FRANKFURT (MNI) – Automatic bailout mechanisms for EMU member
states would jeopardize the budget sovereignty of individual
governments, the Bundesbank asserted Thursday.
Rather than risk the moral hazard of creating a guarantee of
EMU-wide support for governments facing insolvency, political
determination is called for to enforce and strengthen EMU budget rules,
the German central bank said in its Monthly Report.
The no-bailout clause of existing EU treaties has already been
“weakened” by measures to support individual countries, it noted.
The hard-line position lends support to the German government’s
efforts to include an orderly default mechanism in any more permanent
European financial stability facility.
Since the EU Stability Pact rules were not respected in the past,
the framework for enforcement must be strengthened, the Bundesbank
argued.
Basic agreement among member states “appears to exist” on the need
to pay greater attention to debt levels and give more importance to the
preventative aspects of the Pact, it observed. The common goal is also
to enhance budget surveillance.
“Further efforts at crisis prevention should aim to reenforce
fiscal policy incentives at the national level,” it argued.
“Responsibility for other countries’ debts (Haftungsuebername) or
automatic, institutionalized support at the European level is not in
line with national sovereignty in the fiscal policy domain,” the
Bundesbank declared.
Without the political determination to respect and enforce the
Stability Pact, “all efforts at reform will be useless,” it warned.
–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com
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