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Merkel Says Czech Republic May Still Sign Up for EU Fiscal Pact

April 03, 2012

German Chancellor Angela Merkel said she’s leaving the door open for the Czech Republic to join the European Union’s fiscal pact as she seeks to rally the EU behind her agenda to stem the debt crisis.

“Even though the Czech Republic hasn’t signed the fiscal pact, we know that the Czech government has not ruled it out,” Merkel said today at a joint news conference in Prague with Czech Prime Minister Petr Necas. Merkel said the pact’s goals are “fully shared” by the Czech Republic.

The Czech Republic and the U.K., both not members of the euro area, declined to sign the pact when the 25 other EU leaders including Merkel endorsed it in January. The fiscal discipline accord has too small an effect for the Czech Republic to warrant losing part of its sovereignty in exchange for approving it, Necas said on Feb. 7.

Signing up for the pact would mean the Czech Republic would lose its right to decide on many budgetary issues, Necas wrote in an opinion column in the newspaper Pravo. The German-backed accord accelerates sanctions on high-deficit states and requires euro countries to anchor balanced-budget rules in national law.

Merkel praised the Czech Republic for making progress on meeting the 3 percent of gross domestic product budget-deficit limit, adding that it will probably meet the target in 2013.

“This can make the Czech Republic an example” for other EU countries, she said.

Meanwhile in Madrid, an envoy from Merkel’s party said Spain’s government is determined to tackle its debt and there’s no need to discuss bailing out the euro area’s fourth-largest economy.

Spain Aid

“From what I see, there is no necessity at the moment for there to be any talk of Spain having to apply for aid from a rescue fund,” Volker Kauder, parliamentary leader of Merkel’s Christian Democratic bloc, said late yesterday after meeting Prime Minister Mariano Rajoy and other Spanish officials.

Spain is doing “everything it can” to reach Rajoy’s goal of reducing the budget deficit to 5.3 percent of GDP in 2012, Kauder told reporters, speaking through a translator. “It is possible to achieve it.”

Rajoy defied EU allies by raising Spain’s deficit target on March 2, hours after he and 24 other EU leaders signed the German-inspired fiscal pact to stem excessive debt. Merkel cited “fragility” in Spain and Portugal when she announced last week that Germany backed an increase in Europe’s financial backstop against the crisis.

To contact the reporters on this story: Tony Czuczka in Prague at aczuczka@bloomberg.net; Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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