Merkel, Sarkozy Set Out Economic Convergence Plans
Monday December 12 2011 | 06:22 AM

In a joint letter to European Council President Herman Van Rompuy, ahead of the key summit meeting in Brussels, German Chancellor Angela Merkel and French President Nicolas Sarkozy outlined their strategy for budgetary discipline in the eurozone, and set out plans to harmonize economic and fiscal policy.

To achieve the ambitious objectives, the heads of state called for a renewed contract between eurozone member states.

In the letter, the Franco-German heads of state underscored the need for measures to be urgently implemented to overcome the crisis and to substantially strengthen the architecture of the economic and monetary union. 

 The two leaders warned that steps must be taken without delay to guarantee credibility and confidence in the future of the union.

According to Merkel and Sarkozy, key elements for a new stability and growth union involve measures designed to strengthen the institutional strucutre, notably by convening regular summit meetings of eurozone heads of state and government providing strategic direction for economic and fiscal policy in the eurozone. The summits should take place at least twice a year, although in the case of the ongoing debt crisis once a month, focussing on a clearly defined agenda dedicated to promoting growth, competitiveness and fiscal stability.

Other elements outlined in the letter pertain to a comprehensive framework for crisis prevention, including plans to adopt a debt brake rule in the constitution, designed to achieve balanced budgets, with the European Court of Justice overseeing implementation of the agreed rules in national legislation.

The leaders underlined the need to strengthen growth by increasing competitiveness and by converging economic policies, at the very least among eurozone member states.

Here, Merkel and Sarkozy alluded to the need for a new legislative framework, intended to make “faster progress” in concrete areas such as financial market regulation, the labour market, convergence and harmonization of the corporate tax base, as well as the creation of a financial transactions tax.

Other areas alluded to in the joint communiqué included plans to strengthen procedures for implementing a solid fiscal policy, to apply automatic sanctions for member states breaching the 3% gross domestic product deficit, and to implement the European Stability Mechanism in 2012, rather than in 2013 as originally planned.

Concluding their letter, the two leaders call for a decision to be taken at the European Council meeting, which commenced on December 8, in order to have the new treaty provisions in place by March 2012.