UPDATE 2-Germany sees no scope for joint EU fiscal policy

* German rules out joint euro zone fiscal policy

* German and France to discuss euro at bilateral meet

(Adds details and background)

By Dave Graham

BERLIN, Dec 3 (BestGrowthStock) – Germany delivered a firm rebuff on
Friday to calls for a joint tax policy in the euro area, saying
tougher rules on budget deficit limits would bring Europe closer
together as it seeks a way out of debt crisis.

Some European policymakers have argued the bloc’s debt
problems will only be solved with more centralised coordination
of fiscal resources, though Germany is wary of anything that
could lead to its taxpayers bailing out other countries.

Chancellor Angela Merkel’s spokesman Steffen Seibert told a
regular news conference joint fiscal policy was not an option.

“There are no plans and there is no desire for a joint
fiscal policy,” Seibert told reporters. “A decisive reform of
the stability and growth pact already leads to closer
cooperation on economic policy.”

Germany has led a push to toughen up the stability pact,
which is designed to ensure member states’ annual deficits do
not exceed three percent of gross domestic product (GDP).

Most EU countries’ deficits are expected to exceed the three
percent cap this year and next, many of them by a sizeable
margin. However, Germany now believes it could get its deficit
back within the limits next year. [ID:nLDE6B11TJ]

The case of Ireland’s low corporate tax illustrated
resistance to joint fiscal policy, Seibert said.

Dublin has rejected suggestions from European politicians,
including German ones, that it should raise its low corporate
tax to reduce its deficit.

The official position of most EU leaders is that deciding on
tax levels is a matter for individual governments.


However, there has been discussion in the euro zone, led by
France, on the need for some form of fiscal union or “economic
government” in the 16-member euro zone — an idea Merkel began
supporting in early 2010.

Berlin voices strong objections to anything that risks
turning the bloc into a “transfer union” where one country —
most likely Germany — bails out the others. It tends to see
policy convergence as a way of encouraging German-style fiscal
discipline among its more wayward European partners.

France and Germany hold a regular bilateral summit at the
end of next week and Seibert said the euro would be on the
agenda when Merkel meets French President Nicolas Sarkozy.

“In every meeting Germany and France hold at the moment, the
problems relating to European policy and the euro are always
near the top of the agenda, so you can assume that this will be
discussed,” Seibert said.

However, he denied there were any plans for a special
European summit this weekend to discuss the financial crisis.

The German and French leaders upset some of their partners
by bilaterally agreeing in the French resort of Deauville in
October to propose changes to the EU treaty in order to set up a
permanent mechanism for handling future euro-zone crises.

Merkel’s subsequent insistence that this should involve
making private investors share in the sovereign debt risk from
2013 onwards, when the new mechanism would come into effect,
roiled markets ahead of the Irish rescue deal.

The German government has denied any responsibility for
pushing up the debt costs of peripheral euro zone countries such
as Greece, Ireland and Portugal with this position.

“I reject any direct link that is sometimes made between the
political initiatives that Germany and France have made and the
development of interest rates on (government bonds),” said
Seibert, adding there was no single explanation for the euro’s

UPDATE 2-Germany sees no scope for joint EU fiscal policy