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    EU progress is constantly based on compromises  

    Eugene Eteris, European Studies Faculty, RSU
    The summit, which took place at the end of last week, has been the one needed a resolute support of all member states. It was about both the new budget and the ways out of the present crisis. The views varied, and so were the approaches to crisis management. The summits outcome balanced on compromises among there main policy players  France, Germany and the UK.

    When the EU leaders met last Thursday, they already knew that they were to make some controversial steps concerning risk prevention measures (to prevent Greece-style future implosions) and the EU budget composition. Then, an issue of changes to the new EU treaty has emerged. The EU leaders faced a number of controversial problems.

    The German-France controversy over differences to deal with crisis management ended in compromise under which Germany accepted sanctions by finance ministers to ensure budgetary discipline (among the eurozone states, only). French president agreed on changes in the Treaty, to provide for a permanent crisis resolution mechanism to escape any member states default in the future.     

    Paris and Berlin pushed other member states towards agreement for new provisions to create a bail-out procedure (currently a fund at ? 440 bln, that expires in 2013). These provisions would constitute a permanent part of the EU treaty, though with „narrowly limited“ wording, which would not require questionable referenda.    

    France, which compromised with Berlin, insists to make the present temporary fund permanent, whereby each eurozone state would put up capital as collateral for a bond offering to aid a crisis-stricken country.

    The most problem for eurozone countries is to establish a mechanism for restructuring the debt for insolvent states. These measures, which permit emergency aid for states  struck by „exceptional occurrences beyond its control“ are, actually envisaged in the TFEU (art. 122).   

    The new crisis resolution mechanism would replace the European Stability Facility, which also expires in 2013.

    Compromise on EU budget & finances

    The weekend summit ended for Angela Merkel, German chancellor with a compromise with David Cameron, British prime minister. The latter promised that the UK would back up „a small change“ to the Lisbon Treaty (concerning management of national finances) in return for a limit on the EU budget spending. Thus, both leaders agreed that the EU budget should grow „no more than 2,9 per cent“ in 2011  about half the increase demanded by the EU Parliament; the move, which reflected general EU member states austerity measures in the years ahead.

    See: Wiesmann G.,  Barker A. Merkel reassured UK will back treaty change.  Financial Times, 31 October 2010.

    The summit secured a pledge from EU leaders to change the blocs treaty to enforce strict limits on public borrowing and budget deficits. Ms. Merkels support for Mr. Camerons budget initiative was clearly meant to help him in the face of domestic Euro-skeptics. 

    Mr. Camerons position is to support a limited change to the new EU treaty (less than a year old!), as long as it applies only to eurozone members and does not reduce British sovereignty towards Brussels.

    Leaders in Germany and the UK agreed that 2011 would be a year for an attempt to rearrange the EU position at a world-trade deal within the so-called Doha Round trade talks.

    To support this process, the two governments named a high-level advisory group, chaired by trade experts Peter Sutherland and Jagdish Bhawati, to help with trade liberalisation issues.  

    But, there is a clear need for a change in the new EU treaty to create a permanent crisis resolution mechanism. The current Lisbon treaty is simply inadequate to deal with the legal and political complexities of an institutional crisis mechanism. Such an institution is needed to replace the European Financial Stability Facility, EFSF when it expires in 2013.

    The constitutional court is an important factor in the German position. It gave a green light to the EFSF, after the government invoked a „force majeure“ defence (the EFSF was set up to protect the eurozone). The court accepted that argument. But the German government cannot conceivably extend that reasoning to the establishment of an entirely new EU institution. In its ruling on the Lisbon treaty, the court gave an exceedingly restrictive view on the legitimacy of further European integration without an explicit democratic mandate. Furthermore, the court would read the „no bail-out“ clause of the Maastricht treaty in a strict literal sense. It could easily block the new mechanism.

    The European Council at the summit accepted the necessary treatys change; Herman Van Rompuy, the president of the European Council, will make a proposal in December.

    It is still far from being clear, whether the proposed changes will be effective, and whether they are constructed in the way to suit all needs. There are substantial disagreements among member states, which have not yet been resolved, e.g. the German courts legal concerns.

    Compromise on Treatys amendment

    The final provisions of the TEU (Title VI) describe the possibilities to revise the present treaty. The „simple revision procedure“ (art. 48, 6; TEU) allows the European Council to change certain aspects of the treaty by unanimity  and without having to put the changes through member states referendum.

    Mr. Van Rompuy has already proposed a set of new rules and procedures for the eurozone countries only. In terms of substance, the aim is to overcome the big logical inconsistency of three principles underpinning the euro: „No bail-out, no exit, no default“. The first two are firmly enshrined in the European law. Default is legally possible, but politically unacceptable, at least for now. The EU is simply not in a position to handle the repercussions of a sovereign default.

    The incompatibility of those goals lies at the heart of the eurozones governance crisis; some of these principles will have to be sacrificed.

    See: Münchau W. An EU treaty change is necessary but hazardous. Financial Times, 31 October 2010.

    Al member states are keen to confirm, that another treaty change after a tortuous decade to get Lisbon agreed would be a disaster. Besides, without a treaty change, the EFSF must run out. The eurozone would be back to where it was in May 2010.

    Hungarian minister for European affairs, Eniko Gyori, the country holds the Councils presidency in the first half of 2011, would have to negotiate possible treaty changes.

    EU leaders agreed to discuss both treaty change and the EU budget in more detail only at their next summit in December. However, the continuing compromises are needed to secure stability in the European Union. 

    Baltic Course EU progress is constantly based on compromises

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