Richard North, 18/01/2005  

Despite Schröder’s assertive stance on the "reform" of the EU’s Growth and Stability Pact, he is not escaping without challenge.

According to The Times business section today, tensions were rising over his proposals, with a number of the smaller member states lined up with central bankers to oppose the German chancellor’s calls for a watering down of its strictures.

In the lead was Karl-Heinz Grasser, the Austrian finance minister and, according to The Times, a "hardline fiscal conservative". And he has heavyweight support from both the Bundesbank and the European Central Bank. Both these institutions are warning against any dilution of the pact’s rules.

The Bundesbank is particularly dismissive of Schröder’s proposals. The Pact would not be strengthened by them, it says, but "decisively weakened". No longer is the Bundesbank the giant it was, but few chancellors in the past have taken it on and survived to tell the tale.

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