Cause and Effect in European Politics and Law

Brussels is Preparing for the Last European Council This Year

Ralitsa Kovacheva, December 7, 2011

The leaders of the 27 EU countries are gathering in Brussels on 8 December for their last European Council this year. The expectations are high, given the gloomy predictions that the final countdown for the euro area is running. The leaders have already received the report of European Council President Herman Van Rompuy on the possible measures to strengthen the economic union. France and Germany have also come up with proposals formulated in a letter to President Van Rompuy.

Paris and Berlin insist on Treaty changes, introducing automatic sanctions: should a state fail to comply with the budget deficit regulations sanctions will be imposed automatically, which could only be prevented if a qualified majority of 85 percent vote against the measure, the German government explained in an official statement. All 27 countries (or at least the 17 eurozone members) must introduce a golden rule for a balanced budget, while “the European Court should be able to determine whether or not the national legislation in member states guarantees the binding nature of compliance with the permissible debt ceiling,” Merkel and Sarkozy want.

At this stage we do not know whether the Franco-German proposals coincide with the ideas in the report of Van Rompuy. In Brussels, however, some say informally that the President of the European Council has devised a legal trick to avoid Treaty changes. This could happen with a change only of protocol 12, which refers to the excessive deficit procedure and sets ceilings on debt and deficit. According to President Van Rompuy, more stringent rules could be introduced via changing this protocol, which will not be considered as Treaty changes and will not require ratification by national parliaments. The European Central Bank and the European Parliament will only be consulted. The leaders of France and Germany, however, are still talking about Treaty changes, so it is to be seen what this means in legal terms.

It will be interesting to see the reactions of the non-euro countries to the proposed changes. Poland has already made clear that it opposed changes only for the euro area. The UK will try to trade its support for changes against protection of the interests of the City of London, especially with regard to the insistence of France and Germany for a Financial Transaction Tax.

In addition, Merkel and Sarkozy offer the leaders of the eurozone countries to meet once a month as "an economic governance body." Both countries want the permanent rescue fund - the European Stability Mechanism (ESM), to enter into force earlier than initially envisaged - by the end of 2012. An interesting detail in the statement by the two leaders from 5 December is that although they confirm the private creditors participation, according to the IMF rules, it is explicitly stated that Greece is “one-off case” that should not be repeated. "It must be clear that government bonds are a safe investment," Angela Merkel said.

A year ago, in an attempt to persuade the Bundestag to support the ESM, she said: "Have politicians got the courage to make those who earn money share in the risk as well? Or is dealing in government debt the only business in the world economy that involves no risk? This is about the primacy of politics, this is about the limits of the markets”. Apparently in the last year it became clear that we cannot even talk about the “primacy”, but at least some balance could be sought, albeit with varying success.

The summit will begin with an informal dinner on 8th of December and will continue on December 9, focusing on the measures against the crisis and strengthening economic governance. In this difficult moment for the union, the leaders will welcome its newest 28th member - Croatia will sign its accession Treaty on 9 December 2011, and will be a full EU member from 2013.