Merkel: EU Needs Treaty Changes

By PATRICK MCGROARTY

BERLIN—A first round of euro-zone changes that European Union leaders are set to approve Thursday is inseparable from plans for a tougher overhaul over the next few years, which would result in amendments to EU treaties, German Chancellor Angela Merkel said Wednesday.

Ms. Merkel called for a permanent euro-zone mechanism for addressing "existential crises" like the one sparked by Greece's near-default last spring, with preventive measures such as the threat of suspended voting rights for countries that persistently miss debt and deficit targets.

"This is the only way the stability of the euro zone can be permanently assured," Ms. Merkel said in a speech to parliament ahead of the summit of EU leaders Thursday and Friday in Brussels. "This will only succeed with a change to European treaties."

Every member of the EU would need to approve a treaty change, and recent amendments have taken years and prompted conflict between members. Ms. Merkel said the difficulty of securing a treaty change—which she wants in place by 2013, when the emergency bailout fund for euro-zone countries established last spring expires—is no excuse to shrink away from tough reform. "I have no illusions—passing this will be hard enough," she said. "But that doesn't make it any less necessary."

Ms. Merkel also defended an agreement she struck last week with French President Nicolas Sarkozy, whereby he agreed to support her push for treaty changes if she endorsed a more modest initial round of sanctions than Berlin had initially wanted.

Jean-Claude Juncker, who oversees meetings of EU finance ministers, called that pact "unacceptable" in an interview with Germany's Die Welt ahead of publication in Thursday's newspaper. "German-French agreement is not all in Europe," Ms. Merkel said. "But it's also true that without a German-French agreement, much would come to nothing."

The Chancellor also said she plans to call for a global financial-transaction tax at a meeting of leaders from the Group of 20 industrialized and developing nations early next month in Seoul, South Korea. She acknowledged, though, that there is no global consensus for such a tax and said Europe should enact its own without global agreement.

She also spoke out against export quotas that the U.S. and other countries had suggested as a means for relieving global trade imbalances at a meeting of finance ministers in South Korea last week. Such quotas, which could hamper Germany's export-dependent economy, would dampen global growth dynamics rather than encourage them, Ms. Merkel said.

She urged governments to encourage responsible currency policies that reflect economic fundamentals, even as she dismissed talk of a "currency war" as hype. "A debate in such terms is false," she said.