Summit Seen Backing 'Merkozy' Plan - But Then What?

Spiegel
December 7, 2011

The pressure on the euro zone is so great that the German-French plan for treaty changes to punish budget rule-breakers is likely to be approved at a make-or-break EU summit starting Thursday. But it could still be thwarted by political wrangling in the coming months.

Last-minute discussions are underway ahead of the EU summit on Thursday and Friday that could decide the fate of the single currency. A French-German plan for European treaty changes to enshrine automatic sanctions is likely to be approved by leaders, but their three-month timetable for the amendments to come into force looks highly ambitious, and could be upset by post-summit horsetrading and ratification votes.

Officials from the EU member states are also discussing the option of doubling the firepower of the euro bailout fund at the summit, the Financial Times reported on Wednesday. The report, citing senior European officials, said the the temporary European Financial Stability Facility (EFSF) bailout fund could be strengthened by keeping it going even after the permanent fund that had been due to replace it comes into force in 2012.

The EFSF has available assets totalling €440 billion, and the European Stability Mechanism (ESM), the replacement long-term fund, will have €500 billion at its disposal.

The leaders of Germany and France, Chancellor Angela Merkel and President Nicolas Sarkozy, agreed on Monday that the launch of the ESM should be brought forward to 2012 from 2013 to help calm markets.

They also proposed rapid changes to the European treaties in order to enforce budget discipline across the euro zone through automatic sanctions and budget-balancing rules enshrined in national constitutions.

If everything goes according to their plan, the amendments would take effect next March -- either among all the EU's 27 members or just among the 17 euro countries. But it's uncertain whether such rapid treaty changes will be possible. The EU struggled for almost a decade to put the Lisbon Treaty in place.

Though France and Germany are only proposing amendments to existing agreements, their plan for rescuing the euro by whipping treaty changes through in just three months looks more than ambitious.

The devil is in the detail. And history has shown that the Europeans can spend ages passionately arguing about details.

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