Europe’s North Col: A New European Union Treaty?

Whatever medium or longer terms plans Chancellor Merkel has for the European Union, we are undoubtedly embarked on yet another treaty-reform journey. The immediate eurozone emergency may or may not require treaty change (one can only imagine that the Council legal services are engaged in a desperate battle to avoid that) but the dye has been cast on yet another round of treaty negotiation. With President Van Rompuy offering some ‘building blocks’ on this at the forthcoming June European Council summit, the stage is being set for the mother of all constitutional battles.

The game of bluff and double bluff is coming to an end. Merkel and other EU leaders have been (rightly) criticised for their lassitude in addressing immediate eurozone crises. In part this has been driven by their determination to wring every ounce of fiscal reform possible from programme countries, both for such reform’s own sake but also pour encourager les autres. However, this has also driven other member states into upping the ante on their demands for eurozone solidarity which can only be delivered through profound economic and fiscal integration. Whether or not this was part of Merkel’s ‘long game’ or whether it is simply the conclusion to which she has finally been drawn is a matter for biographers and historians. Where we stand now is on a battered, windswept ledge. Either we embark on the difficult and treacherous trek up the north face of further integration, or we fall back – making either a deliberate strategic withdrawal to base camp or simply plummeting from the cliff face.

For Irish policy makers these will be especially challenging negotiations. The unconscionable determination of the ECB that private bank debt should be shouldered by citizens must be addressed. However, the mutualising of that debt across the Union (no less unconscionable but of practical benefit to Ireland) implies a level of integration which will prove both unpopular and problematic in policy terms. Fiscal and budgetary harmonisation can certainly imply tax harmonization. If this does not necessitate agreed tax rates then it may certainly entail some ground rules to prevent tax competition between member states within the new, reinforced Union. While it is not axiomatic that such harmonisation must occur (Delaware in the US, for example, charges no corporation tax) the political pressures will be enormous. Irish policy makers will need to cultivate allies in these forthcoming negotiations – and will be acutely conscious of the fact that even as the eurozone core of the Union tightens we may also be witnessing the UK spinning off into an outer orbit.

Arguably, there is one battle to which Irish policy makers must contribute forcibly and which they must win, and that is to ensure that the institutional infrastructure of any new, reinforced economic and monetary union must be based in law and centred on democratically accountable European institutions. We cannot again allow member states to collude to ensure that the larger members can flout the rules. Nor should the political and economic stability of the Union be held hostage by the latest local electoral dynamics faced by a governing party. The economic and fiscal leap being discussed has to be matched by a comparable political and democratic leap. Are we ready for that?

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