French Finance Minister Pierre Moscovici declared the era of austerity over after his German counterpart offered flexibility on deficit cutting amid renewed bickering between Europe’s two biggest economies.
Germany’s Greens party backed a campaign platform of tax increases that members of Chancellor Angela Merkel’s Christian Democratic bloc said rules out a coalition after national elections in September.
Chancellor Angela Merkel’s allies in the German parliament condemned European Commission President Jose Barroso after he said austerity had reached its limits and should be eased to make way for growth.
A German Finance Ministry official said that budget-cutting rules must allow for flexibility, opening a chink in Chancellor Angela Merkel’s austerity-first policy as the only course to rescue Europe from its debt crisis.
Chancellor Angela Merkel can count on gaining the support of a majority of her coalition lawmakers next week when the German parliament votes on rescue loans for Cyprus, said a senior lawmaker from her party.
Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid.
Germany’s plan to speed up payments into Europe’s future permanent bailout fund with cash is aimed at securing the highest ratings for its bonds, said a senior lawmaker from Chancellor Angela Merkel’s party.
German Chancellor Angela Merkel’s Social Democratic opponents are leaning toward voting with the government in favor of aid for Cyprus after bank shareholders and wealthy depositors were made to contribute, a senior party official said.