Accessibility links

Breaking News

Merkel Says Eurozone Expulsion Needed As Punishment Of Last Resort

German Chancellor Angela Merkel also said no country in trouble should be "left on its own" in a crisis.
(RFE/RL) -- German Chancellor Angela Merkel says the European Union members sharing the common currency must have the ultimate option of expelling any of its members that persistently break the club's fiscal rules.

In a speech to the German parliament today, the chancellor said such an option would be used only "as a last resort," against countries that persistently fail to meet the rules by which eurozone members are bound.

"In the future we need an entry in the [Lisbon] Treaty that would make it possible, as a last resort, to exclude a country from the eurozone if the conditions are not fulfilled again and again over the long term," Merkel said. "Otherwise cooperation is impossible."

Merkel's comments won applause from the lawmakers, many of whom have been highly reluctant to back calls for Germany to become more involved in rescuing Greece from its current financial crisis.

She was echoing a course recommended last week by her finance minister, Wolfgang Schaeuble, who said exclusion from the 16-nation eurozone must be a possible consequence for countries that threaten the stability of the common currency.

Threat To The Euro

Merkel today described the Greek crisis as posing the "greatest-ever challenge" to the stability of the euro, and said that the current rules in the European Union's Stability and Growth Pact are no longer sufficient to deal with problems of that magnitude.

Those rules limit eurozone members' budget deficits to 3 percent of gross domestic product (GDP), but they have not been strictly enforced.

Greece is struggling to cope with a budget deficit of 12.7 percent of GDP, and investors' fears that it could default on its debt repayments have seriously weakened the value of the euro. It has also led to fears of a loss of confidence in other deeply indebted members of the eurozone, including Spain and Portugal.

Merkel softened her hard-line approach to the extent of reaffirming European solidarity. She said no country in trouble should be "left on its own" in a crisis.

In Brussels on March 14, eurozone finance ministers agreed the outlines of a rescue plan for Greece, but it would only come into force if Athens proves incapable of coping itself with its debt obligations. This contingency plan follows the German policy that Greece must accept responsibility for its past neglect of fiscal propriety.

Merkel reiterated that line in her remarks today. She said a "show" of rapid EU financial support can't be the right answer. Instead, Greece must do its best to reach the heart of the problem, and fix what must be fixed.

But Greece is not the only EU member that is living above its means. The European Commission in Brussels today criticized what it called overly "optimistic" growth assumptions masking indebted national budgets.

It said budgetary commitments given by "a majority" of 14 member states, whose deficits are causing concern in Brussels, were seen as likely to fall short.

with agency material