Fast-track ‘fiscal compact’ drawn up
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The eurozone could implement tougher budget rules using a fast-track procedure that would avoid the political pitfalls and delays of a full-blown treaty change, its member governments have been told.
Herman Van Rompuy, the president of the European Council, has drawn up plans that would allow the 17 eurozone governments to agree to a “fiscal compact” without holding national referendums or ratifying in national parliaments.
Under his plans countries that use the single currency would have to enshrine debt and deficit limits in their national constitutions – rules that would be subject to review by the European Court of Justice, the European Union’s highest court.
Crucially, Mr Van Rompuy has concluded that such reforms can be enacted by amending protocol 12 of the EU treaties – a narrow legal procedure that does not require holding an inter-governmental convention or national ratification.
Both conditions would be required in order to conclude a more wide-ranging reform of the treaties. The prospect of such an unruly exercise has stirred dread among European diplomats, who are well aware of the political risks and acrimony that would accompany it.
The last big change to the treaties, to approve the Lisbon reforms, took years to push through, and was almost overturned by an Irish referendum that tore at the fabric of the 27-member bloc.
The question is whether the more modest changes that can be delivered through protocol 12 will be sufficient to appease Germany, the EU’s biggest member state, and the European Central Bank.
Both have demanded a rigid system to sanction profligate governments in order to prevent a repeat of the debt build-up that contributed to the current crisis. Without such a commitment, EU officials fear that the ECB may be less willing to cast aside its reluctance and intervene forcefully in financial markets to bring the crisis under control.
One shortcoming of using protocol 12 is that the European Commission, the EU’s executive arm, could not be handed the authority to discipline habitual budget offenders free of interference from national governments – something Berlin has sought in the past.
Mindful of this, Mr Van Rompuy’s report also sets out additional measures that could be achieved through a wider treaty change. These would give the Commission sweeping powers to scrutinise budgets even before they were presented to national parliaments, and approve economic reforms for troubled governments.
Such reforms could be pursued on a separate legal track to complement those installed more quickly under protocol 12.
Mr Van Rompuy’s report was commissioned by European leaders at a summit meeting in October, and will be the main object of debate at a potentially pivotal follow-up that begins on Thursday evening in Brussels.
It overlaps in most respects with a plan to rewrite the bloc’s fiscal rule book that Paris and Berlin jointly presented on Monday. It notes the possibility of establishing common eurobonds, but emphasises that these should be contemplated only well down the road, after the new fiscal regime had been established.
One crucial difference is that Mr Van Rompuy does not lay out a treaty change that could be undertaken by the 17 eurozone members without the involvement of the 10 EU countries that do not use the single currency.
France and Germany endorsed such a possibility on Monday as a second choice option. It would give them flexibility in the event that the UK’s conservative prime minister, David Cameron, demanded too steep a political price in return for agreeing to steer a treaty change through Westminster.
According to Mr Van Rompuy’s review, the UK would have to approve any changes through protocol 12, but would not have to submit them to its parliament. “This decision does not require ratification at the national level. This procedure could therefore lead to rapid and significant changes,” the report states.
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