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Monday, April 15, 2013

Has Germany really gone off the idea of EU treaty change? (Part II)

Some EU pundits have spent the last several months arguing that a change to the EU treaties is a non-starter. "Don't you know", they say with a high degree of confidence "the Germans have gone off it." And in any case, no one else wants it any way for fear of ratification problems, not least in France.

Charles Grant from the Centre for European Reform said last week that "the Germans have cooled on the idea of rewriting the treaties." Another observer on BBC Newsnight (not our guy of course) said as late as last Friday that "the German government isn't at all keen on EU treaty change in the short-term", which the studio discussion then picked up on.

It's is definitely the case that the appetite for EU treaty change across Europe is limited, and for that reason it'll be a challenge to achieve it. But as we've said repeatedly, it's absolutely 100% wrong to say that the Germans have gone off the idea of EU treaty change. As we stated in our briefing ahead of Cameron’s Europe speech in January:
“There are currently seven broad proposals floating around for more Eurozone integration – most of which need EU treaty changes to be fully completed...Germany, in particular, is nervous about ad hoc-arrangements lacking firm constitutional grounding.”
Here is the full list:

Crucially, this also includes current proposal for a banking union, which from a German point, sit uncomfortably with the EU treaties. A few weeks ago we noted,
"Those who say that Germany has 'gone off the idea' of Treaty change - in light of David Cameron's speech where he mentioned EU treaty change as an avenue for reform - clearly haven't quite appreciated the nature of the proposals floating around."
Well what do you know, as we reported in today’s press summary, at last week's crucial meeting of EU finance ministers, German Finance Minister Wolfgang Schäuble insisted that an EU Treaty revision is necessary to achieve a banking union, claiming that:
“We’ll only do this on a clear legal basis, because I don’t want risks in Karlsruhe.”
Somehow this announcement still managed to surprise people. But wasn't it always obvious? Anyone who is at all familiar with German history will understand why they're so keen to separate monetary policy from bank supervision. If keeping the two tasks with the ECB, such separation can only take place  if there's a rewriting of the EU treaties (so that the final say no longer rests with the ECB Governing Council). This also matters for non-eurozone countries as that guarantees them an equal say in the ECB supervision structure, and therefore makes them more likely to join (particularly Sweden and Denmark, which the Germans are keen on). Indeed, the Swedes - in a very brave moment - tried to push for just such a treaty change but dropped the idea. Further steps, such as a joint resolution fund, will also require treaty changes.

There are plenty of hurdles to fresh EU Treaty negotiations - some countries will want to avoid them like the plague - and even if the Germans can get them off the ground, the timing and scope (limited or full?), remains unclear. It is also still not fully clear whether the eurozone could circumvent the UK via an inter-governmental arrangement if the latter kicks up too much fuss.

But what's clear is that, in the land of ordnungspolitk, the idea of an EU treaty change is alive and well. So hör auf mit dem Blödsinn as the Germans would say.


Rik said...

1. Germany looks to have the Latino Bros by a sensitive organ.
If these want to get further with a banking union (and likely direct bank recap via ESM) they need Germany to agree. And Merkel looks to play chicken in that respect with them (and it is Mercedes against FIAT 500 so clear who is going to win that game when it goes wrong).
The South agrees they can continue with their banking union, they agree not they can forget it.

2. Looks like Dijsselbloom is already creating a parliamentary platform in Holland. Nearly all papers are mentioning a small treaty change will be necessary as a main quote. A sensitive issue in Holland as well.
Unlikely Germany uses this as a delaying tactic and let Dijsselbloom make an idiot out of himself.
Too many people involved to do that in too many countries anyway.

3. Doubtful if Germany will move if the UK makes a big fuss. Better to arrange things beforehand of course for both.
It is legal and the law doesnot change because of the fact the UK makes a fuss or not.
There is a clear opinion by the legal service of the Bundestag that it is required. Furthermore difficult to see a president signing this off otherwise.
Furthermore it gives them (Germany) a good reason to drop the nasty bit of the bankingunion for once and for all if there would be no treatychange.
And 3/4 of Cameron's nasty stuff is probably wanted by Merkel as well.

4. It becomes more and more clear that the contagion danger for the rest of the EZ was considerably hyped (has been reduced if you like). So likely to survive at home Northern governments will simply take a much stronger stand than before.

