Latest treaty draft dilutes 'golden rule' requirement

Thu, Jan 12, 2012, 00:00

EUROPEAN NEGOTIATORS are reviewing a new draft of an international treaty to toughen the enforcement of EU budget rules as talks intensify on a new fiscal pact.

The latest draft, the third in less than a month, dilutes the requirement to adopt a “golden rule” binding governments to not exceed EU deficit and debt limits on a constitutional “or equivalent” footing.

Instead, the new draft says the rule could be applied through “provisions of binding force and permanent character, preferably constitutional, that are guaranteed to be respected throughout the national budgetary processes.”

If retained in the final agreement, now expected within weeks, such language would strengthen the Government’s hand as it seeks to avoid having to insert the golden rule in the Constitution.

Any such move would necessitate a referendum. It remains the case, however, that the Government always believed earlier drafts left leeway to enact the rule in secondary legislation.

The German-led drive for a treaty still presents the prospect of a referendum being required if the initiative is deemed to result in an appreciable transfer of powers to Europe.

The process is viewed with trepidation in Government circles given fears the public would reject the pact as a way of venting anger at the austerity policies enshrined in the EU/IMF bailout.

The Government has made no comment on any of the draft treaty texts but Minister of State for Europe Lucinda Creighton has suggested the negotiation presents a 50:50 likelihood of a vote.

Drafts of the treaty, which is subject to talks in Brussels today, include sweeping provisions to ensure compliance with deficit and debt limits set out in EU law.

The new text emphasises the need for governments to put in place automatic measures to correct “significant deviations” from the fiscal path set out for them under EU rules.

“The mechanism shall include the obligation of the Contracting Parties to implement measures to correct the deviations over a defined period of time”, says the text.

It goes on to say that governments with an excessive deficit procedure “shall put in place a budgetary and economic partnership programme including a detailed description of the structural reforms which must be put in place and implemented to ensure an effective and durable correction of their excessive deficits.”

The content and form of such programmes would be defined in EU law.

EU leaders are working to ensure the new treaty enters into force at the start of next year.

The leaders decided at a summit last month to proceed with an intergovernmental treaty operating outside EU law after British prime minister David Cameron vetoed a new EU treaty.

The latest draft suggests the pact could take effect once ratified by 12 of the 17 euro countries. Its provisions would apply only to countries which have ratified it, meaning countries outside the pact would be subject to different rules.

The new draft, circulated by the office of European Council president Herman van Rompuy, was immediately dismissed by leading MEPs.

Lead negotiators for the centre-right, Socialist, liberal and Green group said the latest text was “not compatible” with the existing EU treaties and fails to respect the European community method of decision-making.

“Specifically, the draft does not guarantee that any decision to implement the new agreement would be taken via the normal procedures laid down in the EU treaties to ensure proper democratic scrutiny and accountability,” they said.