Cause and Effect in European Politics and Law

Is the EU ready for a new Treaty?

Ralitsa Kovacheva, September 7, 2011

“Europe has always moved forward one step at a time and it should continue to do so. This does not mean that fiscal policy in the eurozone should not gradually become more centralised. It should, as long as this process is legitimised by a strong democratic mandate. But strengthening the architecture of the eurozone will need time. It may need profound treaty changes, which will not happen overnight. But the direction is not disputed.”

These words belong to German Finance Minister Wolfgang Schäuble and are part of his article published in The Financial Times on 5 September 2011. For the second time in only a few days Wolfgang Schäuble is talking about the need of treaty changes to strengthen the economic and fiscal governance of the eurozone. On the same day - 5 September 2011 Andrew Duff, MEP (ALDE, UK), who is known as an outspoken European federalist, wrote as well: “The European Union must take a decisive step towards a federal economic government, with common fiscal policies and a larger budget, if it is to save the euro. […] Therefore a major revision of the EU treaties can no longer be avoided.”

At their meeting on 16 August the leaders of France and Germany, Nicolas Sarkozy and Angela Merkel, have proposed the creation of a government of the eurozone headed by European Council President Herman Van Rompuy. The goal is the same – much closer coordination of economic and financial policies of the euro area. There is, however, a substantial difference - the European leaders are trying to avoid changing the Treaties, especially when that requires referenda in some member states. So they prefer “the intergovernmental approach”, which regularly provokes the wrath of European institutions, most notably of the European Parliament. But Wolfgang Schäuble's words are a sign that the cautious attitude to treaty changes is about to change.

At this stage it is obvious that all want “more Europe”. The question is how the different actors imagine it

The idea of a political union attracts the EU founding countries from the outset and has always been a dream of the European Federalists. In the 1990s it was subjected to severe tests (while drafting the Maastricht, the Amsterdam and the Nice Treaties), but it collapsed after the failure of the Constitution Treaty (rejected in the referenda in France and the Netherlands in 2005).

In 1994, Wolfgang Schäuble, then chairman of the CDU group in the Bundestag, launched his idea of a “core Europe”. According to him, this should be a group of countries, led by Germany and France, to coordinate more closely their policies and to serve as an example for others, thus having a “centripetal effect” for the EU. From today's perspective, an important detail is that according to Schäuble this should be implemented within the existing European institutions, without creating parallel structures.

A more important detail is that this ‘hard core’ of the future political union should be formed by the eurozone countries. “In the 1990s, a central feature about the European debate in Germany was the conviction that there should be no monetary union without political union. In this ‘crowning theory’, the euro should be the result of a political union, not the condition for it […] The French pursued the same idea, arguing for the establishment of a ‘government économique’,” Heather Grabbe and Ulrike Guérot noted in their article from 2004 (at the time Heather Grabbe was deputy director of the Centre for European Reform and now is a Director of the Open Society Institute Brussels. Ulrike Guérot was a director of foreign policy (Europe) at the German Marshall Fund and now she is a Head of the Berlin Office of the European Council on Foreign Relations.)

After the failure of the European Constitution, the “core Europe” concept has changed - the hope for a political union was scalded and “the hard core” had already been seen not as a way to achieve more federalism, but as an alternative to it, Heather Grabbe and Ulrike Guérot wrote. “The core” had been already understood as a group of several countries, excluding the others. Joschka Fischer (former Foreign Minister of Germany) has talked about a "European avant-garde" and former French President Jacques Chirac – about a "pioneer group" of countries willing to go further than the others in integration, the authors recalled.

And “the others” have become much more - with the largest EU enlargement in 2004 (10 countries) and the last one in 2007 (Bulgaria and Romania). The Union has become more inhomogeneous, cumbersome and difficult to manage. The attempts to simplify the process of decision-making have ended with further complication. Against this background, the Franco-German leadership has increasingly been perceived not as a driving force of the EU, but as a threat to the interests of the small and the new member states.

