Wednesday, January 11, 2012

The Euro Fiscal Pact: The saga continues, now with better news for Cameron

Following last Friday's meeting of negotiators from EU member states (including the UK), a third draft of the new European fiscal pact is now out. As with the version of the draft out last week, Open Europe has got hold of a copy of the revised draft (available here) and, yet again, we're the first in the Anglosphere to publish the draft.

From the UK's point of view, there are some significant changes, at this stage marking a victory for Cameron and Clegg. The controversial reference to the single market in Article 1 is no longer there - the UK has consistently said there should be no overlap between the euro fiscal compact and single market rules - and the role of EU institutions has been narrowed substantially.

From the eurozone's point of view, the draft may actually be worse news than the previous version, as the markets could judge the watering down of the enforcement mechanisms through the EU institutions as a weakness similar to those haunting the original Stability & Growth Pact. Looks as if the Germans have caved in a bit on an extensive role of the ECJ (which the French never were entirely happy about).

After a first glance, the following are the most significant changes from the previous version:
  • The reference to the single market which reportedly infuriated UK negotiators has gone;
  • A sentence in Article 2 establishing that "In accordance with the case law of the Court of Justice of the European Union, EU law has precedence over the provisions of this treaty" has also disappeared (this could be both good and bad news for the UK and other non-euro members - we'll return to that);
  • The expression "structural deficit" has been replaced by "structural balance", but details on what it means in practice are still lacking;
  • Article 6 on the coordination of debt issuance has been tweaked and now reads, "With a view to better coordinating the planning of their national debt issuance, the Contracting Parties shall report ex-ante on their public debt issuance plans to the European Commission and to the Council";
  • Under the revised draft, the Commission would not be allowed to submit proposals/recommendations to countries with an excessive public debt (something Italy is particularly concerned about, due to its large debt), but only to those running excessive deficits;
  • There seems to be a major backtrack on the role of the ECJ, as its jurisdiction is now again restricted to overseeing whether member states properly transpose the balanced budget rule into national legislation;
  • In addition, the European Commission no longer has the power to take governments to the ECJ. Under the revised draft, the Commission can be "invited" by member states to issue a report on a country which is thought to be in breach of Article 3(2) - the one on the balanced budget rule. If the Commission supports the breach, the concerned government can be taken to the ECJ, but only by another government;
  • The Economic and Monetary Affairs Commissioner would be excluded from the meetings of eurozone leaders, along with the Chairman of the Eurogroup (but Jean-Claude Juncker should not worry too much about this, given that he will attend as Luxembourg's Prime Minister);
  • The latest draft includes a specific date for the entry into force of the fiscal pact, 1 January 2013. The number of countries that need to ratify the treaty before it enters into force is now twelve (down from fifteen, which was probably too ambitious, given the problems that could potentially arise in Ireland, Slovakia and Finland);
  • A brand-new Article 15 has been added, which reads very much as an invitation to the UK and other non-euro members, "This Treaty shall be open to accession by Member States of the European Union other than the Contracting Parties upon application...The Contracting Parties shall approve the application by common agreement";
  • As regards the transposition of the fiscal pact into the EU Treaties, the wording has been slightly toughened up. The expression "an initiative shall be launched" has been replaced with "the necessary steps shall be taken...with the aim of incorporating the substance of this Treaty into the legal framework of the EU."
We doubt this is the last word though...

1 comment:

Anonymous said...

If Cameron was listerning to the people of this country he would bring us out of the EU altogether. The people here are fed up with being ruled in every step of their lives by the EU. Lets get back to basics, out all illegals and stop sending billions to other countries who only use it to make war on us. We can then look after the poor and old and young is this country. Cameron does not live in the real world, he and all his cronies will not feel the pinch that the EU is putting on this country. Be a Man Mr Cameron and get us out of the debt ridden EU. We know it does not work, why don't you. You will have a land slide if you listerned to the people, and by that not to rogues of this country. Stop selling off our country to other people and countries. Give jobs to the people of this counrty. Wake up before it is too late. How I wish Mrs Thather was still able to run the country. It takes a woman with back bone to speak up for her own. One only has to look at Germany. P Taylor