ANALYSIS:The demand for loss of voting rights could be a negotiating tactic
LIGHT WAS fading in Brussels as EU leaders gathered yesterday for their sixth summit of the year, under pressure yet again to resolve a deep political schism over the single currency.
The divisions pit German chancellor Angela Merkel and French president Nicolas Sarkozy against nearly everyone else. But such is the force of Franco-German alliance that their two leaders cannot lightly be dismissed.
In question was whether a formula could be found to keep everyone happy in the eternal debate on economic governance.
Merkel is pushing two sets of controversial measures to strengthen the euro system. First, she wants new powers to deprive countries which breach EU budget rules of their voting rights. Second, she wants to establish a permanent rescue mechanism for distressed countries to replace the temporary schemes in place since May.
The first of these proposals has raised a storm of objections in European capitals.
Not only is the suspension of voting rights at odds with democratic principles, such a measure would also require an overhaul of the Lisbon Treaty, enacted less than 11 months after an eight-year negotiation and considerable turmoil in Ireland.
Taoiseach Brian Cowen says the plan is a non-runner, as do many of his counterparts. While Merkel was still sticking to her demand, some diplomats see her pursuit of this objective as a negotiating tactic to win decisive support for her second proposal.
There may be good reason for this, for the chancellor fears that Germany’s constitutional court will issue an adverse ruling on the EU rescue of Greece and the use of an ad hoc rescue scheme for any other euro country. She is also concerned the unwinding of the ad hoc scheme in 2013 – during Ireland’s EU presidency – would cause further market turmoil if no replacement is agreed.
A succession of leaders lined up in favour of the permanent scheme but many of them have concerns of their own. Some disagree, for instance, that treaty change is required at all.
In addition, Merkel’s push to include “orderly” insolvency procedures in the rescue mechanism has fuelled anxiety that weaker countries would pay higher interest on their debt to compensate investors for an increased default risk.
Further concern surrounds the risk of financial volatility erupting in the event of sovereign default in the euro zone, something the Greek rescue was designed to avoid.
Despite these concerns, the clear sense is that the chancellor won’t back down and that some kind of an accommodation will have to be reached.
This is where the process game in the EU comes into play. Even if the leaders were unanimously agreed on the merits of a particular proposal, they would never agree to an abrupt policy departure with treaty implications.
Such a move would have to be examined in detail; and the person who conducts such studies these days is Herman Van Rompuy, president of the European Council. It was close to certain last night that the summit would invite him to examine Merkel’s proposals, an option that has the advantage of postponing the definitive settlement of divisions around the table.
Still, the big political question centres on scope of Van Rompuy’s mandate. Merkel’s power is such that the leaders were unlikely to rule out treaty change outright in the mandate. At issue, therefore, was whether Van Rompuy was asked to examine narrow treaty changes by way of a simplified revision procedure or a fuller rewrite by way of a more complex overhaul procedure.
The thinking goes that the suspension of voting rights requires a big revision. Therefore, a mandate for Van Rompuy that didn’t hold out that possibility would represent defeat for Merkel.
Diplomats believe the simplified revision procedure – in essence a streamlined format – could be deployed to create a permanent rescue scheme. Whether a change effected in this way would require another Irish referendum remains to be soon. It is clear, however, that Cowen’s preference for minimal change is rooted in his desire to avoid just that.
