Plan to link wages across EU states

PROPOSALS that would see wage increases linked to productivity and to incomes of other trading partners are expected to land on the desks of the EU’s 27 prime ministers over the weekend.

The list of up to eight proposals to improve countries’ competitiveness come on foot of German demands for more rigorous controls on eurozone economies in particular.

They have been drawn up by European Commission president Jose Manuel Barroso and EU president Herman Von Rompuy after consultation with member states over the past week.

The proposals — which will deal with increasing the retirement age, pensions and proposing minimum rates for corporation tax — will be discussed by the leaders of the eurozone at their special summit on March 11.

They will be put forward, according to EU sources, as a set of voluntary targets that countries can choose to adopt or not.

This is an effort to overcome the objections of countries like the Netherlands that object to what they see as giving powers to the EU that are solely the remit of member states.

There will be no sanctions imposed on countries that do not meet the targets but the proposal will suggest that naming and shaming by their peers should be a sufficient incentive to improve performance.

Germany and France demanded countries make greater efforts to improve growth and cut back on debt in exchange for making the EU’s rescue facility, the European Financial Stability Fund, more flexible.

Many countries would like to see money being extended to allow countries buy back their secondary and primary debt at cheaper rates, although others argue the ECB can do this if needed.

The issue of reducing interest rates or increasing the loan terms for Ireland and Greece is also on the table with some support for extending the repayment date.

But any concessions could be based on Germany getting a sufficiently tough competitiveness package agreed and Ireland fears it could be forced to choose between a drop in interest rates on its loans or cutting its corporation tax rate.

Sources believe Portuguese Prime Minister Jose Socrates will hammer out a deal with German Chancellor Angela Merkel on accepting a bailout.