PARIS, Aug 17 (Reuters) - France on Wednesday published a letter containing proposals President Nicolas Sarkozy and German Chancellor made jointly on euro zone reforms to address the debt crisis in the region.
The following is a translation of the joint letter agreed by the two leaders after they met Tuesday in Paris, and which is being sent to European Council President Herman Van Rompuy.
(Part of the preamble has been left out)
France and Germany commit to fully and as fast as possible implement all of the decisions taken by the heads of state and government at the July 21 2011 summit. France and Germany stress the importance they accord to rapid parliamentary approval of these decisions in their two countries by the end of September. They call on all euro zone members to take the necessary measures so a new EFSF (European Financial Stability Facility) can be fully operational by the end of September.
1/ Reinforcing euro zone governance
All the decisions taken over the last year aim to increase stability and promote growth in all of the member states. With that in mind, the euro zone must reinforce and rationalise its institutional framework to improve the efficiency of its decision-making process and enhance the coherence of its institutions and procedures.
This framework should be based on the following proposals:
- Regular meetings of euro zone heads of state and government. These summits will be held twice a year and extraordinary sessions will be called if necessary. These summits will be the cornerstone of the new economic governance of the euro zone. They will have to ensure that euro zone member states apply the Stability and Growth Pact well, discuss certain states’ difficulties and take decisions necessary for avoiding crises. These summits will also allow for competitiveness in the euro zone to be monitored and to define the main principles of economic policies in the euro zone to promote lasting growth, encourage competitiveness in the euro zone to be monitored and to define the main principles of economic policies in the euro zone to promote lasting growth, encourage competitiveness and avoid the emergence of imbalances.
- The euro zone heads of state and government will elect a president with a mandate for two and a half years. We have expressed our desire that you (Van Rompuy) assume this responsibility.
- The Eurogroup of finance ministers must be reinforced.
- The decisions of July 21 extended the scope of the EFSF/ESM. Their efficiency will be improved and their flexibility increased in line with the appropriate conditionalities. In order to fully play its role, the ESM will have to have new analytical capacities especially to analyse debt and capital markets, (and) to complete the analysis and recommendations from the European Commission, the European Central Bank and the International Monetary Fund.
2/ Reinforcing the monitoring and integration of budget and economic policies
The European economic and monetary union must involve even greater coordination of national budgetary and economic policies.
This coordination will be reinforced by the following proposals:
- Relying on pledges made in the context of the Euro Plus Pact, all euro zone member states will include between now and the summer of 2012 a rule on budgetary balance in their national legislation. As a matter of principle, the budgetary balance rule will be included in the constitutions of member states or equivalent legislation in order to guarantee its stability and give it primacy over annual budgets. The rule must apply the goals of the Stability and Growth Pact and guarantee that every euro zone member state should present a balanced budget as soon as possible. It will therefore guarantee a durable reduction in overall debt levels in cases where the reference level (60 percent of GDP) is surpassed. In line with the revised Stability and Growth Pact and between now and the end of 2011, all euro zone member states whose level of indebtedness exceeds the reference level will have to present a plan to bring their debt below the reference level, and to explain how they will take into account the ageing of populations on the long-term sustainability of their debt.
All euro zone member states must confirm without delay their determination to rapidly apply European recommendations for budgetary consolidation and structural reform, notably for the labour market, competitiveness in the service sector and pensions policies. They will have to adjust their budgets accordingly.
We actively encourage the governments and parliaments of all euro zone members to pledge to revise their budget plans in light of any recommendations made during the European semester.
In line with the Euro Plus Pact, euro zone member states easures necessary to improve competitiveness, promote employment, insure the stability of the euro zone in its entirety and reinforce economic integration. It will also be appropriate to make additional progress in terms of coordinating fiscal policy to support budget consolidation and economic growth. Member states are urged to commit to completing negotiations on the (European) Commission’s proposal for a common consolidated corporate tax base by the end of 2012. Euro zone member states will have to be ready to envision deeper cooperation in the domain of fiscal coordination. They will have iscal practices and to fight against fraud and fiscal avoidance.
Structural and cohesion funds must be used to support indispensable reforms aimed at improving economic growth and competitiveness in the euro zone. The macro-economic conditionality of the cohesion funds must be extended to the structural funds. They must aim for the improvement of competitiveness and the reduction of imbalances in member states which have been given recommendations as part of the procedure concerning excessive imbalances. In countries under this programme, the Commission will automatically have to proceed ohesion funds optimally support macroeconomic adjustment programme; it will also participate in selecting and bringing about projects. In the European Commission itself, the Economic and Financial Commissioner will have to play a decisive role in this process. Funds unused by countries in the programme could be pooled into a fund for growth and competitiveness that would be managed by the Commission at European level. In future, payments from the structural and cohesion funds could be suspended for countries which do not conform to the recommendations of the procedure regarding excessive deficits. These changes will have to be integrated into new regulation of the structural and cohesion funds, which will be proposed for the next multi-annual financial framework.
The proposals above will have to be enacted in such a way as to reinforce the cohesion of the European Union as a whole. The European Parliament, the European Commission and the national parliaments will have to be associated with this process in keeping with their respective prerogatives. In terms of treaties in place, European texts, including in article 136 TFUE and in ontext of reinforced cooperation, will be considered. Finally, we wanted to inform you that we have decided to enter a new phase of economic and financial convergence between our two countries.
To this effect we have taken three decisions:
1. We ask our Finance ministries to come up with a common proposal on a financial transaction tax, in order to contribute to the study undertaken by the European Commission;
2. We have decided to meet at the start of every European semester for exchanges on our economic and budgetary policies and to jointly define macroeconomic assumptions for writing of our budgets. A first meeting will take place in January, 2012;
3. Ahead of the Fiftieth anniversary of the Elysee Treaty, we have asked our ministries of Finance and Economy to prepare proposals toward convergence and increased competitiveness of our economies.
We hope that this will give rise to a proposal allowing for the creation of common corporate tax in our two countries, with harmonisation of the tax base and rates, which would be put in place starting in 2013.
Angela Merkel Nicolas Sarkozy (Editing by John Stonestreet) Keywords: EUROZONE/TEXT