The work in progress to draw up a new treaty (agreement) to cover the economic arm of the eurozone is having an impact on the EU more widely, well beyond purely financial and economic issues. This root-and-branch reform of the financial world is gradually bringing in new discipline using an approach which necessarily progresses in stages. The pact under negotiation is influencing the wider political world and the future of the European project. I consider three specific aspects below.
Wider EU powers. In my view, it is astonishing that nobody has pointed out the political significance of transferring some national powers to the EU as part of the process of countries agreeing to let Brussels check over their economic situation and fine them if they are found to be breaking the eurozone's new rules in the future. It is true that the details of how these powers will be shared among the various EU institutions is still under debate; in issue 10526, we explain in detail the difference between one group of countries and the European Commission over the launch of infringement proceedings, but everyone agrees that infringement proceedings are to be run by Brussels and it is the Commission or Council of Ministers that is responsible for issuing proceedings. How many years it took to get the two most powerful eurozone countries (France and Germany) to agree to monitoring by Brussels and for penalties to be automatic, failing a majority vote to the contrary! In the past, the two countries were themselves subject to infringement proceedings under the rules in place at the time... It is understandable that attention now is focusing on the remaining niggles and disagreements, but the most important thing is that the Community method aspects of the new procedures are questioned by nobody.
The first compromise? In yesterday's column, I examined the technical side of preparing the new treaty. Sherpas in the political negotiations receive their instructions from the member states and it is hardly surprising that at times, these instructions are announced ahead of conclusion to the talks among heads of state. This is the case for Italy's request, for instance, for the binding timetable of annual debt reductions to be postponed for a year: Mario Monti explained and justified this request in his recent meeting with Nicolas Sarkozy and his talks with the German chancellor, Angela Merkel, on Wednesday. In theory, the Franco-German position paper would make the first debt reduction compulsory in 2012 for over-indebted countries, and Italy is calling for this to be put back a year to give it time to get its economic recovery programme agreed upon and introduced first. Monti, Merkel and Sarkozy will meet together on 20 January - will they reach a compromise? Merkel and Sarkozy have just said that the top priority is economic growth right now and since they all agree on the aim, compromising on the actual stages would be a good example of how differing approaches can be reconciled at the working group, which will be meeting again shortly to prepare for the ministerial meeting of 23 January and the key summit on 30 January.
Will Britain join in? - No chance. I am sceptical about the outcome of attempts to get the United Kingdom back on board with the other member states. The efforts of Herman Van Rompuy as chair of the European Council (of which the UK is a member), the European Commission (one of the EU commissioners is British) and the European Parliament are understandable, but this is not an institutional matter, or a question of likes, dislikes and politeness - it is a basic question of direction. What goes on in the City of London is highly damaging to the financial markets of the continent, which are constantly under attack from London. Cameron has himself said that he is determined to fight for the City, which is a bedrock of the UK economy, and he has recently said that he will oppose any EU decision that might not be in the City's interests. He has totally rejected the Tobin Tax, for example (see yesterday's bulletin). Far more serious fights will break out shortly when it comes to the EU's budget (Financial Perspectives) for 2014-2020 and the very odd prediction that Scotland might cut itself off from England, Wales and Northern Ireland and apply to join the EU as a separate country. My feeling is that London's disagreements with everyone else can only get deeper. (FR/transl.fl)