GERMANY IS pushing back forcefully against moves to dilute any requirement for constitutional limits on debt and deficits in Europe’s new fiscal treaty.
Berlin’s tough stance could frustrate the Government’s effort to avoid having to call a referendum on the treaty.
Disagreement over the legal character of a new “golden rule” binding governments to keep their national debt and budget deficits within EU limits has emerged as a key sticking point in talks on the treaty.
Germany insists the rule should be enshrined in constitutions. That would necessitate a referendum in Ireland, something viewed with trepidation in Dublin as the Government fears a bruising defeat.
As an alternative, the Government believes member states should be allowed to enact the golden rule in secondary legislation.
No referendum would be required in that case, although questions remains over whether a poll would be required to ratify the wider treaty package.
At the behest of the Irish and other governments, the latest draft of the pact was changed to say the rule could be applied through “provisions of binding force and permanent character, preferably constitutional, that are guaranteed to be respected throughout the national budgetary processes”.
The previous draft said the rule should be put in place on a constitutional “or equivalent” footing. The Government believed this left leeway to deploy secondary legislation, but Germany wants to avoid that option.
In talks on Thursday, German negotiators are understood to have argued that the new draft was insufficient as it would be open to parliaments to water down the legislation on the rule in the future.
However, member states are set to grant a separate German demand that any country that fails to ratify the new treaty should not be entitled to receive emergency aid from the new permanent bailout fund, due to come into force later this year.
The final text remains to be finalised, although governments are agreed on the principle.
Even though Dublin insists it will have no requirement for a second European Union-International Monetary Fund bailout, this would intensify pressure on it to ratify the treaty.
The Government will have no veto over the pact, as EU leaders have decided that unanimous endorsement by the euro zone countries will not be required.
However, the number of countries required to ratify the treaty before it takes effect has to be negotiated.
Also unclear are the exact provisions related to the governance of the euro zone and the co-ordination of economic policy.
The big question is whether a referendum would be required in Ireland.
At one level, the Government wants to ensure the measures in the treaty fall, to the greatest extent possible, within the ambit of existing secondary legislation that binds it to observe EU budget rules.
Such provisions would not involve a transfer of new powers to Europe so they would not on their own – on the face of it, at least – necessitate a referendum.
At another level, however, treaty drafts include new provisions binding governments to introduce automatic correction mechanisms to keep deficits and debt in check in the event of a deviation from EU limits.
That would curtail a government’s room for manoeuvre and, as such, could be deemed to transfer appreciable powers away from the State.
At the same time, member states are already obliged under EU law to reduce their national debt each year by one-twentieth of the debt amount that exceeds 60 per cent of gross domestic product.
As the negotiation of the treaty continues, the European Central Bank has been persistently pushing away in the background for a significant strengthening of the draft treaty to ensure the enforcement of Europe’s economic rules.