Barroso aligns with Merkel in push for treaty change

Merkel Barroso_0.jpg

European Commission President José Manuel Barroso has joined German Chancellor Angela Merkel in believing that the eurozone crisis could not be overcome without a treaty change to transfer national competences – such as budgets – to European institutions.

Speaking to senior EU diplomats yesterday (4 September), Barroso argued that there was a need for “further political and institutional integration” and a consolidation of “a truly political union” through a change of the EU treaty.

He admitted that “treaty change takes time”, but stressed that in order to restore confidence, the Union needed a two-track approach: action on the short term, but also a "horizon" for strengthening the bloc’s institutions.

“Short term is not enough because the so called markets know very well that in the longer term the stability of the currency depends also on the political construct and on the solidity of the institutions that are behind it,” he said. “That is why as the same time we are giving short term answers to the instability we need to have a horizon for the medium and long term. So these issues – short, medium and longer term – should not be seen as incompatible and we have to act on the several areas.”

Barroso is expected to develop his views on treaty change in his State of the Union speech, to be delivered on 12 September in the European Parliament in Strasbourg.

Other highlights of his speech are expected to include closer fiscal union and a full banking union, extending the powers of the European Central Bank (ECB), while creating a separate agency to supervise some banks (presumably derivatives and over-the-counter trading).

Divisions over ECB

On the ECB, Barroso acknowledged there were divisions on the role of this institution.

“Rightly, the ECB does not want to give the message that the member states can go on with, let's put it frankly, irresponsible fiscal policies, unsustainable levels of debt and lack of supervision as we have seen recently when we have discovered that the reality of the financial sectors was not exactly the one that they were pretending to be,” he said.

On both points, Barroso appeared to align with Merkel, who wants a new treaty for closer European political union to help overcome the bloc's sovereign debt crisis. The German chancellor hopes a summit of EU leaders in December can agree a concrete roadmap to launch the process.

Together with European Council President Herman Van Rompuy, Eurogroup President Jean-Claude Juncker and ECB President Mario Draghi, Barroso is expected to produce a concrete proposal at the 18-19 October summit of EU leaders. A final report and roadmap for further economic and monetary union is expected to be adopted by EU leaders at the 13 December summit.

The four leaders already presented a reportTowards a Genuine Economic and Monetary Union, at the June EU summit, and were tasked to continue their work. This report, however, focused on “the sorter term” measures, such as setting "upper limits" on member states' annual budgets, prior approval for issuing government debt beyond the level agreed in common, closer coordination on labour mobility and tax coordination.

But France appears hesitant to take the big federalist leap with a treaty change that would enshrine German fiscal austerity in stone. Instead, Paris wants to introduce eurobonds rapidly as a way to mutualise debt in the eurozone and reduce the borrowing costs of the most fragile economies like Spain and Italy.

The press in Ireland already notes that the new treaty change would require a referendum in the country, which had adopted the Lisbon Treaty at a second referendum in October 2009, after having rejected it during a first popular vote in June 2008.

Some EU leaders, including German Chancellor Angela Merkel, have argued that a treaty change could help enforce fiscal rules to avoid repeats of the debt crises plaguing members of the eurozone.

Making changes to the EU Treaty has proven cumbersome. The most recent example was Lisbon Treaty, which was eventually ratified by all 27 member states after heated debate and two referendums in Ireland.

  • 12 Sept.: Barroso's State of the Union speech
  • 18-19 Oct. 2012: Interim report on finalising the economic and monetary union to be presented at EU Summit in Brussels
  • 13-14 Dec. 2012: Final report and roadmap for further economic and monetary union to be adopted by EU leaders at Brussels summit


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