In a leaked document yesterday, European Council President Herman Van Rompuy said that tougher rules to deal with the eurozone debt crisis can be put into place without treaty change, as being pushed by Germany and France.
The details of the report are to be discussed in an EU summit due to be held today and tomorrow, with Malta taking the line that something must be done, and if treaty change is needed, “so be it”.
But the dynamic duo of Europe, Merkozy, are pushing for a new EU treaty by March, saying that the new rules should be cast in stone.
In the interim report, Mr Van Rompuy proposes a plan aimed at agreeing on what has been termed a “new fiscal compact” without holding a referendum or ratification by the parliaments of each eurozone country. This would avoid a similar scenario to that which unfolded when the EU tried to push forward a Constitution.
According to media reports, the draft says the new rules can be implemented by amending a protocol - a procedure that needs national consensus but does not require substantial changes to the EU treaties. This, the EU President said, would speed up the necessary reforms, but Germany and France do seem adamant.
The proposals being made in the Van Rompuy report build on the premise of the Maastricht criteria, insomuch that each eurozone member’s deficit should be below 3% of Gross Domestic Product while sovereign debt should be below 60%.
Moreover, the plan proposes a “golden rule” which is more of a moral obligation to enshrine into national legislation, a guarantee of a balanced budget in the medium term.
Another proposal being put forward is to allow for the the eurozone bailout fund to be given a banking licence to borrow directly from the European Central Bank. But the biggest shocker is the proposal to endow the European Commission with powers to impose austerity measures on nations which require bailouts.
What will happen in reality is that just like the last five summit meetings before this one, France and Germany will hold bilateral talks and will try to reach a compromise with the EU President. At the same time, they will also try to appease and strike a deal with the ever more vociferous UK, led by David Cameron.
Although the UK does not use the euro as a currency, Mr Cameron is determined that the UK, still seen as the trade hub of Europe, does not become marginalised through deals designed to save the euro.
The truth is that Europe seems to have finally realised that dilly-dallying around and putting band aids on the Eurozone is simply not going to work. The markets are still jittery and countries are struggling to sell their bonds – even Germany. Europe needs to find a long term solution. We tend to agree with France and Germany on this one. If rules are hard and fast and enforced, it will not only stabilise market confidence, but should also ensure that a similar crisis does not ever unfold again. Just like everything else, the EU needs a ‘policeman’ and with the implementation of these rules, the Commission itself will act as regulator and enforcer. It is a shame for countries like Germany and Malta to have to give up ‘sovereignty’, but in a situation where we are lumped with the irresponsible actions of Greece, Portugal, Spain, Ireland and Italy, perhaps it is the lesser of two evils.