However, the debate about the future of the federalist idea would have probably remained purely philosophical for a long time, had the debt crisis not struck the eurozone. The need for “saving” troubled countries and eventually, the Monetary Union itself, sparked again the debate about the deeper integration of the euro zone and revived the idea of Schäuble for the European core. Today, however, the situation is much changed, compared to 1994. The eurozone consists of 17 countries, which are very different in economic terms (exactly as a result of the lack of common economic policies). We talk about “core” and “periphery” of the euro area, but also about the “North” and “South”, as not all of the “core” countries belong to the “North” as an example of successful economic development.

Moreover, there are 10 more countries in the EU, of which only 3 (Great Britain, Denmark and Sweden) have a choice whether to adopt the euro, while for others the question is not whether but when. The issue of eurozone governance cannot be considered without taking into account how the separation of the current 17 euro area Member States would affect the potential 7 new members (for now) to join the EMU in the foreseeable future. The threat of a “two-speed Europe” is here again, if there has ever been a different situation at all.

Unlike France, Germany has always been opposed to the concept of a two-speed Europe. Recent events, however, apparently have changed the German position - Wolfgang Schäuble was quoted as saying that far-reaching financial governance reforms were needed to solve the debt crisis, no matter how difficult a treaty change would be and even if the result could be a complete separation of the eurozone countries from the rest.

Even assuming that “the rest” may be “sacrificed” if this is the price to save the euro, there still remains another serious issue: how to organise eurozone's governance in purely institutional terms. Here we have a serious discrepancy in the views. France and Germany clearly prefer to resolve the issues at an intergovernmental level - remember the Euro Plus Pact and the proposed government of the eurozone. The European institutions uphold “the community approach” and try to enforce the overall economic governance of the EU (the package of 6 legislative proposals on the matter is blocked in negotiations between Parliament and the Council), although there is also a different regime envisaged for the euro area and the rest.

The question is, as noted by Wolfgang Schäuble too, that this is not enough and a centralised governance of the eurozone is needed. To that end Member States need to cede part of their sovereignty to a central authority, which would require changes in the EU Treaty and maybe even a new Treaty. Another interesting question is what this central authority should be - whether it would be the eurozone government as proposed by Merkel and Sarkozy, or the European Commission, or the European Parliament. The President of the European Central Bank Jean-Claude Trichet has launched the idea of a European Finance Ministry.

MEP Andrew Duff believes that the time has come for drastic reforms. The Lisbon Treaty should be transformed “into a more durable constitutional settlement for the EU” as “the new form of EU federal government will require the creation of an EU treasury and the integration of the presidencies of the European Commission and European Council.” Member States, which do not want to participate in this “political union” to be offered a new form of associate membership, the lawmaker suggested.

Former German Chancellor Gerhard Schroeder, in turn, launched the idea of United States of Europe. In an interview with Der Spiegel magazine, he argues that the Commission should become a government, controlled by Parliament. “National parliaments cannot be expected to accept a loss of sovereignty on budgetary matters without parliamentary control mechanisms being implemented elsewhere,” he noted. “The Commission or a European finance minister will have to retain the right of initiative, but the control mechanisms will have to be democratised.” This means that decisions should be taken by the national parliaments and ultimately - by the European Parliament. It is curious to note that the former German chancellor does not speak simply on his behalf but as a member of the recently founded Council for the Future of Europe along with former British Prime Minister Tony Blair, former Spanish Prime Minister Felipe Gonzalez and former European Commission President Jacques Delors.

Is the EU ready to touch the Lisbon Treaty again after its painful adoption? Will the power struggle between the different centres (the Parliament, the Commission, the Member States as the Council and the Member States among themselves) shift the focus of attention from the real purpose of potential treaty changes? Is the EU ready to lead the debate on a political union from a pragmatic point of view, because it is no longer about a philosophical dispute, but about the survival of the Economic and Monetary Union? How long can be delayed the finding of a cardinal solution, given the speed which the debt crisis spreads by? At this stage all seem to prefer palliative solutions. It is true that there are many issues to discuss, many interests to protect and much to lose. The only thing missing is time.