Merkel courts opposition over EU fiscal treaty

By JUERGEN BAETZ

BERLIN

German Chancellor Angela Merkel is meeting Thursday with opposition leaders to win their backing for the European Union's treaty enshrining fiscal discipline.

Merkel's center-right government needs the support of opposition parties to secure a two-thirds majority in Parliament for the legislation to pass.

Center-left opposition leader Sigmar Gabriel reiterated ahead of the talks that his party would only vote for the so-called fiscal pact if it is amended to include an economic growth pact.

"It's not about changing the fiscal pact, but about complementing it with initiatives for growth and employment," Gabriel told German public broadcaster ARD.

The Social Democrats' demand has been emboldened by this month's election of France's center-left President Francois Hollande who also seeks to amend the treaty with measures to promote growth and create more jobs in the southern European nations hardest hit by the debt crisis.

Germany's government wants to pass the legislation jointly with the bill for Europe's new permanent rescue fund before Parliament's summer recess -- a timetable that could be derailed by the opposition's demands.

Led by Merkel, 25 EU nations last year agreed to the treaty which limits the countries' ability to pile up more debt, binding them to strict fiscal and deficit targets as a way to stabilize the continent's finances and regain investors' trust.

However, Germany appears more isolated in its insistence on austerity measures across Europe now that the continent is on the brink of a recession.

Many economists say more austerity measures could drag down some of the bloc's already fragile economies and defeat the point of the fiscal treaty, because the debt burden -- measured relative to a country's output -- would actually start looking even worse once a nation is in recession.

Economists and politicians have therefore called for measures that would help a country's economy grow.

Merkel's government, however, strictly opposes the idea of fostering growth through more spending, saying it would only make Europe's debt woes worse. Instead, it maintains that growth can be fostered through a more intelligent use of existing EU funds and implementation of structural reforms.

Foreign Minister Guido Westerwelle insisted Thursday that the government was not suggesting austerity alone.

"We all know that budget discipline is important, but that it can't be everything," he told reporters. "We also need solidarity, and we also need growth -- those are the three pillars upon which we build our policies."

During his campaign, France's Hollande insisted he would not sign Europe's fiscal pact until it includes measures to promote growth.

The EU's 27 leaders discussed the issue at an informal summit Wednesday in Brussels, but failed to reach an agreement on a set of measures which is set to be decided at another formal summit late next month.

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David Rising contributed to this story