After months of proposals and negotiations behind closed doors the efforts of the European Commission to improve and make more effective existing rules regarding the debt and deficit levels in the Eurozone seem to have been thwarted by the Herman van Rompuy task force, i.e. Member States in disguise. And not by finance ministers from Greece or Spain or any other ‘endangered’ economy.
The usually stringent German Chancellor Merkel has joined the French President Sarkozy in watering down the Commission’s proposals. At the European Council meeting the heads of governments have decided for a permanent crisis mechanism and have agreed to limited treaty change. A statement by van Rompuy following the task force meetings in preparation of the European Council suggests there is still some ambiguity over what will actually happen. How will this new mechanism work in practice and what are the concerns? But the real divisive issue is still ahead: how will the permanent fund be legitimised? In the meantime, there is plenty of time for the Member States to refine the content of the deal, during which there will also be many counter-deals to make up for Merkel’s and Sarkozy’s exclusive coup that dumbfounded many.
Commission officials had called for new procedures to be introduced to ‘punish’ Member States in a semi-automatic manner – sanctions would be applied unless finance ministers in the Council voted against them by qualified majority. Accordingly, this would have ensured, and from an economic perspective rightly so, that the decision would be more technical and less political. In the statement made by van Rompuy, this ‘reverse majority rule’ is confirmed as agreed by the task force.
Is this really the case? A closer look at a joint declaration by France and Germany following their Deauville meeting reveals some qualifications.