Merkel: Needed EU treaty changes will take years

BERLIN - German Chancellor Angela Merkel flatly rejected any quick-fix ideas to try to resolve the European financial crisis, telling lawmakers Friday that treaty changes and a stricter fiscal union were the only path forward — a process could take years.

Merkel and French President Nicolas Sarkozy are pushing for a reorganization of existing European Union regulations, in order to ensure the eurozone's long-term stability and win back the trust of markets that have grown jittery over what they view as European dithering.

In laying out to the lower house of Parliament plans she will take to a Dec. 9 EU summit in Brussels, Merkel insisted the 17 nations that use the euro currency need to strengthen European Union institutions and eurozone financial regulations. She called for closer supervision of national budgets, coupled with legal regulations that would allow for stronger enforcement of spending rules.

"The German government has made it clear that the European crisis will not be solved in one fell swoop..." she said. "It's a process, and this process will take years."

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Merkel said that because the crisis is above all one of trust, in order to move forward, "we need to do away with the underlying deficiencies in the fiscal and currency union."

"In order to win back trust, we need to do more, where we today have agreements, we need in the future to have legally binding regulations," Merkel said.

However, CBS MoneyWatch's Jill Schlesinger says the final solution may be difficult for Merkel to stomach.

While Schlesinger agrees with Merkel's appraisal that no short term measures can work, she adds that the financial crisis gripping Europe, "requires a coordinated effort among the 17 eurozone countries, one which admits that the survival of the EU requires the stronger economies to bail out the weaker ones - sorry Germany!"

"It will also require debts to be restructured and, as a result, big banks will take it on the chin," says Schlesinger. "Unfortunately, the suffering will also extend to taxpayers, most of whom had little to do with creating the crisis."

The eurozone's current budget rules have been violated about 60 times over the past decade by a number of nations — including Germany — but no country has been seriously punished.

To ensure that nations are keeping their budgets in check with the limits of the stability pact — deficits not more than 3 percent of gross domestic product and overall government debt of not more than 60 percent of GDP — Germany is pushing for the right to take countries in violation before the European Court of Justice.

"We have to win back that trust that was damaged 60 times," Merkel said.

On Thursday, Sarkozy called for a "refounding and rethinking the organization of Europe." He said that without some new "convergence" among European countries, the continent's crushing debt could destroy the euro. Merkel and Sarkozy are to meet Monday to finalize their joint strategy ahead of next week's EU summit.

Stock markets across Europe welcomed the calls for more strict regulations through EU treaty changes, rising overnight on Sarkozy's comments. The bond yield for Italy also continued to drop, an indication of improving investor confidence in that country's financial future.

Merkel reiterated her objection to so-called eurobonds, held jointly by all EU nations, telling Parliament that jointly backed government debt across the eurozone is no solution.

"The current discussion (about joint bonds) does not contribute to solving the crisis," Merkel said.

She also pushed back against charges that Germany, along with France, is trying to dominate the EU, singling out those nations whose governments have been forced to push through tough austerity measures and praising their efforts.

"I don't think we can imagine how much these people contribute so that the euro will be a lasting and stable currency," Merkel said. "I would like to express my absolute respect before these efforts, for that is a contribution to Europe's future."

She also rejected an idea floated this week, of taking advantage of a clause in the EU's constitution to allow the eurozone nations to enact their own treaties for governing the currency, underlining that any treaty changes must include 27 member states.

"We are going to Brussels with the goal of pushing through treaty changes, in order to avoid a spirit of division between the eurozone and non-eurozone members," Merkel said.