January 15, 2012

The emperor’s new treaty

EUobserver Blogs

Has there ever been a time in EU history where a treaty is being negotiated that a) virtually nobody wants b) does not solve the problem at hand c) whose contents are already, or could in future, be part of general EU law and d) deteriorates in quality the more it is negotiated?

Some of these points applied to other treaty-making rounds. But not all of them at once.

The whole point of this treaty exercise – which is using an inconvenient intergovernmental track because of the UK – is political.

Germany needs some sort of pact that makes it look like it will be almost impossible for member states to be big and careless spenders in the future. A fiscal straitjacket. The document could then be served up when Germans are feeling unenthusiastic about mutualising eurozone debt,  or greater involvement of the European Central Bank, for example.

The problem is most of what is in the slim draft (now 16 articles) could simply be done using the normal EU law-making procedures.

The six-pack of economic governance legislation – in place since mid-December – already represents a ground-breaking shift in Brussels’ relations with member states when it comes to budget matters.

New legislation, announced in November, consolidates these budgetary powers still further, giving the commission even greater discretionary powers over national spending.

So what is left? Not much but still two things to which Berlin remains very attached – a constitutional debt brake and automatic sanctions for excessive deficit countries. These cannot be done via the current treaties.

But the “fiscal compact” is having difficulty delivering on just these two points. Language requiring a debt brake to be written into national constitutions has been softened when compared to earlier versions, to head off any referendums.

Meanwhile the very (German-esque) essence of the treaty – namely language getting fiscal miscreants to cut their deficits – has also been softened.

Under the latest draft, member states may ignore the tough budget deficit limits in case of an “unusual event” or a “severe economic downturn.” Echoes of the not very forceful Stability and Growth Pact. Language allowing the European Commission to take member states to court for not implementing the debt brake has also gone. Instead member states should take one another to court. An unlikely proposition.

Mario Draghi, head of the European Central Bank, and inventor of term fiscal compact had this to say of it on Thursday:

“The wording of such rules needs to be unambiguous and effective.” Hardly a ringing endorsement.

MEPs say the latest draft does not reflect the actual discussions. Technically what the parliament thinks does not matter. But if it were to ultimately reject the outcome, it would make it harder to get the document through national parliaments.

The European Commission will not accept any conflict with EU treaties or establishment of parallel structures. France, quite happy to have parallel structures, does not want the EU institutions having too many powers

Meanwhile, no one wants to set off a national referendum if at all possible.

It is hard to imagine what will emerge by end of January when EU leaders are supposed to give the nod to the first draft.


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