Revising European Treaties, Paolo Ponzano, 11 November 2013, EUI, Florence

SPEAKING POINTS FOR THE WORKSHOP “REVISING EUROPEAN TREATIES”.

First at all, I would like to welcome several Professors of European Law or European Affairs as Jean-Paul Jacqué, Jacques Ziller, Wolfgang Wessels, Antonio Padoa Schioppa, Lucia Serena Rossi, Francesco Gui, Gianni Bonvicini, Roberto Castaldi and many others for their participation to this workshop. Secondly, I welcome the participation of some former colleagues within European Commission, as Pieter Van Nuffel (one of the authors of Penelope project which I consider one of the best draft Treaties in the history of the European integration), Antonia Carparelli (former Head of Cabinet of Commissioner Walstrom, Mario Tenreiro, Head of Institutional Unit in the General Secretariat) and others European officials (as Beatrice Taulegne, Director at the Committee of Regions).

Last but not least I would like to thank Andrew Duff (Spokesman for the Alliance of Liberals and Democrats in the EP and President of the UEF)) for having accepted to present its work, adopted by the Spinelli group of EP, on a “Fundamental Law” for the EU.

My introduction will only be a remember of the main reasons for which we discuss today the possible revision of the European Treaties in the short or medium term and a short summary of the position of some national governments on this issue.

1. The main reasons for revising European Treaties:

a) In these same rooms of the EUI, Prof. Paul De Grauwe as well as others economists have asserted that a monetary Union cannot survive in a medium term without a political Union OR an economic Union equipped with an automatic mechanism of safeguard in order to contrast with any asymmetric shock between national economies. For this purpose, the document called Blueprint adopted by EC in November 2012 provides for a set of measures in a short, medium and long term period in order to achieve a genuine economic and monetary Union. Some of these measures can be adopted by the secondary law of the Union (for instance the Single Resolution Mechanism for the Banking Union), while others measures (as the creation of a separate European budget for Euro area or a Debt Redemption Fund involving a joint liability from all Member States) will require Treaty changes. This demand has been expressed clearly by the European Commission in its Blueprint document (because a Redemption Fund with joint liability could be in contrast with the “no bail-out” clause of art. 125 of the current Treaty). As some of you know, the EC will present in next March its report on the creation of a Debt Redemption Fund.

b) In a recent article on Financial Times, the economist Wolfgang Munchau came to similar conclusions. The European Union, with its treaties and its crisis resolution tactics, is not compatible with a functioning single currency in the long run. The way the Euro zone is trying to solve the crisis – without debt forgiveness and without joint liability debt instruments – has produced a deflationary debt crisis with no end in sight. Wolfgang Munchau suggest to recognize that the Euro zone is now the true kernel of European integration and to continue from there, changing the treaties with a view to turning the EU into an organization fit to manage a true monetary and political union (including a framework for the resolution of existing debt, joint liability instruments for future debt, a banking union and additional fiscal transfers as well). This opinion remember me the famous Alexander Hamilton plan which was addressed to the American Congress in 1790 to resolve the sovereign debt problems of the American states. The main difference between the two debt crisis is that in 1790 the federal government of the United States was already in place and that the principles of trust and solidarity could prevail within a Federation against the reluctance of some American states (as Virginia) to pay for the debts of others states (as, for instance, Massachusetts). The history does not repeat itself in the same way.

c) Another reason for which the treaty revision is inescapable – as Andrew Duff write in its commentary to the Fundamental Law – is because failing to transform the EU into a fiscal union run by a federal economic government will jeopardize the EU’s very survival. As Andrew Duff together with Jurgen Habermas, Ulrich Beck and many others analysts of the European integration wonder, where is the democratic legitimacy of the European Council in imposing tax rises in Greece or wage cuts in Portugal ? Such a situation might be tolerable in the very short term but not in medium term without restoring in a democratic manner the scrupulous rule of law.

d) Finally, a last reason for which the revision of the treaties seems inescapable is the request of the current British government to repatriate in 2015 some competences of the EU (probably in social, migration and others fields). As this request is unlikely to be accepted by others Member States (as well as the request of the Netherlands authorities to repatriate the Union’s competences in 54 cases of secondary acts of the EU), the European Council should find another solution.. A possible solution could be to grant to the United Kingdom a set of new derogations or “opting-out” provisions in exchange of establishing the euro-zone as a permanent enhanced cooperation which could deepen its integration without the British agreement.

2. Short summary of the positions of the main Member States.

We have summarized above the position of British government. Prime Minister Cameron does not wish the withdrawal of UK from EU, but need to obtain some concessions from the European Council in 2015 on a repatriation of some European competences in order to have a chance to overcome the referendum on the status of the UK within the EU in 2017. This request has provoked some reluctance from most Member States to start a negotiation with UK on the revision of the Treaties because they fears to open a “Pandora box” which could give to UK some premature concessions without compensations in return.

The attitude of German government is not entirely clear for the time being. In the past July, Minister Schauble had written a letter to the Commissioner Michel Barnier to challenge the Commission’s proposal for a single resolution mechanism because this proposal was not in line with the provisions of the Treaty and would require changes in the primary law. Currently this position seems outdated because an agreement on this proposal is at sight in the Ecofin Council of next December.

In the meantime, German authorities are working with French administration on the establishment of a fiscal capacity for the Euro zone – as envisaged by the Blueprint of EC – which could stabilize the economies of Southern countries on the basis of contractual arrangements. Finally, the Spiegel has attributed to Angela Merkel the proposal of some Treaty changes in order to create a European Minister of Finances and to reinforce the economic governance of the EU and the competences of the EC in this field.

President Hollande expressed itself in last June in favor of the creation of a political union in the next two years. However, he still did not explain which should be the main elements of this political union. If this notion would cover, for the essential, the establishment of a European economic government composed by monthly meetings of European Council, this solution would not solve the problem of the democratic legitimacy of the EU. Furthermore, French authorities are in favor of the creation of a separate budget (and a separate decision-making) of the Euro zone, solutions which requires – as President Hollande has recently underlined – some Treaty changes.

Finally, the current Italian government has indicated its intention to take a concrete initiative for the revival of the European project during the second semester of 2014, in which Italy will chair the Council of the EU. It is still not clear which concrete initiative it will be. A possibility could be that the Italian government suggest the meeting of an European Convention in order to modify the Treaties in conformity with art. 48 of the Lisbon Treaty. Furthermore, the Italian government seems in favor to create a separate budget (and a separate decision-making) for the Euro zone.

In conclusion, the combination of the attitudes of the main Member States’ governments with the need to create new instruments and mechanisms for achieving a genuine Economic and monetary Union confirm the expression used by the Andrew Duff commentary to the “Fundamental Law” following which a near revision of the European Treaties is inescapable. Another conclusion we could draw from the attitude of some Member States is the growing move towards a form of “constitutionalisation” of the Euro-zone (with a separate budget and a separate decision-making).

Paolo Ponzano

Senior Fellow at the EUI.