Brussels, 07/12/2011 (Agence Europe) - “To overcome the current crisis, all necessary measures to stabilise the euro area as a whole will have to be taken” and we are confident that we will succeed in this, reads the letter sent on Wednesday 7 December by Nicolas Sarkozy and Angela Merkel to the president of the European Council, Herman Van Rompuy. This letter details the compromise reached on Monday between Sarkozy and Merkel on the reform of the Treaty. “We need to take a decision at our next European Council meeting in order to have a new treaty provisions ready by March 2012”, state the French and German governments.
Alongside the single currency, “a strong economic pillar is indispensable, building on enhanced governance to foster fiscal discipline as well as (…) enhanced competitiveness”, argue Sarkozy and Merkel. In order to achieve these goals, they recommend a “renewed contract” between the member states of the eurozone.
“We need more binding and more ambitious rules and commitments for the euro area member states (…). We propose that those new rules and commitments should be enshrined in the European Treaties. Alternatively, the member states whose currency is the euro will have to go ahead. In that case, we would ensure that those member states willing and able to do so would be able to join and the European institutions would play an important role. We would also work towards bringing this new agreement into the framework of the European Union as soon as possible”, the two leaders write.
Critical characteristics of this new “Union for stability and growth” are as follows:
A strengthened institutional architecture. The governance of the eurozone must be significantly reinforced. We should provide for a more integrated and more efficient institutional set-up without duplicating existing European structures or institutions. This set-up should be based on: - (1) regular summits (at least twice a year) of the euro area heads of state or government, with a permanent president. These summits should provide strategic orientations on the economic and fiscal policies in the euro area. The impact of our domestic economic and fiscal policies on the euro area should be considered as a matter of common interest, whilst safeguarding national responsibility; - (2) during the crisis, the eurosummit should meet on a monthly basis: each meeting should focus on a precise agenda regarding governance and policies to foster growth, competitiveness and fiscal stability. Member states having signed the Euro Plus Pact will be invited to participate in the discussions on issues related to it; - (3) a ministerial Eurogroup and a reinforced preparatory structure to prepare and implement the decisions taken by the summit and ensuring the current functioning.
This framework will, the letter continues, be “fully consistent with the EU institutional architecture. We strongly reaffirm our willingness to fully associate the European Commission. The European Parliament and national parliaments should also be involved in an adequate way.”
A comprehensive framework of prevention. “We need a comprehensive framework on prevention consisting of strengthened coordination, surveillance and enforcement as well as positive incentives, building on current arrangements” (new macro-economic imbalances procedure, EU 2020 strategy, Euro Plus Pact, etc). This framework should comprise in particular: - (1) the adoption by each euro area member state of rules on a balanced budget translating the objectives and requirements of the Stability and Growth Pact into national legislation at constitutional or equivalent level; - a new legal provision should set minimum requirements of the national rules of the balanced budgets. The European Court of Justice, on request of the European Commission or a euro area member state, should have the possibility to verify the transposition in the national regulatory framework; - (2) the commitment of the national parliaments to take into account recommendations adopted at European level on the conduct of economic and budgetary policies.
“We need to foster growth through greater competitiveness as well as greater convergence of economic policies, at least among euro area member states.” In order to achieve these objectives, and on the basis of Article 136 and/or enhanced cooperation, a new joint legal framework which is fully compatible with the single market should be brought in, to allow faster progress to be made in certain specific areas (financial regulation, employment market, convergence and harmonisation of the corporate tax base and the creation of a financial transaction tax, growth-support policies and a better use of European funds at the level of euro area member states).
Stricter budget policy procedures. To strengthen the preventative arm of the Stability and Growth Pact to ensure stable budgets as the norm, a new procedure should be set up to correct any overshoot above the 3% of GDP level in a country's deficit. As soon as the Commission establishes that a eurozone member state has overshot the 3% of GDP, there would be automatic penalties unless the Eurogroup decides otherwise in a qualified majority vote. Exceptional circumstances would have to be taken account of, namely: - (1) the duty for the eurozone country in question to agree with the European Commission and have endorsed by the Eurogroup in a reverse qualified majority vote on behalf of the other member states a “European Partnership for Reform”, listing structural and budget measures to be introduced by the country in question to help it cut its deficit: - (2) an escalating series of measures to reduce the rights of the country in question might be given the go-ahead as a targeted response to the deficit overshoot. The stages and penalties introduced or recommended by the European Commission would have to be agreed to by the Council of Ministers unless a qualified majority of eurozone member states decides otherwise.
Under the one-twentieth rule for debt reduction set out in the six-pack of draft EU legislation, the debt reduction procedure for eurozone nations which overshoot the 60% GDP level should be included in a new EU treaty.
A permanent crisis settlement system. The document sets out that a speeding up of the process of setting up the European Stability Mechanism (ESM) should bring it on board next year so it can be used to help deal with the problems facing the eurozone and the danger of further countries being affected by the debt doubts, and providing emergency aid where necessary. To maximise the effectiveness and decision-making capacity of the ESM, “super majority” voting rules should be introduced, a super majority being at least 85% of the capital provided to the ECB.
When it comes to private sector involvement, the ESM treaty should be altered to make it clear that the bond write-down for Greece was a one-off. The document says that all other eurozone nations confirm their unaltered determination to fully honour their bonds. A section of the ESM preamble should make it clear that the eurozone will use the IMF's practices. Common terms of reference for collective action clauses (CAC) should be introduced into the law of the eurozone member states.