Crisis-hit European finance ministers took their first steps on Friday toward punishing countries that don’t honor the rules on keeping national debts and deficits down, including cash penalties.
However, on the same day that the German parliament approved its share of a 750 billion euro (US$944 billion) eurozone rescue package, running to about 150 billion euros, ministers showed no appetite for a bid by Berlin to force heavily-indebted partners into bankruptcy.
The first meeting of a new “task force” convened by EU President Herman Van Rompuy also left the difficult question of possible treaty changes required to craft a tough new regime of “economic governance” across the 27-nation EU on the back burner.
After the biggest drop in more than a year on Wall Street triggered fresh turmoil on Asian markets, work will now begin on a first report not scheduled to be delivered to EU leaders until June 17.
The task force’s final report is not due until October.
Van Rompuy said there was “a very clear broad consensus on the principle of having financial sanctions and non-financial sanctions.”
He was referring to EU rules restricting deficit and debt levels, rules that lie in tatters in the wake of huge debts accumulated in Greece, Spain, Portugal and elsewhere, but European Commissioner for Economic Affairs Olli Rehn said the devil would lie in the detail, warning of “some difficult discussions” still lying ahead.
Van Rompuy said the task force — which includes most EU finance ministers — would also focus on finding ways to reduce divergences in competitiveness between individual European economies, while working to come up with “effective” crisis resolution management for the future.
However, the German proposal to declare the most insolvent economies bankrupt, as a condition for creating a permanent safety net, drew no immediate support, Van Rompuy said, adding that it remained a “long-term” possibility.
French Finance Minister Christine Lagarde also said that the controversial plan “does not figure” among ideas being taken forward in the short term. Neither did the panel discuss a Belgian suggestion that eurozone debt be pooled and guaranteed by all.
Hot issues surrounding financial regulation, despite a sweeping package of reform being pushed through by US President Barack Obama’s administration, have already been left to national leaders to sort out at the June summit, days before a key G20 meeting in Toronto.
Swedish Finance Minister Anders Borg had warned on his arrival that delaying action could cause further chaos on markets that have consistently punished signs of indecision.
“We need to be able to report earlier than in autumn, this cannot go on for months,” he said.
Britain stood well back from the fray — offering loose backing for the eurozone to resolve its own problems, but no ideas of its own.
British Prime Minister David Cameron met German Chancellor Angela Merkel in Berlin, after seeing French President Nicolas Sarkozy in Paris.
“There is no question of agreeing to a treaty that transfers power from Westminster to Brussels,” Cameron said.
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