THE INITIATIVE of the European Commision in proposing a new package of measures to reinforce euro members’ fiscal discipline represents a far-reaching development of EU integration and the sharing of sovereignty. It deserves, hyperbole notwithstanding, widespread debate in the Dáil and beyond. The proposals involve euro member states assessing each others’ annual budgets in detail and in advance – perhaps even ahead of parliamentary scrutiny.
There will be a greater focus on debt levels and real penalties for non-compliance to ensure that budgets accord with the unenforced Stability and Growth Pact agreed in the mid-1990s. “Peer pressure lacked teeth,” commissioner for monetary affairs, Olli Rehn admits .
Although, in an immediate sense, a response to the fallout from the Greek crisis, the measures are in reality an attempt to complete the unfinished business of the establishment of the euro, the economic governance dimension that many believe is an essential corollary and prop of economic union.
The creation of a €750 billion safety net fund for euro member states could be seen as creating a “moral hazard”, a free-ride temptation to fail for less responsible euro states in the knowledge that a rescue would be forthcoming. In the circumstances such a fund could not have garnered political support without commitment to countervailing means to enforce discipline.
That is the logic of the German position. Chancellor Merkel, spoke yesterday of an “existential” crisis for the euro, warning apocalyptically that there is far more at stake: “If the euro fails, its not just the currency that fails but Europe and the idea of European unification.” She insists that the commission’s proposals, though “an important step in the right direction” are yet “not sufficient”. Berlin also believes another treaty will be necessary to enact the required measures, but that option will simply not run in other capitals, not least Dublin and London. It is both unnecessary and politically explosive.
That increased economic co-ordination is necessary is hardly at issue. Its scope may be, however. A scope that ranges from the maximalist position of the Germans to those, Ireland included, who will insist on a lighter touch.
The legal base for the enhanced supervision lies in Article 136 of the consolidated treaties, an import of the Lisbon Treaty, but the principle, long accepted in theory, goes back to Maastricht. Nevertheless, many Irish voters may well express surprise at the idea our partners have already been given the right, which they now propose to exercise, to pre-vet our budget, let alone, as Fine Gael suggests, the right to suggest we raise corporation tax rates. (The latter is not explicitly part of the proposal. Any attempt to do so would quickly end up in the European Court of Justice.)
But there is a perception of a democratic deficit here, an education and selling job for the Government on the issue which again will appear to many to reflect the old myth of an unaccountable Brussels running our lives. This may well be the right approach – persuade us.