–Adds Comments on European Stability Mechanism

PARIS (MNI) – French President Nicolas Sarkozy and German
Chancellor Angela Merkel said Monday that they had agreed on a joint
approach to confront the Eurozone debt crisis and that they were
determined to seek a preliminary accord at this week’s EU summit that
would restore confidence.

The two leaders said the joint French-German plan includes a
modified EU treaty that would allow for automatic sanctions for
countries with budget deficits above 3% of GDP.

They said they would seek approval of the changes from all 27
European Union countries but if that were not possible, they would push
ahead with the 17 Eurozone states.

“We are open either to change the treaty for the 27, which would be
the most logic way, or if somebody does not want to go along… we go
the way of the 17 Eurozone member states,” Merkel told a press
conference here following her meeting with Sarkozy.

The two leaders said the French-German plan, which will be detailed
in a letter to European Council President Herman Van Rompuy on
Wednesday, aims to conclude a deal on treaty changes by March.

The plan appeared to contain concessions by both sides. France, for
example, agreed that eurobonds should be ruled out as a solution to the
crisis and that sanctions for excessive deficits should be automatic.

Merkel, meanwhile, agreed that the European Court of Justice would
not be capable of annulling a national budget. The court’s role would be
to assess whether national budget rules were in compliance with the
European treaty and represented a true engagement by states.

Merkel explained that under the German-Franco proposals each member
state would implement a “golden rule” in its national constitution which
would guarantee its compliance the budget rules in the Stability and
Growth Pact.

The leaders also agreed that the implementation of the European
Stability Mechanism, the permanent successor to Europe’s current
bailout fund, should be brought forward to the end of 2012 from the end
of 2013.

Decisions regarding the ESM should be taken by a qualified majority
vote, rather than unanimity, which is the case with the current European
Financial Stability Facility.

Asked what response the leaders expected from the European Central
Bank, Sarkozy said the two leaders had agreed to make no comment on the
ECB.

Sarkozy said that they hoped to determine as soon as Friday whether
the treaty changes could be envisioned by all 27 EU state or only
members of the Eurozone

“We want a forced march to reestablish confidence,” Sarkozy said.
“The imbalances that led to this situation must never be allowed to
recur again,”

–Paris newsroom +33142715540; jduffy@marketnews.com

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