‘Economic government’ proposal gets frosty reception

FRANCO-GERMAN proposals to boost fiscal convergence in the eurozone have been given a cool response from other member states and failed to convince investors that the bloc’s debt crisis was closer to being solved.

Traditional German ally, Austria, criticised plans announced by Chancellor Angela Merkel and French President Nicolas Sarkozy to move towards an “economic government” in which euro states would agree to give up sovereignty over economic policy.

A separate proposal, to write German-style “debt brake” rules into national constitutions across the 17-nation currency bloc by mid-2012, faces big hurdles, given that Mr Sarkozy himself is struggling to secure a parliamentary majority for such a plan at home.