be suspended for budgetary breaches.

Excessive debt levels among some member states posed the biggest danger to the euro area, the chancellor added.

EU leaders meet on Thursday and Friday to discuss the Franco-German proposals and Merkel said she would work to ensure van Rompuy was given a mandate to set out plans for the "limited treaty changes" and options for a new rescue mechanism.

He should present these to EU leaders by March, she said.

"I will say this quite clearly for our government and our country. To me, our approval of the report by the van Rompuy task force and a precise mandate for Herman van Rompuy are interlinked," she said. "They are one single package."

(Additional reporting by Paul Carrel and Brian Rohan; Editing by John Stonestreet)

http://www.reuters.com/article/idUSTRE69Q2Y320101027

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Date: 2015-12-24; view: 781