Debate in Parliament - 11th Session - October 17, 1996 - 8th Topic
Paper of the Faction Republikaner No.12/11 + 12/20
EMU Stability and Monetary Policy in the EMU
Speaker: Wolf Krisch Republikaner.
Brief translation of the Debate:
This Topic covers two papers of the Republikaner faction, i.e.
Antrag/paper no.12/11 concerning Budgetary Discipline within the European Union and
Antrag/paper no. 12/20 concerning the European Central Bank, National Banks, Monetary Policy and Interest Rates.
The agreed upon Stabilitätspakt - pact of stability -is in itself insufficiently defined and therefor cannot achieve its purpose.
The main reason are non binding conditions of the Maastricht Treaty and the possibility of different interpretations of this treaty, in particular when concerned with budgetary and financial policies of the member countries.
Neither the sanctions of article 104c EG-Vertrag / common market agreement nor the special "agreement concerning excessive deficits" can guarantee the necessary household discipline of member states.
Even the Dublin agreement is not precise and open to various interpretations. Sanctions against member countries with excessive budget problems might seem too harsh and will not be implemented - but soft sanctions will be meaningless.
The main problem:
Bail-Out-Effects cannot be ruled out.
Article 104b EG-Vertrag / common market agreement defines a "No-Bail-Out-Clause". But Article 103a, section 2 contradictingly allows Bail-out.
Possible result: a large enough financial crisis of a single member state can endanger the stability of the EMU.
To prevent this, the pressure on stronger member states - in particular Germany - will be great to intervene and give financial help.
The minimum result will be inflation.
Cohesion policy, the principle of solidarity e.g. in the European Investment Bank will counteract the "No-Bail-Out-Clause".
The transfer system within the currency union will be a cause for larger debts of member states.
It is in the interest of financially weaker countries to continually enlarge the EU household and to establish a transfer system with a financial balancing effect. The Delors II agreement might help these trends.
Hence countries with excessive deficits could get external credit based on bail-out assumptions - a dangerous situation.
The Republikaner therefor demand modification of article 104c and better definition of stability oriented goals.
The Republikaner demand
Monetary options of the European Central Bank and Banking structure.
In addition to fiscal problems the Maastricht Treaty causes a monetary problem due to different monetary policies within Europe.
It must be assumed that a central monetary system might be introduced, which will be different to the existing German system.
This will cause a major change in the German banking structure and the likely disappearance of smaller banks. Other detrimental effects must be expected, such a change in monetary policies resulting in increased inflation.
All of the demands of Die Republikaner are in agreement with the demands of business associations and financial experts.
The Republikaner demand more stability in the Economic and Monetary Union.
Note: this brief translation does not bring across the full intentions of the Landtagsfraktion Die Republikaner but may serve as
a position paper.