EU Referendum


Eurocrash: Merkel's treaty plans take shape


26/08/2012



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Quite remarkably – or perhaps not – news of the Samaras/Hollande meeting in Paris yesterday has all but disappeared and, most tellingly, could hardly be found in the French press at all. And for Spiegel, last night the big story was Merkel calling for a new treaty.

Actually, that's not quite true. She was calling for "more Europe" in early June and, after the interim report of the Future Group came out openly at the end of that month supporting the idea of a United States of Europe, giving more power to Brussels.

Now, Merkel is beginning to set out a "concrete shape" to the plan and it looks as if she is going for the full Monti. She want the European Council in December to decide on setting up a convention with the task of "preparing a new legal basis for the EU". This will extend the fiscal pact to a full political union.

Spiegel does note, however, that many member countries reject the idea "vehemently" and, even if the Future Group ten were in general accord, Ireland is in opposition because it does not want to risk a referendum. Even compliant Poland is dubious because it sees little chance of agreement among the 27 EU members.

One has to recall, though, the Asmussen view, where the EU splits into a politically integrated core comprising the rump eurozone, with an outer ring of states, including the United Kingdom.

This, most likely, is the shape of the new European Union, with discussions to make it happen starting in earnest next year. It is one that can readily accommodate Greece on the periphery - which can be bought off with a new "Marshall Plan" - and eventually Spain and Ireland. Italy, as a member of the original Six, would remain in the core group.

Such a scenario is not without its challenge for the UK, which would see itself "relegated" to peripheral status. It would be unable to meet the entry requirement to the core, which would demand that all members were part of the single currency.

Most likely, this would be seen as advantageous to the likes of Cameron. It would defuse the pressure to leave the EU, as the new status would undoubtedly be sold as membership of a "trading agreement plus" – following the appearance of a renegotiation. That would satisfy the ambitions of the Tory europlastics, without actually making a clean break.

Any such arrangement would almost certainly require a British referendum. But, since a convention might take two years (or more), and the treaty negotiations another year, that gets Cameron past the general election with the "Europe" issue parked, and the "outers" completely marginalised.

Whether the Merkel plan has any chance of fruition is anyone's guess, and much will depend on the German people themselves, who will also have to be consulted. But it is a stratagem that can accommodate the loss of some members from the eurozone without fatally damaging the EU.

Most of all, it buys time and that, all along, had been the strategy of the "colleagues", which to date has worked remarkable well. With so many predicting the demise of the euro (not least this blog), the construct has confounded its critics with its resilience.

On past form, therefore, one can surmise that those hoping for a quick resolution are going to be seriously disappointed. We are in for the long haul.