EU SUMMIT IN BRUSSELS:A LOOK into Angela Merkel's luggage for today's EU summit is likely to reveal an extra blouse, a big stick and no carrot.
After 15 euro zone crisis summits, Berlin has decided that the 16th summit will only end when they have agreed a “new treaty basis” for a rigorous new EU budgetary rulebook containing a credible sanctions mechanism.
How leaders reach a deal – either with all 27 EU members or, as is increasingly likely, among 17 euro zone members – is now, German officials say, a secondary matter.
Berlin seemed taken aback yesterday by proposals from Brussels to modify existing treaty suggestions, binning the plan publicly as “typical Brussels legal trickery”.
“I’m more pessimistic than I was a week ago,” one senior German official said. “We have the impression that a whole series of actors have yet to understand the seriousness of the situation.”
The lead-up to every summit is marked by public posturing, hand-wringing and megaphone diplomacy. Berlin’s insistence, however, that it was not interested in “lazy compromises” – in its view changing EU secondary law instead of treaty change – was strong stuff by German standards.
Merkel has always insisted that the euro zone crisis will not be solved with one “big bang” solution, but after a week where Standard Poor’s rating agency put Germany and 15 euro zone neighbours, not to mention the EFSF bailout fund, on a credit rating “watch-list”, her old strategy has been thrown overboard.
Instead of incremental progress, a close confidante of the chancellor conceded yesterday that Merkel would “this time not accept a collection of tiny steps”.
The tough language indicated that Berlin has not got as far as it had hoped in pre-summit negotiations with treaty change hold-outs, including Ireland and Britain.
Finance ministry officials in Berlin dismissed as “unachievable” British demands for legal safeguards before it agreed to treaty change. As for Ireland, Berlin officials conceded that treaty change could be problematic but insisted that the quality of the final deal was paramount, not concerns on how to get it ratified.
“How such a new treaty basis is ratified depends on each member state and what it means for Ireland I cannot say – that depends on the politicians and legal minds in Ireland,” a senior official told The Irish Times.
So how to do the deal? Berlin officials are eyeing the legal provisions for the permanent bailout mechanism, ESM, which is still on the drawing board before it is ratified next year. German sources suggest that adding budgetary rules it wants to the ESM would deliver the quantum leap required to convince markets that the euro zone is finally on a sound footing.
It was an indication of the pressure building that Berlin and Paris already seem at odds over the contents of their joint letter to European Council president Herman Van Rompuy. German officials took a dim view of suggestions that, when it comes to policing the new rules, Paris had got the better of Berlin in talks.
French president Nicolas Sarkozy announced earlier this week that national breaches of new budgetary rules would not, as Berlin has demanded, go before the European Court of Justice.
However, German officials insisted yesterday that new debt-limiting legislation, although framed in national rather than European law, would be formulated in such a way that the European Court of Justice could still examine its efficacy.
As the clock ticks down, it is up to Germany’s EU partners to decide how much of Berlin’s position is bluster and how much is brinkmanship. What is clear, though, is that Merkel has painted herself into a tight negotiating corner.
Anything less than treaty change will, in Berlin’s eyes, not convince markets that EU leaders mean business with binding budgetary regulation. After bad experiences with Greece, Berlin is happy to take private sector involvement in debt write-downs off the table for good.
“The same conditions should apply to sovereign bonds in the new, more rigorous [euro zone] regime as in other regions of the world,” a government official said.
In an indication of the rocky road ahead, German officials advised journalists travelling to Brussels to bring not one but two extra shirts, and to be ready for talks to drag on into Saturday. As one Merkel adviser put it grimly: “We have no plans for the weekend.”