ountries unable to pay their debts to European banks. The plan being discussed by a small cabal of political leaders and finance experts in Berlin would effectively strip governments of the ability to determine broad areas of economic and budget policy.
According to a recent report in Der Spiegel, a group of experts numbering fewer than a dozen are drawing up a document at the request of German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble. The deliberations on the new plan are being kept as low key as possible in order not to frighten money markets.
In May, Germany agreed with other European governments and the IMF to set up an unprecedented rescue fund of €750 billion (US$945 billion) to be used to refinance the debts of those eurozone countries facing repayment difficulties. The German chancellor is now concerned that the new plan being worked out in Berlin could be regarded as a vote of no confidence in the European bailout package. The euro fell on Monday when news of the plan was leaked.
Essentially, the Berlin plan foresees the restructuring of debt for ailing European countries. The prime candidates are currently the economies of Greece, Portugal and Spain. However, a number of other countries are also struggling to repay their outstanding loans to foreign banks and could be next in line. In exchange for the restructuring of their debts, the countries affected would be expected to yield up broad powers over their economies.
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