Sunday

27th May 2018

Twenty five EU leaders sign German-model fiscal treaty

  • Merkel and Van Rompuy - the treaty was drafted under heavy influence from Berlin (Photo: consilium.europa.eu)

Germany's vision of an EU of fiscally prudent states held in check by tight budgetary laws and the threat of legal action came a step closer on Friday (2 March) when 25 leaders signed a new treaty on fiscal discipline.

In a low-key signing ceremony, all countries except the UK and the Czech Republic, became signatories to the 16-article pact, which, after going under a variety of monikers, has now been lumbered with the title "Treaty on stability, co-ordination and governance in the economic and monetary union."

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

"Its effects will be deep and long-lasting." said EU council president Herman Van Rompuy ahead of the signing, adding that it will help prevent a "repetition of the debt crisis."

In line with Berlin's wishes, the text includes an article obliging those that ratify it to enshrine a balanced budget into national law, while a country breaching the budget deficit rules will be subject to intense surveillance, with curbed discretionary spending powers, and obliged to carry out an agreed list of structural reforms.

Ahead of the signing, German Chancellor Angela Merkel said the treaty represented a "strong signal" on how the EU is dealing with the eurozone crisis and spoke of a "politically unified Europe" of the future.

The treaty was drawn up in a record two months but it is an only intergovernmental agreement, after the UK in December vetoed a full-blown EU treaty change.

The awkward status - outside the EU's normal architecture - has had lawyers scratching their heads over how to get EU institutions to implement it. It has also weakened the treaty's bite as countries breaching the implementation of the balanced budget rules can only be brought to court by another member state - a politically difficult option.

The treaty will go into force once 12 of the 17 euro countries have ratified it, and only those that have done so will have access to the eurozone's permanent bail-out fund, the ESM - a provision pushed by Berlin.

The agreement foresees that eurozone country leaders will hold summits twice a year, an arrangement that some non-euro countries fear will fortify divisions between the 'ins' and 'outs.'

Designed to ease German political and public opposition to further bail-outs, critics say the treaty, with its belt-tightening focus, risks worsening Europe's struggling economy.

The biggest debate on the treaty is likely to be in Ireland where it will be put to a referendum - the debate has already started about what concessions Ireland should seek to sweeten the vote for a population looking to vent its anger at having to foot the bill for bad behaviour by banks.

Another wrinkle in German Chancellor Angela Merkel's plan is the possible election of Francois Hollande as French President later this spring.

Hollande - while backpedalling on previous, much stronger comments - has said he wants the treaty to have more emphasis on growth and questioned the exact role of the European court.

Ireland to hold referendum on fiscal compact

The Irish government will hold a referendum on the EU's new fiscal treaty. The pact can still enter into force in other euro-countries if it says No, but Dublin would not be eligible for future bail-outs.

Legal challenges may delay eurozone bail-out fund

Legal challenges in Germany, Ireland and Estonia, as well as political uncertainty in the Netherlands, may delay the setting up of a permanent eurozone bail-out fund at a time when Spain's economic woes require a strong firewall.

Opinion

The dangers of resurgent nationalism in Greece

Virulent nationalism in Greece has been stirred up in the context of austerity and renewed negotiations with Macedonia. Recent attempts by the government to address the inequalities suffered by LGBT persons have also been met with a reactionary backlash.

Opinion

Linking EU funds to 'rule of law' is innovative - but vague

Defining what constitutes 'rule of law' violations may be more difficult than the EU Commission proposes, as it tries to link cohesion funds in east Europe to judicial independence. A key question will be who is to 'judge' those judges?

News in Brief

  1. Italy set to pick eurosceptic finance minister
  2. UK foreign minister fooled by Russian pranksters
  3. Rajoy ally gets 33 years in jail for corruption
  4. Close race as polls open in Irish abortion referendum
  5. Gazprom accepts EU conditions on gas supplies
  6. Facebook tells MEPs: non-users are not profiled
  7. Commission proposes ending France deficit procedure
  8. UK households hit with Brexit income loss

Stakeholders' Highlights

  1. Counter BalanceEuropean Ombudsman requests more lending transparency from European Investment Bank
  2. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  3. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  4. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  5. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  6. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  7. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  8. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  9. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  10. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  11. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  12. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach