EU Treaty amendments proposed less than a year after Lisbon is implemented
Civitas, 21 October 2010
In response to the economic crisis, France and Germany are keen to push through changes to the Lisbon Treaty, writes Natalie Hamill. In an effort to develop a ‘more lasting mechanism’ to deal with instability in the Eurozone, Germany and France are promoting plans that would pave the way for a fixed system to respond to future Eurozone problems. However, the proposed plan raises many questions about how (and if) treaties could be amended.
The Greek debt crisis, which nearly brought the Eurozone to its knees earlier this year, highlighted the massive failings of the Stability and Growth Pact (which is meant to protect against member states’ finances getting out of control and undermining the stability of the Eurozone). The Stability and Growth Pact (SGP) rules have proved difficult to enforce. For example, the Pact requires a majority vote before any punitive measures can be taken against states who break the rules (i.e. ensuring their budget deficit doesn’t fall below -3% of GDP and ensuring national debt doesn’t exceed 60% of GDP). In the past, Eurozone member governments have proved to be overly-comfortable with flouting the Pact’s rules, and have shown little concern regarding possible repercussions. For Greece, this culminated in the public finances spinning out of control, which ultimately caused serious damage to the stability and reputation of the Eurozone.
In a bilateral meeting on Monday, France and Germany examined how the SGP could be reformed to prevent other crises in the future. The two countries proposed that states that break SGP rules should face automatic penalties, with a majority of states needed to stop such measures being instigated (a reversal of the current system). It is noteworthy that France only agreed to champion such stringent measures after it persuaded Germany to give states sixth-month leeway to get their finances back on track before such penalties are enacted.
In addition to toughening up the ‘corrective’ elements of the SGP, further proposed measures include strengthening the SGP’s ‘preventative’ arm, so that there is less chance of a member state’s public debt reaching an excessive level in the first place. In particular, the Franco-German declaration states: ‘the Council should be empowered to decide (acting by QMV) to impose progressive sanctions in the form of interest-bearing deposits on any member state whose fiscal consolidation path deviates particularly significantly from the adjustment path foreseen in the Stability and Growth Pact’.
The Franco-German dialogue controversially concluded that a permanent Eurozone bailout fund should be established before 2013 (the current ‘safety-net’ mechanism – the €440 billion European Financial Stability Facility – developed in the wake of Greece’s bailout, expires in June 2013). Both Germany and France readily accept that such a move would require treaty changes.
There can be no doubt that the current Stability and Growth Pact measures have failed to ensure economic stability, therefore stronger regulations need to be implemented to protect the EU from future crises. However, amending the Lisbon Treaty will not be a popular move. The UK’s Prime Minister, David Cameron, has already promised that any future treaty changes must be subject to referenda in the UK.
It took eight years of difficult negotiations and bickering before the Lisbon Treaty was ratified. Therefore, any future attempt to amend the EU Treaties is likely to tread a treacherous path. If (or when) treaty amendments do make it to the negotiating table, there is no guarantee that reforms would be limited to matters of financial regulation – it could become a free-for-all for states seeking to request amendments. To guarantee the survival of the Eurozone, the SGP needs to be reformed. However, attempting treaty amendments so soon after the controversy caused by the ratification of the Lisbon Treaty could prove to be a fatal move for member state relations, which are already strained in the current, fraught economic climate.