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Member states warm to proposals to tighten EU budget rules

4 min

The European Union on Thursday looked ready to support changes to the Lisbon Treaty backed by Germany and France that would tighten budget rules, including sanctions on member states that fail to keep their deficits and debt in check.


REUTERS - The European Union signalled on Thursday it was ready to back calls by Germany and France for limited changes to the bloc's main treaty to shore up Europe's defences against any new financial crises.

EU leaders were expected at a two-day summit to sign off on a new set of budget rules, including sanctions for states that fail to keep deficits and debt in check, to help cope with any new sovereign debt problems like those in Greece.
Despite initial hostility to the proposals from Germany and France, the bloc's dominant powers, comments by leaders showed support was growing for changes to the Lisbon treaty so that a permanent system can be created to handle sovereign debt crises.
Some leaders oppose far-reaching changes, partly because amending a charter that took eight years to negotiate and became law only 10 months ago would struggle to win public support, but many said they would back limited changes if they were needed.
The leaders are aware that any sign that they are scaling back efforts to tighten budget discipline could unsettle financial markets worried by debt problems in euro zone countries such as Portugal, Ireland and Greece.
"I will make clear today that, in my view, a politics that puts the euro as a whole in danger, that brings the monetary union in danger, is a politics that also rocks the basic tenets of the European Union," German Chancellor Angela Merkel told reporters as she arrived at the EU headquarters for the summit.
"We need a mechanism that also includes banks and funds that earn high interest and that it is not just the taxpayer who has sole responsibility," she said, reiterating how she believes the permanent system should work.
She repeated calls for euro zone countries to have their voting rights suspended at meetings if they fail keep their budgets in check. But most other countries said this was unacceptable and the demand was expected to be blocked.
Growing momentum
Germany wants limited treaty alterations to ensure there is a permanent and legally sound crisis-resolution system in place for countries that use the euro. It has threatened to block the budget reforms if no deal is reached.
Many of the EU's 27 member states see the logic in Germany's proposal and could support it in principle, but need convincing that a change to the treaty is needed to set up the mechanism, and want any agreed amendments to be narrowly defined.
Any change to an EU treaty must be approved unanimously and ratified by all member states, either in a vote of parliament or via a referendum. The European Parliament should also agree.
In a sign that momentum towards treaty change was growing, countries such as Finland, Greece, Sweden and Britain, along with Poland, Slovakia and Ireland, signalled they would support limited amendments, although Warsaw linked its support to a deal on pension reforms.
"The euro area needs a credible permanent crisis mechanism to ensure the financial stability of the euro area as a whole," said Finnish Prime Minister Mari Kiviniemi, whose country had said earlier this week it opposed such moves.
"If this new system requires treaty change, then treaty change should be done."
European Commission President Jose Manuel Barroso said treaty change could be discussed if it was needed to improve the EU's ability to respond to economic and financial crises.
France's European affairs minister, Pierre Lellouche, said in Berlin that countries were warming to the Franco-German position, which he called a gift to Europe.
Mandate for Council, Commission
EU sources said the leaders were expected to give a mandate to the Commission and to Herman Van Rompuy, the president of the EU Council which represents the member states' governments, to work out how the treaty could be amended.
"Van Rompuy will receive a mandate to talk to the 27 member states on the opportunity for a treaty reform. And the Commission will receive a mandate to explore the technical modalities of such a reform," a senior EU source said.
In an agreement struck in the northern French town of Deauville on Oct. 18, Merkel and French President Nicolas Sarkozy said they wanted concrete treaty change proposals on the table before an EU summit next March.
Germany wants to have the changes in force before the 2013 expiry of the EU's temporary mechanism for handling the euro zone debt crisis, a 440-billion-euro ($600-billion) IMF-backed fund called the European Financial Stability Fund (EFSF).
The EFSF is taxpayer-funded and Germany fears it could violate a clause in the Lisbon treaty against bailouts. It has faced legal challenges in Germany's constitutional court.
Britain, which opposes any treaty amendments that could transfer more power to Brussels, has indicated it could back the proposal if it affects only the euro zone. Ireland said it hoped to avoid holding a referendum on treaty change.


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