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Report: France wants closer euro zone economic policy
BERLIN—France wants all 16 euro zone governments and any other interested European Union members to co-ordinate their economic policy more closely in the future, Economy Minister Christine Lagarde told a German newspaper. “The crisis showed us that it is not sufficient to limit public debt as foreseen in the Maastricht Treaty. Ireland stuck to these criteria and finds itself nevertheless in difficulty,” Lagarde said in an interview with the Sueddeutsche Zeitung.
“The EU must not look just at the budgets, it must monitor how the economies in the member states develop.”
Countries that set out to boost exports and increase investment in a certain sector, for example, would directly affect other EU countries. “I don’t think it is possible to take away sovereignty over budgets from national states, but we could co-ordinate with each other already when we are preparing tax legislation. Germany and France plan exactly that—more and more we want to co-ordinate already when we draft our budget plans for the coming years,” she explained.
“Furthermore, I can also imagine creating an arbitration body (for closer economic policy co-ordination),” Lagarde said. European countries’ diverging tax rates have become a subject of tension. In negotiations on Ireland’s EU/IMF bailout last month, France and Germany wanted Ireland’s ultra-low corporation tax rate—long seen by higher-tax European countries as unfair competition—to be addressed but Dublin made clear the tax rate was non-negotiable.
Lagarde, in the interview, acknowledged that all 27 member EU states were unlikely to agree to such a wide-ranging move to co-ordinate economic policy, with the UK likely to vent fierce opposition, but she said some countries outside the euro zone would be interested. “I doubt that a co-ordinated economic governance would be possible with all 27 states. Great Britain, for example, disagrees entirely on certain things. “But that shouldn’t hold up all the others,” she said.
Lagarde rejected the idea of issuing common euro zone bonds—which some European policymakers and analysts say would help ease market concerns about peripheral euro zone debt—at least until member states have aligned themselves more closely. “Definitely not at present,” she said, when asked under what conditions France would support debt jointly issued by all 16 states. “Before we introduce euro bonds, we first need a economic governance,” she said. She also told the newspaper that the French government was committed to lowering its debt and was currently planning to propose a tax reform prior to presidential elections in 2012. (Reuters)
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