5. Personally I am not that impressed by a lot of the commentators and analyst. Unlikely yourself they have completely missed the fact that times have changed (commentators) and that decisionmaking is politically based and not economically (analysts). Pretty poor for people that are supposed to keep track as their main occupation of what is happening in Brussels. Simply howling with the other dogs iso using their brain.

Denis Cooper said...

Of course Germany hasn't gone off the idea of changing the treaties.

But they would be changes that the German government wanted, when the German government wanted them, and the assigned role of the governments of the other countries would just be to agree with what the German government wanted and keep the lid on any local discontent.

This became apparent back in 2010.

October 28th 2010:


"European Union leaders have come to a consensus that the bloc's treaty must be changed, although only in a limited fashion, in order to allow for the creation of a permanent bail-out fund for member states."

"Initially horrified at the Franco-German demand for a wholesale re-writing of the EU rulebook only a year after the Lisbon Treaty had been approved, the other EU leaders are now warming to the idea of a "limited" tweaking of the treaty in a way that they hope will avoid major political fall-out."

"Berlin in particular has been worried that while a long-term bail-out facility may be necessary on top of existing measures up to 2013, any permanent structure along could run afoul of treaty rules forbidding EU bail-outs of member states and be struck down by Germany's strict Constitutional Court.".

"Mr Van Rompuy would also explore whether legally this can be done without the tweak having to be presented to national parliaments for approval, which would almost certainly grind down the process, or even further, whether such a move would provoke referendums in some countries, notably Ireland, which maintains a constitutional requirement that any shift in powers from Dublin to Brussels be approved in a vote by the people."

Denis Cooper said...

Continued ...

October 29th 2010:


"European leaders have given way to German demands for a change to the European treaties, but the procedure for the change and its size has been calculated explicitly to avoid the danger that it could provoke referendums in some EU states.

In a significant victory for German Chancellor Angela Merkel, early on Friday (29 October), EU prime ministers and presidents backed "a limited treaty change" to deliver tighter fiscal discipline and allow for the creation of a permanent bail-out fund for members of the eurozone."

"Viritually all EU member states had vehemently opposed any treaty change going into the summit, but in the end they were convinced by Germany's need for the change in order to avoid a legal clash with its Karlsruhe-based Constitutional Court."

"Germany is worried that any permanent structure could run afoul of treaty rules forbidding EU bail-outs of member states and be struck down by the country's strict Constitutional Court, thus opening the euro once again to an assault by markets as occurred in the spring.

Caught between the need for a structural change and their fear of both the activism of Karlsruhe and the growing euroscepticism of citizens, the other leaders signed off on the move only so long as the change envisaged was "small, small, small - the smallest possible ... in order to ensure there is no possibility of referendums," in the words of a Danish diplomat speaking to EUobserver.

The method EU leaders chose to achieve the change will be via what is called the "special revision procedure," introduced by the Lisbon Treaty, under which the treaty can be amended by the European Council alone, so long as there is unanimity and the changes do not extend the competences of the European Union.

In this way, a full Intergovernmental Conference, normally required ahead of a treaty change and which involves consultations with the European Parliament and negotiations amongst the different member states, is also to be avoided.

"This leaves out the parliament and the possibility that different countries would come to the table with different things they want to add or take away from the treaty," the Danish diplomat continued. "We had to make sure that we did not open the Pandora's Box."

Ms Merkel was quite clear however, that the changes will deliver a "quantum leap" for the Union in terms of economic convergence between member states.

"This is a quantum leap as to the future handling of the treaty - especially the preventive arm for deficit procedures allowing for quasi-automatic sanctions," Ms Merkel told reporters after the summit. "One important measure I want to underline: the surveillance of competitiveness of country - so that council works as economic government you have all been asking me for."

Asked about concerns in the UK and the Netherlands about a potential referendum on the treaty changes, Ms Merkel explained: "That's why we have said 'limited changes,' limited to the crisis resolution mechanism that will be the object of it.""

Rik said...

Both Merkel and Germany and the EZ need a treaty change as you write.
She also likes more competitiveness for obvious reasons but also as it would mean part of the structural reforms the South is not doing at the moment.

Of course they donot like referenda and alike.

So that is what they like and Cameron likes a treatychange he can sell at home and preferably before the election.

And both have to sign off. Quid pro quo.
Cameron can easily use his backbenchers and the public opinion to force his hand. 'No treatychange without rights back'. Or order a referendum on a limited treatychange only covering the bankunion anyway as from that moment on all treatychanges will have to be approved via referenda. To show the UK public he is sincere about his promise.
Simply much too risky for the Eurobrigade to go that road.

