NO LESS than three separate moves are now under way in Europe to toughen the enforcement of the EU’s long neglected budgetary rules.
Whatever the fine grain of the eventual compromise, the Government and future Irish administrations can expect ever increasing oversight of their fiscal policies.
This is to say nothing of the increasing possibility that Taoiseach Enda Kenny will have to fight a European referendum at a time when onerous austerity policies linked to the EU-IMF bailout are biting hard. If that sounds like an impossible mission, Mr Kenny may not have choice in the matter.
The rush to deepen the integration of Europe’s divergent economies comes amid a drastic escalation of the debt emergency.
Anxiety about a very poor investor response to a German bond auction on Wednesday may well prove overdone. Still, the rise in borrowing costs for France, Austria, Belgium and the Netherlands points to a new level of disruption.
The situation is increasingly urgent. As supposedly secure countries feel the heat, expectation is building that fevered debate over Europe’s chaotic response to the crisis will turn soon to some kind of an endgame.
EU leaders are due in Brussels for a summit in a fortnight. As market turmoil intensifies, they are under pressure to deliver yet another “big bang”.
There is little certainty. But a meeting in Strasbourg between German chancellor Angela Merkel, French president Nicolas Sarkozy and Italy’s newly installed technocratic prime minister Mario Monti served up some vital clues.
The first was Sarkozy’s abrupt retreat from his drive to radically expand the mandate of the European Central Bank. Dr Merkel simply brushed this off, leaving her closest ally with nothing to show for an intensive diplomatic push to give the ECB a new role. The chancellor wants no truck with anything which would see the central bank print money to hand to errant euro zone governments. Sarkozy backed down.
This leads us to the second clue. Dr Merkel still rejects eurobonds – debt with a common euro zone guarantee – but she signalled she might yet accept the introduction of such scheme if firm moves were made towards the alignment of fiscal policies throughout the single currency area. This is in line with increasingly public whispers from Berlin, where the expression “never say never” is in vogue.
As the chancellor emphasises, however, there would have to be a big leap forward in the integration of the euro zone economies. In defiance of her many critics, she says this can be achieved only on the back of a reinforced EU treaty.
Among other objectives, she wants recalcitrant governments to face the might of the European Court of Justice if they consistently break budget rules.
Dr Merkel and Mr Sarkozy will submit a joint proposal on treaty change before the summit.
This is viewed with deep unease in Dublin, given the requirement for a referendum to facilitate the transfer of any appreciable new powers to Europe. However, Dr Merkel is no mood to back down.
Her plan comes on top of a new legislative initiative from the European Commission, which was made public just two days ago. In addition to all that, European Council president Herman Van Rompuy is working on his own set of proposals to strengthen economic governance within the euro zone.
The commission does not want treaty change and neither does Mr Van Rompuy. In the view of commission president José Manuel Barroso, there is sufficient scope within article 136 of the EU treaty – which empowers the authorities to take measures specific to the euro zone – to achieve the requisite strengthening of the system.
Mr Van Rompuy is wary of prompting British claims for a repatriation of powers from Brussels if the treaty is reopened. Therefore, he is working to achieve maximum flexibility within the law as its stands.
Just as Mr Sarkozy did yesterday, however, all the signals suggest that the rest of Europe will have to follow Dr Merkel.
While treaty change may well become the price of eurobonds, the increased external scrutiny of national budget can be expected to be pretty severe.
Nothing tried to date has succeeded in restoring shattered confidence in the single currency project.
Time is running out.
