Tough love
July 31, 2011
Brussels should suspend subsidies to eurozone member states that break the rules requiring national governments to keep their budget deficits to a healthy minimum, according to Germany's Finance Minister Wolfgang Schäuble.
"You can quickly suspend payments from the EU budget to those countries that break the rules," Schäuble told the daily Frankfurter Allgemeine Zeitung. "We don't have to wait until the child has fallen down the well."
The European Union's Stability and Growth Pact, passed in 1997, requires the 17 eurozone member states to keep their annual budget deficit under 3 percent of their total economic output with a view toward generating surpluses in the long run.
Violations of the pact are partially responsible for the current debt crisis that threatens to spread beyond insolvent Greece, Ireland and Portugal and jeopardize the stability of the euro, the currency used by the eurozone.
Eurozone indivisible
The 17 eurozone members came together in July and agreed to a second bailout for Athens, this time to the tune of 109 billion euros ($156 billion). Schäuble defended the bloc's decision, dismissing the idea that Greece should abandon the euro and devalue its currency to raise revenue through cheaper exports.
"The eurozone would suffer an irreparable loss of confidence if a single one of its members left the monetary union," Schäuble warned
"I don't even want to try to imagine what that would do if the markets realized that they can expel a country from the eurozone," he continued.
Some EU member states have pushed for Brussels to enforce the Stability and Growth Pact by inspecting and approving national budgets before they become law.
Author: Spencer Kimball (AFP, dapd, dpa)
Editor: Nicole Goebel