THE NEGOTIATION of Europe’s new fiscal treaty is into the final strait as EU leaders push for a deal at a summit in Brussels on Monday week.
Although a new draft treaty circulated last night to diplomats and officials heralds progress, a number of sensitive issues remain to be settled. Still, the essential parameters of the pact are now in place.
No matter how the document is honed in the days ahead, it is clear that the treaty will make it difficult if not impossible for participating governments to evade Europe’s sacred writ when formulating their fiscal policy.
For Dublin, the big question is whether a referendum will be required for Ireland to participate. This carries huge political risk for Taoiseach Enda Kenny – domestically, and in the European arena – given the danger of a defeat.
Under the 1987 Crotty ruling of the Supreme Court, his Government is obliged to go to the people to approve any measure which exceeds the essential scope or objectives of existing treaty provisions. But will the new pact do that? It is impossible to answer that fully until the final text is agreed. However, attention centres on two key elements of the initiative.
The first is the “golden rule”, which will impose binding limits on debt and deficits.
The second is the adoption of an “automatic mechanism” to bring budgets back under control should a government deviate from the rule.
The latest draft treaty, the fourth in five weeks, retains provisions which call for the adoption of the golden rule on a “preferably constitutional” footing. This leaves ample scope for the Government to adopt the rule in secondary legislation, but it may not be the final word.
German negotiators have pushed heavily for a constitutional provision, which would necessitate an Irish referendum. It follows that Chancellor Angela Merkel may well hold out for a constitutional requirement on the basis that the legislative route is an insufficient second best.
Merkel may well be the only EU leader to hold that view but she remains dominant in the euro zone and is wont to impose her will.
This is but one question on which Kenny finds himself on the wrong side of the chancellor. Trouble is brewing again over corporation tax – and he needs her support for his campaign to reduce the burden of Ireland’s bank debt.
For obvious reasons, Dublin’s negotiating strategy is to ensure as far as is possible that all provisions in the treaty are directly in line with the State’s existing responsibilities under EU law. No new duties, no new law.
At one level, of course, the pact is designed to toughen the enforcement of rules which already apply to the authorities in Dublin.
In question, however, is whether a measure such as the “automatic mechanism” ties the hands of any Irish government to the extent that it has no real say over its budget framework for as long it is in breach of its obligations under the pact.
Constitutional lawyers and politicians will argue over that. Some might say it amounts to an appreciable transfer of powers to Europe from Dublin. Others might say that existing budget laws presuppose a vigorous application of the rules at all times, even if some governments wilfully flouted them in the past.
Either way, this will be a judgment call for the Government. Even if it decides a referendum is not required, it still faces the near-inevitability of a Supreme Court challenge. Quite what the judges make of it all is anyone’s guess, but it would take a brave soul to bet on a Yes vote if they did call for a referendum.
The bottom line is this: Merkel’s push for a new treaty is the last thing Kenny needs right now but he and every other euro zone leader has no choice but to play along.
The great irony is that most participants in the talks believe the new pact will do little on its own to calm the crisis in the euro zone. At the same time, the question remains as to whether the adoption of the pact is a prelude to German acceptance of eurobonds. Berlin’s final answer is still awaited.