In These New Times

A European investment fund is urgently required to rebuild the real economy.

M&C

19th January, 2012

Berlin – A Franco-German plan to ward off recession in the eurozone urges diverting EU cash to help eurozone nations struggling under austerity, as well as a transactions tax on the finance industry, a German newspaper reported Thursday.

The Sueddeutsche Zeitung said the confidential six-point plan drafted by German Chancellor Angela Merkel and French President Nicolas Sarkozy was to be sent to European Union President Herman Van Rompuy in advance of a January 30 EU summit.

Germany has been under fire from battered southern eurozone nations, which say it advocates austerity without a recipe for growth.

The plan will urge the EU to set up a ‘fund for growth and competitiveness’ to aid nations that have already adopted austerity and reforms, the paper said. Money from unused EU programmes would be diverted into the fund.

According to the newspaper, the plan proposes that government labour exchanges be legally obliged to offer a job or retraining to every single unemployed person within a set deadline and that labour exchanges in border zones send jobless people to the next country.

It also argues that red tape needs to be reduced for small and medium sized companies and they should be able to borrow money more easily. It proposes partly reducing bank regulation to free up credit.

The advocacy of a transaction tax is likely to increase strains in Merkel’s coalition, in which the Free Democrats, a junior party, are strictly against such a tax unless it is accepted by Britain, Sweden and other critics.

Merkel has said she ‘personally’ favours applying the tax to the 17 eurozone nations only, if the non-euro nations do not accept it.