EU policymakers struggle to square circle

Heading into their crucial two-day summit, European policymakers struggled to meet two mutually exclusive demands: Berlin’s insistence on full-scale change of European Union treaties to enshrine fiscal discipline and the need to assuage financial markets with quick, decisive action.

Germany’s determination to push Europe into potentially tortuous negotiations and then ratifications of treaty changes has raised fears in Brussels and in several national capitals that the summit’s conclusions could lead to more uncertainty rather than less.

Those concerns have become so acute that, according to a senior EU official, José Manuel Barroso, the European Commission president, called every EU leader ahead of the summit to warn them that if they agreed to change the treaties, they had better be prepared to deal with the consequences.

“It would be devastating if we have a decision to make a [new] treaty and afterwards we don’t get a treaty,” said the official. “You remember what has happened in recent summits. There were great decisions, they were hailed as historic. The day after . . . the decisions weren’t implemented. They have to be sure they will deliver. That is their responsibility.”

Treaty change would be likely to trigger messy national debates. Although British prime minister David Cameron’s backbench revolt within his own Conservative party has garnered the most attention in Brussels, the political upheaval has been wide and deep. In Finland, parliamentarians on Thursday prevented their government from agreeing to proposed changes to a separate treaty setting up the eurozone’s rescue fund. In the Netherlands, pro-EU opposition parties – which have normally backed the minority government on European issues – threatened to call early elections if treaty change were agreed.

Slovakia is facing national elections where contentious EU issues have become pre-eminent. In Ireland, government leaders have been anxiously trying to find ways to appease Germany while pre-empting a national referendum.

Even in Berlin, Angela Merkel, the chancellor, faces problems within her own coalition, where her Free Democratic partners will hold a referendum about whether they will block an element vital to the treaty change: the creation of the eurozone’s €500bn rescue fund.

“A full treaty change will most certainly give us years of uncertainty and risky referendums,” said one European diplomat. “Even if we would succeed, we may end up with a perfect treaty but no Europe to govern.”

According to another EU official, the head of the eurozone’s €440bn rescue fund, Klaus Regling, has become so concerned about the prospect that the summit will agree only on drawn-out treaty reform that he told a meeting of negotiators that they needed to change their focus or risk the markets’ wrath next week.

The official said that at the pre-summit meeting, many core eurozone countries – including Belgium and Italy – urged either reforms without any treaty changes or limited amendments. In addition, Pedro Passos Coelho, Portugal’s prime minister, said he was against any “major change” to EU treaties, arguing Europe needed a “short-term solution” that restored financial stability. Important changes to the treaty would create more uncertainty than already existed, he added.

“How can you imagine a smooth ratification under the current psychological conditions?” asked one diplomat from a new EU member state.

To thread the needle, Mr Barroso and Herman Van Rompuy, the European Council president, have urged that alongside long-term treaty changes, EU leaders take advantage of an arcane protocol in existing treaties to implement many of the changes in two to three months without the need to consult national parliaments and referendums.

At the summit, aides to the two EU leaders distributed a chart showing that through the normal EU legislative process, plus using the protocol, most of Germany’s goals – tougher surveillance of eurozone budgets, tough sanctions for spendthrifts – could be achieved without years of debate.

“We can build an almost [complete] fiscal compact now,” said a senior European Commission official. “So let’s do it now, and then let’s start the bigger treaty change exercise in parallel and embed those results later. Because we are not sure the markets will believe the guarantees by leaders that they will get all this stuff ratified without complications.”

Additional reporting by Joshua Chaffin and Quentin Peel in Brussels and Peter Wise in Lisbon