SHOWDOWN ON AUSTERITY GATHERS PACE

Germany and France have moved towards a bruising and potentially destabilising showdown on how to tackle the European debt crisis.

Francois Hollande has made a presidential pledge to re-open the EU’s financial pact. Angela Merkel said in response “the fiscal pact has been negotiated; it has been signed by 25 Government leaders, and has already been ratified by Portugal and Greece. Parliaments all over Europe are about to pass it. Ireland has a referendum on it at the end of May. It cannot be negotiated anew”.

There is a backlash across Europe against austerity and a greater emphasis on boosting growth and job creation. If Hollande wins the French presidency and also secures a parliamentary majority in June he and his team are committed to not ratifying the EU pact unless it is modified to include growth boosting policies. Technically, the pact can come into force without French ratification but this is politically inconceivable.

The Dutch Government has collapsed recently over a failure to agree on spending cuts and comply with the new rules.

Spain’s credit rating has been revised downwards recently because the austerity is defeating the chances of economic growth.

The Romanian Government has recently been ousted in a vote of no confidence triggered by opposition budget cuts.

The Czech Government is fighting for its survival.

Herman Van Rompuy said “Over the past two and a half years the EU has had to react to the economic and financial crisis. This has not been easy and lead to some frustration at times and strains. We have had to deal with the urgent pressures of the sovereign crisis. The emphasis should now shift increasingly to measures that can boost growth and jobs.”

Hollande responded robustly to Merkel “it’s not Germany that decides for the whole of Europe”.

Tim Corfield