Sarkozy and Merkel union just too powerful to ignore


OPINION:Wheels have been set in motion for fresh EU referendum – which is the last thing this Government needs, writes ARTHUR BEESLEY

ANGELA MERKEL and Nicolas Sarkozy have opened the door for a revision of the EU treaties to accommodate permanent measures to settle sovereign financial crises in the euro zone. Barely 11 months after the enactment of the Lisbon pact, the development could hardly come at a worse time for the Government.

The new consensus between Berlin and Paris raises the prospect of another European referendum campaign in Ireland, one that would be fought against the backdrop of stringent austerity policies encouraged by the EU authorities. Not only that, but Merkel and Sarkozy are pushing for the introduction of the changes by 2013. This would coincide with Ireland’s presidency of the EU in the first six months of that year, increasing pressure on Dublin to avoid any repeat of the Lisbon and Nice debacles.

This might well seem like light years away from the present debate over a four-year package of cutbacks, reforms and tax increases.

For Taoiseach Brian Cowen, however, prickly questions over changes to the EU treaties will come to the fore within a matter of days as European leaders prepare for their autumn summit in Brussels tomorrow week. Did anyone see this coming? Yes, but not this soon.

For months, Merkel has pushed the notion of treaty change to establish on a firmer footing legal grounds for extraordinary financial interventions to prop up ailing euro countries. Nothing Berlin wants in Europe can lightly be dismissed, so this was a debate that could not be avoided.

Before her joint statement in Deauville with Sarkozy, however, the chancellor was perceived to be fighting a lone battle. The Deauville declaration changes that quite radically. Not only is Paris on board for treaty change, but the two leaders are pressing their EU counterparts to proceed down the road as soon as the summit next week.

This unexpected intervention on Monday evening had the effect of pulling a rug from under the feet of European Council president Herman Van Rompuy, who at the time was chairing a meeting of EU finance ministers in Luxembourg.

At issue at this meeting were new procedures to impose financial sanctions on governments that persistently breach EU budget rules. A deal was ultimately done, but only after Germany joined the clamour from France to water down the “quasi-automatic” character of the sanctions mechanism proposed by economics commissioner Olli Rehn. The price, of course, was Sarkozy’s new alignment with Merkel.

In a flash, the démarche set aside a sequencing process assiduously followed by Van Rompuy in the months since he was charged with striking a deal on new measures to fortify the EU’s system of economic governance.

At all times, the explicit understanding was that the procedures possible within the ambit of the treaties as they stand would be agreed first, with measures demanding treaty change coming only after that.

Merkel and Sarkozy upended that plan on Monday evening, their joint declaration coming more than an hour before Van Rompuy’s meeting broke up.

There are two strands to their plan, each of them far-reaching.

First, Merkel and Sarkozy want to allow the suspension of EU voting rights from governments that break budget rules. Such a penalty would amount to a political sanction from a country’s European peers, something with inevitable implications for the government concerned in their domestic affairs and European politics generally.

Second, they want to establish on a permanent footing the ad-hoc bailout scheme set up after the Greek rescue for any other distressed euro member. Furthermore, this would include procedures for “orderly” renegotiation of sovereign debt.

Given the upheavals seen in the euro zone this year, there’s nothing intrinsic to either proposal that goes so far beyond the bounds of current practice as to be unacceptable. What is particularly knotty, however, is the fact that they cannot be executed without reopening the treaties.

This presents a host of dilemmas, not least the likely requirement for a referendum in Ireland and constitutional limitations in Austria and Denmark over their governments’ scope for manoeuvre.

While only euro members would be affected by the legal measures themselves, in all likelihood the treaty change would have to be enacted in each of the 27 member states. This means British prime minister David Cameron, whose resistance to any increased powers for Brussels is clear, would be drawn into the debate.

The initial response in Irish diplomatic circles was sanguine. “We look forward to hearing more concretely from France and Germany what their proposals are,” said an Irish official. In private, however, there is no appetite in Dublin for anything that could bring the Government anywhere near referendum territory.

Lawyers may well argue over whether the Crotty judgment requires a referral to the people in this instance, but it cannot be argued that any of the mooted changes are insignificant.

For one thing, the establishment of a permanent rescue mechanism would do away definitively with the no-bailout clause that was originally enshrined in the Maastricht Treaty. Though breached in spirit by the inter-governmental deals to rescue Greece and prop up any other euro country, it remains the letter of the law. Given the political turmoil that surrounded these interventions, it would be impossible to make light of such a change to the treaty.

In addition, any suspension of voting rights would bring the European authorities further into the realm of casting a severe political judgment on elected leaders of a member state. That’s no small thing. In the words of Belgian finance minister Didier Reynders, this would be quite a “fundamental” change in the way the EU works.

So where to from here? Van Rompuy’s original objective was to receive a sign-off from EU leaders next week for the sanctions deal reached in Luxembourg.

He will receive that, but Merkel and Sarkozy have jump-started a far bigger debate and one with huge potential for political tension.

Although diplomats from smaller member states bemoaned the opening of a can of worms by Berlin and Paris, it is a given that their combined might is sufficient to carry the day in any EU debate.

Tentative preparations are already under way for treaty “convention” next spring. It promises to be testing business.

Arthur Beesley is European Correspondent

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