8/13/2019 2010 Germany_Economic Governance_Position Paper

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Position Paper: Germany

 Economic Governance in the aftermath of the Euro debt crisis

Introduction

Since the start of the economic crisis in Europe the economic stability of the EUas a whole as well as the economic stability of each individual member state has been

called into question. Germany has worked from the beginning of the Euro debt crisis toencourage the EU to address the root causes of the crisis rather than succumb to an

ineffective quick fix such as a bail out. Due to the intricate interconnectedness of the

eurozone economies emergency aid eventually became a necessity to prevent furtherdeterioration of the situation. Germany continues to support addressing the crux of this

crisis through a closer alignment of eurozone states’ overall economic policies. Germany

 believes that reform of the Stability and Growth Pact to include preventative measures.

The German Situation

Although an economic powerhouse of the EU, Germany has still felt the effects ofthe Euro debt crisis. The interdependence of Europe’s economies ensures that great

economic volatility in one country will extend across all of Europe. The effects of market

shifts in one country become magnified by the common currency of the Euro. While theGerman economy has managed to remain strong and even begin to recover, true recovery

cannot come until other European economies regain momentum.

Germany’s reluctance to agree to a bailout and our recent unwillingness to

increase the capacity of the European Financial Stability Facility (EFSF) is due to our

refusal to disproportionally assume the burden of the stability of the eurozone economy.

Germany would prefer to use our economic size to influence and direct economic policy

rather than to become the bankroller for future bailouts. Germany seeks long-termsolutions that can promote economic growth for all economies. We recognize that

 providing financial assistance without any major policy changes does nothing to preventfuture crisis. Germany also requests continued cooperation when it comes to issues of

funding, and hopes to share the financial burden equitably.

Proposals

•  Implementing more stringent enforcement of budget discipline rules, especiallyregarding debt limits.

•  Enforcing stricter monitoring of eurozone members states’ debt; extension ofscrutiny to structural and competitive aspects of the economy.

•  Creating a European Monetary Fund.•  Imposing sanctions on eurozone member states that repeatedly fail to comply with

the economic guidelines.

o  Possible sanctions include suspending voting rights in EU Council ofMinisters.

•  Increasing EFSF, while sharing the burden of funding.•  Harmonizing tax systems and encouraging labor market integration