Financial Times
December 11, 2011
The European Union last week destroyed the illusion that the eurozone and the UK could happily coexist inside the EU. That may have made it a historic summit. But the decision to set up a fiscal union outside the European treaties will do nothing whatsoever to resolve the eurozone crisis.
There are different notions of a fiscal union – some more integrated, some less so, some obsessed with fiscal discipline, others with a joint bond. But whichever your preference, this is not something you would wish to do outside European treaties. The existing treaties form the legal basis for all policy co-ordination of monetary union. It gets very messy when you try to circumvent them.
Changing a treaty is a big deal and I understand why there is not much appetite. Everybody still remembers the failed constitutional treaty of the last decade. What is now known as the Lisbon treaty took almost 10 years from inception to ratification. A new treaty requires every member’s consent, a convention, an intergovernmental conference, a final agreement by the European Council and the European parliament, and then ratification by each country, some by referendum.
Germany understood perfectly well that its proposals would require a full-blown treaty change. The involvement of the European Court of Justice as an enforcer of fiscal rules cannot be achieved otherwise. I disagree with the content of the German proposals and the one-sided fixation on fiscal discipline. But I agree with the legal judgment: if you want a fiscal union, nothing less than a full treaty change will do. If the EU had accepted the idea, a treaty convention might have produced a much more balanced fiscal union that the one Germany and France now want to create in a fast-track separate treaty.
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