Brussels, 27/10/2010 (Agence Europe) - The European leaders are meeting on Thursday 28 and Friday 29 October, to debate the biggest reform of the economic and monetary union since the creation of single currency, on the basis of the report by the “task force” on economic governance, led by the permanent President of the European Council, Herman Van Rompuy (EUROPE 10241). Amongst other things, they will discuss whether it may prove necessary to revise the Treaty of Lisbon in light of the creation of a permanent financial crisis management mechanism, due to the inability of a eurozone member state to refinance its sovereign debt on the markets. Also on the agenda of the European Council will be the G20 Summit in Seoul, the climate conference of Cancun and preparations for various bilateral summits, including the one between the EU and the United States, to be held in Lisbon at the end of November.
"We expect the European Council to enshrine the report of the 'task force”. This would be an entirely anticipated result", a European diplomatic source announced on Wednesday 27 October. This report takes up the broad outlines of the reform of the Stability and Growth Pact recommended by the European Commission (EUROPE 10225). As well as tightening-up of supervision of public deficits, greater emphasis will be laid on controls on public debt and a procedure to monitor macro-economic imbalances will also be brought in. In all three areas, the countries of the Eurozone will be open to sanctions earlier than is currently the case, of either a political or financial nature. All of these measures will be made into legislative texts by next summer.
In a difference of scale with the legislative package of the Commission, the “task force” waters down the procedure leading to sanctions being imposed on any country which infringes the revised pact. It suggests a period of six months, during which the Member State in question will be called upon to take corrective measures. If the Council considers the measures insufficient after this time, the Commission would be authorised to propose sanctions which would be effective, unless a qualified majority of the Council opposes this. The sanctions will take the form of financial deposits, which may or may not bear interest, or fines.
Lowering the degree of automation of the sanctions is the result of a Franco-German compromise made at the highest level. This agreement between the two principal economies of the Eurozone has been criticised, harshly in some cases, even by the coalition in power in Germany, as well as in European Parliament and ECB circles. On Wednesday, a Commission spokesperson distanced himself from the "personal" comments of the commissioner for justice and fundamental rights, Viviane Reding, who spoke out the day before against the Franco-German "diktat". "We would like a discussion which focuses on the substance", he said.
Revise the treaty? The “task force” takes the view that in the medium term, a crisis management mechanism is vital. Getting this mechanism up and running, and the possibility of suspending the voting rights of a member state in the Council, will need extra work. Possibly also a modification of the Treaty of Lisbon, as called for by Germany and France. Moreover, Berlin would create a link between the tightening-up of the pact on the basis of the existing treaty and the creation of the management mechanism on the basis of the modified treaty. "We need a new, robust framework. It must be legally watertight and this will happen only with a change of the treaty", the German Chancellor, Angela Merkel, told the Bundestag on Wednesday, as reported by AFP. She added that strict budgetary rules will never prevent future crises from breaking out. "It is true that a Franco-German agreement is not everything in Europe. But without a Franco-German agreement, not much is possible", she added.
Although the finance ministers agreed on the need for a crisis management mechanism, there is no reason for the European leaders to reject the idea, said this European diplomatic source. "We hope to see discussions on the best way of organising the work to be carried out subsequently", she added. If the decision on the various options for the revision of the treaty (e.g. normal procedure or simplified procedure) seems premature at this stage, pre-decisions will have to be made on the content and timetable of the future work. According to the Commission spokesperson, the European Council will provide the opportunity to sound out the member states on questions such as the "substance, format, content and legal domicile" of the permanent crisis management mechanism. As regards the content, the “task force” raised issues such as the conditions for the future instrument to be triggered and the respective roles of the EU, the eurozone, the member states, the IMF and the private sector. Nothing was said about the timetable. For their part, Paris and Berlin have suggested that Van Rompuy put concrete proposals to the European Council by March 2011. In the spring, two mechanisms were created, to be active until 2013. The first mechanism is to be used to support Greece, to the tune of 110 billion euros. A second, which was created preventatively, would be capable of mobilising up to 750 billion euros to rescue the eurozone as a whole.
Pragmatic expectations of Cancun. Pragmatism and a willingness to sing from the same hymn sheet in Cancun must guide the European leaders when they meet on Friday to decide on the EU's negotiation position for the UN climate conference (COP16, 29 November - 10 December). This conference has been designed to act as a stage - a crucial one, certainly, but a stage nonetheless - towards the subsequent inclusion of a binding global climate agreement for post-2012 (EUROPE 10238). To this end, the European Council should adopt the qualified conclusions of the last Environment Council (EUROPE 10237). It will state that the EU is prepared to offer the maximum level of transparency on the rapid-implementation financing of the aid pledged to the developing countries to help them adapt and attenuate (7.2 billion euros for 2010-2012). It will not change the negotiation position decided upon one year ago for the European target for the reduction of its emissions by 2020: 20% unilaterally, or 30% if the conditions to do so are met. So far, this is not the case; indeed, we are a long way from comparable commitments on the part of the industrialised countries and the emerging economies.
No discussion of the substance is anticipated. In his letter of invitation to 27, Herman Van Rompuy states that the approval of the conclusions "will provide an opportunity for those of you who would like to say a word about the preparation of the Cancun conference to do so". (M.B./A.N./trans.fl)