Shifts on the New Fiscal Compact

The EU Observer has reported some changes in the drafts on the new fiscal compact:

"The role of the EU commission in taking debt sinners to court for not properly transposing the golden rule into national law, an idea introduced in the second draft at the demand of the European Parliament, has also been watered down to the commission "issuing a report" at the demand of another country adhering to the pact.

The power of taking countries to court is instead to reside with countries - a u-turn going back to the first draft - after French worries the commission risks becoming too powerful.

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Another watering down of earlier drafts rules out introducing new sanctions for countries that break rules on overall public debt, opting instead to limit such penalties to ballooning budget deficits.

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The 'working group' which is pumping out the texts - a mixed bag of member states' officials led by a Luxemburger - kept another EU parliament demand, to enshrine the intergovernmental pact in EU Treaty law in the next five years.

But it also changed the threshold of countries needed to ratify the pact for it to come into force from 15 to 12. In the first draft, the threshold was even lower, at nine countries."

The "golden rule" on deficits will no longer have to be inserted into constitutions, so the final deal could simply require an act of parliament to ensure governments don't spend over a certain limit. This would get around the need for referendums in several Member States, but it could open up political problems in the future if budgets passed by parliaments are being challenged by other EU countries in the courts - a potentially politically toxic situation.

France's position on the Commission's powers is revealing and worrying for the credibility of the pact. Given that it's simply a Stability and Growth Pact Plus, further entrenching the current rules, the institutional and political credibility of the mechanisms actually working was the key problem. Of course, if any contracting country can take another to court, then it's more likely to happen than under the current system which requires a vote in Council. Still, France wants the Commission to be kept away from this position of power because diplomacy could still influence the outcome - and this would be much more advantageous to larger Member States who could throw their weight around more. The potential for differences in treatment echo the complaints from the smaller Member States that France and Germany were among the first to break the Stability and Growth Pact in the last decade. Also, the value of integrating the deal into the current treaties for the European Parliament is questionable if the Commission's role is minimal, since there would be little for the EP to act on.

Finally, setting the minimum number of Member States at 12 for the treaty to come into effect will, if it's in the final draft, have a big effect in the parliamentary votes and referendum campaigns as it ensures that even some Eurozone states could reject it (and stay outside it), and the deal wouldn't be completely stopped. The fear of exclusion (and the effect of this on the economies of the excluded Eurozone States) will make opposing the deal more problematic, and it will be a major feature of the Yes campaigns.



UPDATE: Honor Mahony has written a good blog on the problems these shifts reveal for the future of the negotiations.