Emergency narrow treaty change now, political union later

“At the moment, when you have a raging fire around the euro, the idea that now, especially if proposals are for quite a narrow treaty change, to say, that this is to be the moment for a complete rewrite of Lisbon, that's not real,” said the official. “I don't think that anyone is seriously proposing going down that route.”

The likelihood of the markets waiting around for the lengthy process of winning public backing for such far-reaching changes is non-existent. The more surgical the treaty change, the greater the probability of it overcoming the various domestic political hurdles it will face.

“For now, what the Germans want is an emergency, narrow treaty change," the official continued. "It is a matter of immediate needs versus a more long term change ... Integration will be an incremental process."

There have been suggestions that if treaty changes would not be possible at the level of the 27 EU member states due to objections from the likes of the UK or the Czech Republic, both non-euro countries with powerful eurosceptic government factions and popular sentiment, Merkel would push for an intergovernmental treaty between eurozone states alone.

However, Britain does not believe Germany will likely be satisfied by anything other than treaty change at 27, as the ECJ is the property of the full EU, not the eurozone.

"It is difficult to see how they can achieve their objectives through an intergovernmental agreement if their key objective is the use of the court to enforce budget discipline."

The creation of a separate eurozone court would in theory be legally possible, but certainly messy.

While there are no papers or formal proposals making the rounds of the European chancellories, it is understood that Germany has been talking about a tweak to Article 126 of the EU treaty - the clause requires states to avoid excessive deficits - with the aim of re-opening the debate about countries that breach the Stability and Growth Pact, the bloc’s fiscal rulebook.

The plan would see the ECJ given the power to impose sanctions automatically without having to have such a move pass through the European Council, the body composed of the bloc’s premiers and presidents.

If sanctions and fines were wielded by judges instead of politicians, there would no longer be any fear on the part of the markets that the imposition of sanctions could still in principle be voted down.

The goal of full political union meanwhile would only take place at some time in the future. The UK believes that there is an expectation of greater political integration, but it will only happen incrementally.

However, while Berlin does indeed appear to be looking at a two-stage process, it may be considerably more advanced than a minor treaty change to tighten fiscal oversight followed by a longer-term effort toward political integration that is just a political dream.

Merkel wants more than a tweak of the treaty in the short term, and the federalist fervour at the CDU convention is more than just a party activist’s pipe dream.

The chancellor is looking at a two-stage process where by the end of next year, amendments can be made both to offer up sanction-wielding power to the EU’s top court, but also to create a super-commissioner who can set guidelines for a heavily indebted country akin the Dutch government’s proposal issued in September of making delinquent states wards of the commission.

The second stage, according to a report in Spiegel magazine, would then be a push toward full political union, grounded by an amendment to the German constitution to allow this. Such a radical move would be achieved by a two-thirds majority in both of the country’s two parliamentary chambers, or, more ambitiously, a national referendum.

Nevertheless, the German weekly reports that while Merkel and her finance minister, Wolfgang Schaeuble back the plan, the foreign ministry believes such plans are overambitious and favour just a rapid amendment of the EU treaties to deliver a ‘Stability Union’.