New treaty gets EU legal clearance, UK sidelined

European Court of Justice President Vassilios Skouris. [ECJ]

A draft intergovernmental treaty to tighten fiscal discipline in the eurozone has received the green light from the European Council's legal service, paving the way for a final text to be agreed by the end of January, EU officials said on Friday (16 December).

The announcement comes as a blow for Britain, which had expressed doubts that the EU institutions could be used to police the new intergovernmental deal, agreed outside the EU legal framework.

The European Council's legal service published a draft of the treaty intended to be submitted for signature by heads of states at a summit on 1-2 March.

The officials said the new treaty text could be finalised by the end of January.

The draft treaty text broadly puts into legal terms the conclusions of the 26 EU leaders following the 9 December summit, including:

  • A general commitment by contracting parties to maintain deficits not in excess of 0.5% of GDP, not taking inflation into account.
  • An undertaking that sanctions administered by the Commission will apply for eurozone countries with budget deficits in excess of 3% of GDP.

EU officials, speaking with the authority of the European Council's legal service, said that the Court of Justice would have jurisdiction over the working of the treaty’s balanced budget rule under Article 273 of the EU Treaty.

This article gives the Court jurisdiction in any dispute between member states which relates to the subject matter of the treaties – if the dispute is submitted to it under a special agreement between the parties.

Legally sound

The treaty will be binding as soon as the ninth of the 17 eurozone countries ratifies it. It will have a binding effect on those non-eurozone signatories only in relation to the simple balanced budget (0.5%) commitment.

The sanctions and full effect of the treaty will affect non-eurozone signatories following their entry into the euro area.

An EU diplomat said: “The UK would consider that an interpretation of Article 273, and would want to reserve judgement on that interpretation.”

But another EU official told EURACTIV the draft treaty was legally sound. “This is coming from the top of the Council’s legal service. It does not seem to me that the interpretation can be in very much doubt.”

The draft treaty text will now be examined by a forum of about 100 delegates made up of representatives of EU member states and institutions on Tuesday (20 December).

An agreement to tighten fiscal discipline in the wider EU-27 proved impossible at the 8-9 December EU summit, after UK Prime Minister David Cameron made "unacceptable demands" to exempt London's financial district from financial market regulations.

Faced with a UK veto, EU leaders agreed that a new intergovernmental treaty should tighten fiscal discipline in the eurozone and address the bloc's debt problems.

The treaty will be drafted by March 2012 and opened to ratification by nations outside the 17-member eurozone.

  • 20 Dec. 2011: New forum for the intergovernmental agreement will meet.
  • 1 Jan. 2012: Denmark takes over the rotating EU presidency, succeeding Poland.
  • End of Jan. 2012: Van Rompuy will seek to have a draft of the intergovernmental accord agreed.
  • Late Jan./early Feb. 2012: Summit of the European Council.
  • 1-2 March 2012: Next regular EU summit. '17+6' group plus others expected to sign to new intergovernmental treaty putting in place the so-called "fiscal compact".
  • July 2012: Entry into force of the eurozone's permanent bailout fund, the European Stability Mechanism (ESM).
  • End 2012: Target date for completing ratification process of new treaty.

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