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German Chancellor Angela Merkel’s crisis-fighting policy has failed and only exacerbated the turmoil, Germany’s opposition Social Democrats said as they unveiled proposals to spur economic growth in Europe.
SPD chairman Sigmar Gabriel plus Peer Steinbrueck and Frank-Walter Steinmeier, respectively the former finance and foreign ministers in Merkel’s first-term government, called for an investment and growth pact alongside the Merkel-inspired budget treaty going through ratification in European Union states. They threatened to block the fiscal pact in Germany’s parliament unless Merkel agrees to add growth measures.
The timetable for passing the fiscal pact and associated legislation to set up the permanent bailout fund, the European Stability Mechanism, is “completely unrealistic,” Steinmeier told reporters in Berlin today. The government underestimated the mechanics of getting the two-thirds majority in parliament needed to pass the legislation and it is “very ambitious to assume” both bills pass before the summer recess, he said.
The main opposition party, buoyed by victory in an election in Germany’s most populous state two days ago, said their proposals on growth mirrored the program of Francois Hollande, who is due to meet with Merkel in Berlin today after he was inaugurated in Paris. Hollande defeated Nicolas Sarkozy in the French presidential election on May 6 after campaigning against Merkel’s austerity drive and in favor of a focus on growth.
“We’re calling for an economic program, a growth and investment pact, so that the fiscal pact can function at all,” Gabriel said. Merkel and Sarkozy’s policy “has failed the whole way.” he said. “The reason is the one-sided and incorrect crisis analysis that views the problem as one of pure over- indebtedness.”
Among the measures the SPD demanded were better use of 80 billion euros ($103 billion) of EU structural funds, more European Investment Bank funding and the introduction of a financial transaction tax, policies that Merkel has already backed. The SPD also favors the introduction of joint euro-area bonds, which Merkel rejects.
Shifting crisis policy “will cost money,” said Steinbrueck. “Money that’s well spent.”
He compared it to the process of paying for German reunification over the last 20 years, which he said cost 100 billion euros a year and has been “far reachingly successful.”
“There will be changes and the government knows it,” Gabriel said. “In the end, Merkel will not push against a change in her policy, since she knows what this would mean for her.”
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