PARIS (MNI) – To overcome the debt crisis, the Eurozone must have a
common “economic government” and guarantee investors against the risk of
debt default, French Prime Minister Francois Fillon said Tuesday.

“In the future there will be no involvement of private investors in
the restructuring of sovereign debt in the Eurozone,” Fillon declared to
parliament, insisting that the haircut on Greek debt was “exceptional”
and will not be used by any other member state in the future.

The future European Stability Mechanism should be operational by
the end of next year, as proposed by French President Nicolas Sarkozy
and German Chancellor Angela Merkel on Monday, and play the role of a
“real European Monetary Fund” to aid countries in difficulty, so that
the EMU financial system becomes “a pole of stability and attractiveness
for foreign capital,” Fillon said.

“We must not let investors have any doubt about our determination
to defend the Eurozone,” he said.

The political independence of the European Central Bank must be
“entirely respected,” Fillon stressed. “This way it can continue to play
its decisive role in this exceptional period.”

The changes to the Maastricht treaty proposed by Sarkozy and Merkel
to assure that sanctions are levied automatically against excessive
deficits should be approved by March and ratified by the end of next
year at the latest, he said.

Political leaders — and not the European Court of Justice — must
be the “keystone” of a future economic government and be able to refuse
sanctions with a qualified majority, he said. “Nobody wants a government
of judges.”

Responding to concerns raised by the rating agency Standard &
Poor’s about France’s ability to meet its deficit targets, the prime
minister pledged that “budget commitments will not be modified” and “the
government will do everything to respect them strictly.”

Fillon noted that the E6 billion in budgeted outlays put on ice for
next year would assure that the public deficit falls to 4.6% of GDP even
if growth is closer to the consensus forecast than the government’s
target of 1%.

The decline of Europe is not inevitable, he said, warning that the
cost of disintegration would be “exorbitant” even for the most solid
members of the Eurozone.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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