Van Rompuy tables blueprint for eurozone ‘fiscal pact’

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There are quicker ways to save the euro than modifying the EU treaties, says European Council President Herman Van Rompuy in a paper to be discussed at a crunch European summit on Thursday. EURACTIV provides the text of the blueprint. 

The paper, obtained by EURACTIV, will form the basis for discussion when EU leaders meet in Brussels on 8-9 December and will seek to draw a line under the euro zone's debilitating debt crisis.

It will be discussed alongside joint Franco-German proposals to reform the EU treaties and strengthen fiscal discipline, which Nicolas Sarkozy and Angela Merkel presented earlier this week.

The Van Rompuy paper follows up on those calls and proposes several options, some of which can be implemented without changing the treaties.

Any solution to the debt crisis will start with a "determined" implementation of already agreed measures, Van Rompuy stressed, such as the reinforcement of the bailout fund, the European Financial Stability Facility.

But additional measures are necessary to introduce "qualitative changes towards a real 'fiscal union'" and convince markets that future failures will not happen, Van Rompuy states in the paper. "Transforming the euro area into a true economic union requires further progress in terms of integration, in order to achieve a 'new fiscal pact'."

The paper lays down two options for moving towards a fiscal union:

  • Introducing a "golden rule" in the member states' constitutions to keep countries within the limits of the Stability and Growth Pact, which caps public debt and deficits at 60% and 3% of GDP respectively. "The Court of Justice would be competent to supervise the implementation of this rule into national law."
  • A straight modification of the treaty provisions on fiscal discipline in the eurozone (article 136). Such a revision could, for example, allow the European Commission to examine and possibly reject draft budgets before they are voted in the national parliaments, a measure that the current treaties do not allow.

The second option does not seem to attract Van Rompuy's favour as it "would take longer and would require ratification by all member states," including those outside the eurozone.

The former Belgian prime minister therefore seems to lean for the first option, which would only require a change in Protocol 12, an addendum to the EU treaty, which can be modified more easily.

"Such a decision does not require ratification at national level," Van Rompuy writes. "This procedure could therefore lead to rapid and significant changes."

Falling short of Franco-German demands

Although pragmatic, Van Rompuy's solutions seem to fall short of what Angela Merkel and Nicolas Sarkozy have been calling for.

Speaking at a joint press conference on Monday, the French and German leaders specifically asked for a new treaty to be agreed by March 2012 so that it can be ratified at national level by the end of the year.

Merkel insisted that the new treaty pushed by France and Germany would introduce provisions on fiscal discipline that cannot be implemented in the current treaties.

"Let me take one example: in the Lisbon Treaty as it stands, it is anticipated that a procedure for excessive deficit can only be launched if a qualified majority of [member states] consent to it. We want just the opposite and this requires a modification of the Treaty."

The Franco-German couple are adamant that they will pursue those changes forcefully and will not hesitate to sideline countries that do not want to follow.

"Our preference goes for a treaty of 27 so that no one feels excluded from the Franco-German process," Sarkozy said. "But we are quite prepared to go through a treaty at 17, open to all states that would like to join," he added, suggesting the 17 eurozone countries could go ahead on their own.

Will all eurozone countries sign up?

However, not all eurozone countries might be willing to ratify such an accord.

Slovakia, which adopted the single currency in 2009, was the last to ratify an expansion of the EFSF in September, bowing down only after considerable pressure was applied by Germany and other eurozone members.

In Finland, ratification of the fund's expanded remit also stirred much public debate, with Helsinki asking for "collateral guarantees" in return for supporting the second Greek bailout plan.

Andrew Duff, MEP, spokesman on constitutional affairs for the Alliance of Liberal and Democrats for Europe (ALDE) expressed his disapproval of the 'quick-fix' solution Van Rompuy suggested and insisted on the revision of the main body of the Treaty rather than tinkering with protocols.

"Mr Van Rompuy's first proposed option which is to avoid serious treaty change and to rely on the fast-track procedure to amend Protocol No 12 is fraught with difficulty. For one thing, the Protocol is about the implementation of the excessive deficit procedure (Article 126(14) first sentence TFEU), and not about the excessive deficit procedure itself (which is laid down in earlier provisions of Article 126). The existing Protocol leaves the detail of the implementing procedures up to national discretion: 'The Member States shall ensure that national procedures in the budgetary area enable them to meet their obligations in this area deriving from these Treaties' (Article 3 of the Protocol)."

"I very much doubt that an extension of the functions of the Court of Justice can be made by such a light constitutional procedure without risking the possibility of a legal challenge."

"All in all, I am dissuaded of the viability of the Protocol No 12 route and much prefer Mr van Rompuy's second proposed option of a full-scale treaty change leading to credible economic government of a fiscal union fully legitimised and enriched in its preparation by a democratic Convention."

 

German Chancellor Angela Merkel, backed by France's Nicolas Sarkozy, have insisted on modfiyng the EU treaties to avoid repeats of the debt crises plaguing members of the eurozone.

Article 136 of the Treaty on the Functioning of the European Union (TFEU) says eurozone countries may "adopt measures specific to those member states whose currency is the euro", for example:

  • "to strengthen the coordination and surveillance of their budgetary discipline";
  • "to set out economic policy guidelines for them, while ensuring that they are compatible with those adopted for the whole of the Union and are kept under surveillance."

However, more recently Germany and France have been exploring radical methods of securing deeper and more rapid fiscal integration among eurozone countries, aware that getting broad support for the necessary treaty changes may not be possible.

  • 8 Dec.: EU summit starts at 18.45hrs Brussels time and continues over the next day.
  • 1-2 March 2012: EU summit to agree on treaty change text, with ratification to follow in each member state agreeing to the new rules.

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