German Finance Minister Pushes for EU Treaty Changes

German Finance Minister Wolfgang Schaeuble said the European Union needs to quickly enact treaty changes in order to better deal with the eurozone financial crisis. The German Finance Minister said that a treaty change was needed so that the European Union could have veto power over the budgets of individual European Union countries. Such veto power in the hands of the European Commission would mean that countries like Greece and Italy would be forced to stick with reforms that they promised to make in order to reduce their fiscal deficits. While most troubled eurozone countries like Greece, Italy and Portugal have already enacted austerity measures that raise taxes while cutting government spending, the measures have been widely unpopular and caused a number of general strikes and a few violent protests. There's widespread concern that politicians might eventually bow to the public pressure and roll back the unpopular austerity measures. European heads of state, led by German Chancellor Angela Merkel and French President Nicolas Sarkozy, have made a number of moves in an attempt to prevent the financial problems plaguing a few eurozone members from spreading. However, Schaeuble said that the fact that the European Financial Stability Facility (EFSF) was paying higher interest rates than the countries that guarantee it was evidence that investors were losing confidence in the eurozone. Schaeuble repeated Germany's opposition to so-called "eurobonds" or having the European Central Bank (ECB) take a greater role in fixing the European Union's financial crisis. The German Finance Minister once again voiced the German opinion that eurozone members that are facing financial turmoil need to get their budgets under control before eurobonds can be considered.

Traders who believe that Schaeuble's call for treaty reform is a step in the right direction might want to consider the following trade:

Traders who believe that allowing the European Union to veto member states' budgets could create a backlash may consider an alternate position: