German opposition party backs fiscal union

The Social Democratic Party said it backs changes to the German constitution to allow for jointly guaranteed eurozone bonds and a European fiscal union. The opposition party's announcement, made Monday by party Chairman Sigmar Gabriel, came as the German government confirmed support for a European Central Bank proposal to get involved in bond markets as long as financially troubled countries first apply to the eurozone's rescue funds, the Financial Times reported. Gabriel attacked the German government's management on the eurozone crisis, warning that the bloc would disintegrate if it isn't supported by a common fiscal policy. "You will not be able to hold the euro together without a common financial and tax policy," he said. However, such a policy shift would require a significant transfer of budget sovereignty from national parliaments to the European level, and would necessitate a change in the German constitution, the Times said. A shift, however, also would allow for the introduction of jointly guaranteed eurozone bonds, which has strong support from France, Spain and Italy, but has been resisted by German Chancellor Angela Merkel. Gabriel said the party was backing a program for European reform based on a report it commissioned. The report's contributors argue that Merkel's measures failed to arrest the eurozone crisis by wrongly identifying the main cause as a lack fiscal discipline by individual members, and insisting on national austerity measures. "Only through common liability for eurozone government bonds can the current instability in the financial markets ... be eliminated, or at least limited," the report's authors said. Gabriel's stance was condemned by government supporters who said it would open a path to a "transfer union" in the eurozone, in which Germany would guarantee the debts of its partners, the Times said. Merkel spokesman Georg Streiter said any need for German constitutional change "lies a very long way in the future."