Britain wins opt-out from EU ‘economic government’

Cameron.jpg

UK Prime Minister David Cameron secured an opt-out on closer economic integration, claiming a victory at his first EU summit in Brussels yesterday (17 June).

EU leaders agreed to greater surveillance and coordination of national budgets but a deal on sanctions for countries in a weak financial position will not be finalised until a high-level task force, led by permanent Council President Herman Van Rompuy, reports in October.

Cameron said he had secured "a clear agreement" that London's economic sovereignty would not be affected by any changes agreed at the next EU summit.

"This meeting has ensured that UK opt-outs are safeguarded," said the new prime minister. The bottom line for the UK is that "the euro zone needs to sort out its problems," he added.

Cameron also stressed that the UK would always present its budget to Westminster before Brussels, in response to proposals from the European Commission to have national budgets pre-examined at EU level.

Leaders await task force report

The Van Rompuy Task Force will look at whether withholding EU funds might be an option for punishing errant governments, while an earlier Franco-German proposal to suspend countries' voting rights has met with a cold response from other member states.

There have been ongoing concerns among diplomats about the practicalities of imposing sanctions, with some fearing that financial penalties would exacerbate economic problems (EURACTIV 17/06/10).

Speaking in Brussels, French President Nicolas Sarkozy suggested making sanctions tougher for eurozone members than countries such as the UK and Denmark, which have opted out of the single currency – something likely to appeal to the UK's new leader.

Sarkozy also stressed that economic policy decisions in Europe were "not federal" and that the practice remained "unanimity decision-making" among heads of state and government.

The French position remains at odds with the German view that the proposed "economic government" would be for all EU members and not just eurozone countries.

At the insistence of German Chancellor Angela Merkel, Sarkozy dropped his earlier suggestion that the EU's economic government should be dealt with only among the 16 members of the euro zone.

Budgets to be 'peer reviewed'

It was also agreed yesterday that from 2011 member states will present budgetary data to Brussels in the first half of the year so that the EU executive and European Council can assess the assumptions underlying the plan.

At the insistence of the UK, the final agreement at the summit adds that this will "take account of national budgetary procedures" – satisfying Cameron's desire to provide information to British houses of parliament before sharing budgetary details with Europe.

In addition to stepping up the level of peer review, EU leaders agreed to develop a scoreboard "to better assess competitiveness developments and imbalances" and allow for an early detection of unsustainable or dangerous trends.

Herman Van Rompuy, president of the European Council, said the Council had backed stricter supervision of economies which will strengthen the long-term financial position of member states.

"We also agreed to strengthen the Stability and Growth Pact – both in prevention and in correction. These proposals may, judged on themselves, seem small steps. Judged together, however, they are a great leap forward," he said.

He warned against creating a "dividing line" between the 27 member states and the 16 members of the euro zone. "Therefore the euro zone will only meet at summit level when necessary and under my chairmanship – like it happened already in March and May," Van Rompuy said.

He added that European economic governance needs to follow the role of the institutions as laid down in the Lisbon Treaty.

European Commission President José Manuel Barroso said there had been "very fruitful" work by the Task Force chaired by President Van Rompuy.

"In fact today we have already had an agreement on some of the most important orientations in terms of economic governance in Europe and I have announced that the Commission is ready to further fast-track its work with more detailed proposals on 30 June and other proposals by September. We believe it is important to conclude this work as soon as possible so that we can have a new system ready for the beginning of the next year," he said.

UK Prime Minister David Cameron said he was "pleased at the level of determination among EU member states to tackle their fiscal deficits".

On the thorny issue of the UK's relationship to the euro zone, Cameron claimed that it is not in the UK's interest to have a weak single currency.

Noting that 40% of British trade is with eurozone countries, he said that the UK supports a "strong and succesful euro," though he added immediately that his country's "red lines" would be protected.

French President Nicolas Sarkozy said the idea of an economic government for Europe "has to be fleshed out" and that a final decision would be made at the October summit when EU President Herman Van Rompuy will present the result of his task force.

"We are still at the beginning," Sarkzoy said, explaining that the economic governance concept included better coordination of growth and competitiveness strategies, such as measures to boost higher education. 

Asked whether the European Parliament and European Commission were not being sidelined in the EU's plans for greater economic governance, Sarkozy was adamant. "I am sorry, it is not Mr Barroso who is in charge of the competitiveness of the different member states of the European Community. It is not the Commission that can take decisions instead of member states on economic policies that each one of us has to take," he said.

Belgian MEP Guy Verhofstadt, leader of the liberal ALDE group in the European Parliament characterised the European Council's conclusions as "a missed opportunity to produce an ambitious and far-reaching reform of Europe's economic governance and competitiveness strategy," accusing leaders of contenting themselves with half-measures.

"Member states have failed to learn the lessons of the recent past and repeated the mistakes of the Lisbon Strategy that was high on expectation and low on enforcement."

"The Council has not understood the message of the Parliament, united behind a resolution on economic governance and one on Europe 2020. The European Parliament stressed the necessity for more Community method instead of intergovernmentalism and for more enforceable measures instead of the open coordination and peer review, which has been proven in the Lisbon Strategy not to work."

Poul Nyrup Rasmussen, leader of the Party of European Socialists (PES), said the conservative majority on the European Council had taken a "wrong-headed austerity-only" approach to tackling the crisis.

He accused French President Nicolas Sarkozy and German Chancellor Angela Merkel of having a "naked disregard for the plight of ordinary people".

"Yet again Chancellor Merkel and President Sarkozy have got it wrong. Today's Council should have been about concrete plans for economic co-ordination that rediscovers European solidarity. Instead we have the macho politics of punishment. What Europe needs is to balance budget consolidation with policies that encourage growth and jobs," he said.

Rasmussen called for a coordinated economic policy that recognises that the EU is a single trading area and economic union, "not a disparate collection of competing member states".

Belgian MEP Wilfried Martens, president of the European People's Party, said the economic reforms agreed by EU leaders were a "quantum leap forward".

"I welcome the conclusions of the European Council on economic reforms since they represent a quantum leap forward in the stabilisation of European monetary union, and a substantial improvement in the fiscal coordination of our national budgets at European level. I am pleased that the European Council is following the path set-out by the EPP leaders at yesterday's party summit," Martens underlined.

As the Greek crisis raged, the last European Council conclusions in March underlined that "overall economic policy coordination will be strengthened".

Leaders also stressed that "coordination at the level of the euro zone will be strengthened in order to address the challenges the euro area is facing". "The Commission will present by June 2010 proposals in that respect, making use of the new instruments for economic coordination offered by Article 136 of the Treaty," reads the final text.

Article 136 of the Lisbon Treaty states that the EU Council of Ministers – representing the 27 member states – can adopt measures concerning eurozone countries in order "to strengthen the coordination and surveillance of their budgetary discipline" and "to set out economic policy guidelines for them".

The permanent president of the EU Council, Herman Van Rompuy, set up an ad-hoc task force to reach this target and strengthen the EU Stability Pact.

  • October 2010: Van Rompuy Task Force submits final report to EU leaders.

Subscribe to our newsletters

Subscribe