Saturday 10 December 2016

Eurozone gears up for battle as France and Germany argue with council's view

analysis

Luke Baker

Published 08/12/2011 | 05:00

European leaders are gearing up for a 'battle royale' over changes to the EU's treaty at a summit starting today as they seek to forge deeper integration in the eurozone and turn the tide of the debt crisis.

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Competing visions are on offer about how to modify the Lisbon treaty, with France and Germany taking one line and European Council president Herman Van Rompuy another. In between, several member states have concerns about both views.

The ability of the eurozone to plot a path to closer economic integration, and in the process persuade financial markets that the currency project can survive, depends on whether leaders can reach a meaningful consensus at the summit scheduled to end tomorrow.

German Chancellor Angela Merkel and French President Nicolas Sarkozy agree that several changes to the EU treaty, which took eight years to negotiate, are needed to enforce stricter budget rules in eurozone states and prevent any future debt crisis.

"The current crisis has mercilessly uncovered the deficiencies in the construction of economic and monetary union," they wrote in a joint letter to Mr Van Rompuy issued yesterday. Mr Van Rompuy will chair the two-day summit.

"We need more binding, and more ambitious rules and commitments for the euro area member states. We propose that those new rules and commitments should be enshrined in the European treaties."

Mr Van Rompuy does not disagree on the goal, but he differs on the best method of getting there. In a report compiled after a week of consultations with all 27 EU leaders and which will form the basis of debate at the summit, Mr Van Rompuy proposed a 'fast-track' procedure to modify the treaty via a little-known section called protocol 12.

The advantage, his report suggests, is that 'surgical' modifications to protocol 12 would not require approval by all parliaments in the EU and would only require consultation from the European Parliament -- not that body's full approval -- which could also take time and would be divisive.

"This procedure could therefore lead to rapid and significant changes," Mr Van Rompuy said in the report, delivered to EU capitals on Tuesday.

However, Berlin hit back at the proposal almost immediately, with a senior German official telling reporters yesterday that this was not the way to go and that, if necessary, Germany and France would push for a treaty among the 17 eurozone countries alone, not the whole EU.

The threat of a treaty for 17 may just be aimed at putting pressure on the rest of the EU to sign up to treaty change, but either way a senior EU official said it was a risk strategy that could end up backfiring.

"A solution that does not involve 27 states will be a serious problem. It will show the EU is divided and that is not good for the markets," said the official. "We're not going to save the euro if the result of the summit is a split Europe."

France and Germany both oppose the idea of jointly issued euro area bonds, but Mr Van Rompuy left open that possibility and also suggested that the eurozone's permanent bailout fund, the ESM, could be given a banking licence, a position that Berlin opposes, although Paris supports it. (Reuters)

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