Socialists Mount Attack on European Central Bank
Germany joins France in undermining the euro
GERMANY and France yesterday announced plans to create an economic policy apparently compromising the European Central Bank's independence.
The broad thrust of their plan is likely to be endorsed by the 11 Socialist finance ministers in the European Union, who are preparing to sign a statement on Sunday calling for greater public investment more emphasis on growth, and for the European Central bank to have regular dialogue with politicians. But the move sparked open warfare with bankers.
It is further proof that the "New Left" in Europe is pushing for greater political influence in the running of the euro and for higher spending to counter the economic downturn. Oskar Lafontaine, Germany's Finance Minister, said: "We are entering into a new phase of European politics. What is decisive is that not only do we have a single currency area but also that it is accompanied by a co-ordinated economic and financial policy." Member countries must take all possible measures to develop the right "policy mix" to promote growth, "as in the end only more growth leads to more employment".
"We must drive forward tax harmonisation in Europe", he said, since Germany would not accept as a net contributor to the European Union's budget that the recipient countries "offer themselves on a large scale as tax havens". Mr Lafontaine was speaking after talks with his French counterpart, Dominique Strauss-Kahn.
Their approach, and calls by Mr Lafontaine and others for the ECB and national central banks to cut interest rates, provoked an angry response from German bankers, who see it as the abandonment of the strict financial disciplines of the era of Helmut Kohl.
Martin Kohlhaussen, the Federal Association of German Banks' president, reacted furiously, saying the new German government's repeated calls for lower European interest rates were a blatant attempt to influence the ECB. Mr Kohlhaussen, chief executive of Commerzbank AG, said: "It is not the debate as such that disturbs us, it is the way in which it is being conducted. Such an unconcealed public attempt to exert pressure not only damages the politicians and the Bundesbank, but in the end also harms Germany's financial centre."
Both ministers insisted that their emphasis on the need for investment and growth did not call into question the EMU stability pact, under which single currency countries will face fines if they overshoot spending limits.
"The pact is not in doubt. We in Germany have no problem meeting the pact criteria," Mr Lafontaine said at the meeting of the Franco-German economic council. But the drive for more emphasis on investment came amid growing pressure to consider allowing a flexible interpretation of the pact's rules.
Neil Kinnock, the EU transport commissioner in Brussels, also called for greater emphasis to be placed on growth and for the ECB to talk to politicians about the overall direction of economic policy in the euro area. Jacques Santer, President of the European Commission, insisted that Brussels would defend the ECB against any attempt to question its independence from political control.
The London Telegraph, Nov. 17, 1998 |
