German finance minister details debt fund plan before EU summit
By Madeline Chambers
BERLIN (Reuters) - Germany's Finance Minister spelled out details on Saturday of his proposal for national redemption funds for excess sovereign debt which he intends to present at a crunch summit of EU leaders next week aimed at restoring confidence in the euro.
Wolfgang Schaeuble outlined his plans under which states would effectively siphon off a chunk of their debt to a special national fund and pay it off over about 20 years while committing to reforms to keep debt levels on target.
Schaeuble believes his proposal, which has won qualified support from Chancellor Angela Merkel, would boost confidence as states would be sending a signal they were serious about limiting debt levels to 60 percent of gross domestic product.
Investors are desperate for a sign from EU leaders next week that they can find a solution to the more than two year-old debt crisis which is having a knock-on effect on the global economy. Merkel is pushing for binding EU rules on budget discipline.
"We need a redemption fund in every single country of the euro zone," Schaeuble told the Passauer Neue Presse.
"Each of these countries should put into a special fund that part of its debt which exceed 60 percent of its GDP, and should pay that off with tax revenues. Over a period of 20 years, the debt should be reduced to 60 percent," he said.
In Germany's case, the fund - covering federal, state and municipal debts - would amount to about 500 billion euros ($672 billion) as German debt is around 80 percent of its gross domestic product, said Schaeuble.
An earlier proposal this month from a panel of independent economic advisers to the German government which was rejected as unrealistic by Merkel, envisaged a European Redemption Pact. Continued...