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Monday, October 18, 2010

Germany wins French backing for EU Treaty change

As we anticipated in our previous post, it appears as if Germany has won French backing for a change to the EU treaties in return for greater flexibility on sanctions for eurozone countries which run excessive deficits.

France and Germany have agreed that the Lisbon Treaty should be changed by 2013 in order to:
  • Set up a "robust crisis resolution mechanism" for the eurozone, which presumably includes a mechanism for an orderly default procedure for countries that go bust;
  • Introduce political sanctions for rule-breakers, including the temporary withdrawal of voting rights within the Council.
The taboo of another round of Treaty change negotiations has now officially been broken. This is potentially huge - and throws up a number of interesting questions for eurozone and non-eurozone countries alike, not least the UK.

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