Merkel pushes for treaty change

Member states warming to ‘limited treaty change’.

Angela Merkel, Germany’s chancellor, arrived at a summit of EU leaders in Brussels today promising to push for a treaty change to set up a permanent eurozone crisis mechanism.

Speaking before the start of the two-day summit, Merkel said: “We in Germany…will be pushing for a treaty change on the question of how we react in future if the euro as a whole is in crisis.”

She said a permanent rescue mechanism was needed that “also involves the banks and funds which have benefited from high interest rates so that it is no longer only taxpayers who bear the responsibility”.

Merkel said that the summit should also discuss suspending voting rights for EU members that break financial rules.

Merkel’s call for a treaty change was badly received by other EU leaders when she issued a joint call for revision with Nicolas Sarkozy, France’s president, on 18 October.

But many member states seem to be coming around to the idea, provided the change is limited to a very narrow amendment of the treaty focusing on the crisis mechanism.

José Manuel Barroso, the European Commission president, said it was “unrealistic” to expect any treaty change to include stripping member states of their voting rights.

“I find it unacceptable…it is incompatible with the idea of limited treaty change and it will never be accepted” by member states, Barroso said. But he suggested that the Commission would be open to a treaty change if it was limited “to the issue of economic and financial crisis response”.

Mark Rutte, the new prime minister of the Netherlands, called the Franco-German plan “far from ideal”. He said the International Monetary Fund should be involved in any permanent bailout system adopted by the EU to ensure the stability and strength of the euro.

Dalia Grybauskaite, Lithuania’s president, said any change to the EU’s budgetary rules limiting member state voting rights was “risky”. She said Germany’s call for a treaty change could be accepted only “if it is very narrow, very focused and very clearly on the mechanism”.

Fredrik Reinfeldt, Sweden’s prime minister, said he was ready to debate the Franco-German plan but said any treaty change had to be minor, to avoid referendums.

Court concerns

Germany argues that treaty change is necessary to set up a permanent eurozone stability mechanism to replace a €440 billion temporary facility agreed in May. Berlin says that the mechanism could be ruled illegal by the German constitutional court unless treaty language that bans bailouts is changed. The facility has been challenged in the court by a group of academics and economists.

Germany thinks the changes can be made through a small treaty change. Under a new provision in the Lisbon treaty, minor changes can be agreed without convening an intergovernmental conference and risking governments coming up with a wish-list of changes they want to make to Lisbon.

This simplified revision mechanism would probably not need to be put to a referendum in Ireland because it would not involve a transfer of powers from national capitals to the EU. David Cameron, the UK’s prime minister, is also using this argument to resist calls for a referendum in the UK.

France and Germany’s call for the suspension of voting rights for countries that break budget rules would, however, be a clear case of a sovereign country giving up power and would trigger the need for a referendum in Ireland.

Merkel appeared to soften her demand for treaty change on voting rights this afternoon. She said before the start of the summit that there was already a mechanism in the Lisbon treaty for suspending member states’ voting rights if they fail to respect the EU’s basic values.

The Franco-German plan was being discussed as part of economic governance reforms that EU governments are expected to agree in response to the eurozone sovereign-debt crisis.

The new rules will increase surveillance of member states’ national budgets to deter them from running up excessive deficits and debts. There will also be sanctions for countries that break the rules in the form of possible fines if corrective action is not taken in time.

The changes to economic governance rules have been prepared by a taskforce chaired by Herman Van Rompuy, the president of the European Council.

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