She simply doesnot have much choice.

Denis Cooper said...

Rik -

Like the last one, that demanded by Merkel in 2010 as described above and embodied in European Council Decision 2011/199/EU, most of the EU treaty changes Merkel may want could be framed in such a way that Hague could again use his so-called "referendum lock" law to block a UK referendum.

Did you notice the UK having a referendum on that EU treaty change? No, because Hague ruled that because on paper it did not "apply" to the UK it only needed approval through an Act of Parliament.

And here is that Act, the European Union (Approval of Treaty Amendment Decision) Act 2012:


Anonymous said...

Denis - this was 2010.

The flavour of the month is bank bailouts by bondholders and savers, according to media coverage of Rehn's proposed directive.

The wealth tax proposal in Germany is unofficial and could be just a bit of Merkel politicking before her general election, although 'Conservative' Spain currently has a general wealth tax on residents with over €700,000 of assets anywhere in the world.

Further integration could be pursued via article 352, assuming unanimity, or by an intergovernmental treaty on the lines of the ESM, with the CJEU being asked to adjudicate.


Denis Cooper said...

Anonymous -

You mean that further integration could be pursued through abuse of Article 352 TFEU, otherwise known as the "we'll do as we damn well please" clause, despite Declaration 42 promising that it would not be abused:

"In any event, this Article cannot be used as a basis for the adoption of provisions whose effect would, in substance, be to amend the Treaties without following the procedure which they provide for that purpose."

But it should be noted that in May 2010 when the EU governments agreed to the illegal bail-out of Greece there was no attempt to legitimise the establishment of the EFSF by invoking Article 352 TFEU, indeed the Decision cited no legal base for doing that.

Denis Cooper said...

Here's the Irish Times still holding its pro-EU line, although with some difficulty and I wonder if the author has his tongue partly in his cheek:


"In the euro crisis, Berlin has wielded three instruments of torment to extract political concessions from EU partners.

The first two, labelled “constitutional court” and “Bundestag” respectively, are used by Berlin in late-night Brussels meetings to draw political lines in the sand. We’d love to give you this or that, German negotiators say apologetically, but we wouldn’t get it past Karlsruhe or the Bundestag."

"So was German finance minister Wolfgang Schäuble following this approach when, in Dublin last weekend, he extracted a third instrument from Berlin’s toolbox of political persuasion: treaty change?"

"The first is to ensure legal separation between the single supervisory mechanism (SSM) and the governing council of the European Central Bank. Non-euro European countries are not going to join the SSM without this, Berlin worries. This could be addressed with a limited treaty change, Berlin legal eagles believe, which might obviate the need for an Irish referendum.

Berlin’s second treaty change request involves plans for a European bank resolution mechanism to wind up problematic banks.

Neither treaty change has to happen in the short term, German officials say, nor are they belated political preconditions for allowing bank recapitalisations from the European Stability Mechanism."

Anonymous said...

Denis - 9:43am

Have had a look at your Declaration. It just says they're not supposed to do anything beyond the general framework of powers, which is so broad that there is probably not much you cannot fit into a catch-all.

Don't forget the EU was wily in getting the working time measure through as elf'n'safety when it was properly an employment measure.

Don't forget either that Declarations are not legally binding, and it is unlikely that the CJEU would object to creeping integration.


Anonymous said...

Denis - 9:43 am

Article 352 is essentially about the single market. I seem to remember the spin doctors telling us that the single currency was essential to complete the single market so anything to do with either could be fair game.


Rik said...

Hague could use his referendum lock if the changes are marginal.
But on the other hand Cameron and the rest of the party want to get reelected as well.
The latter looks clearly the present priority.
If they miss an excellent opportunity to reneg may be the best one in several decades they look like a bunch of jokes.

Hard to see as well that the backbenchrers woulf let them get away with it as well btw.

Cameron has to work on his credibility to get reelected. Not destroy it.
Just look at yourself how irritated you get just by the thought he will do a u-turn again. And like yourself there are probably 30% (my guess) others in the electorate. 15% UKIP and 15% pro demecracy whatever the outcome.
You can say reelection goodbye and put the UKIP permanetly on the map.

There are no absolute certainties but hard to see it otherwise that Germany needs a treatychange. The other Euro bunch simply have to agree or nothing goes re banking union. And Cameron will make his demands clear for giving his approval.