The European Stability Mechanism

Denis Cooper has summarised something rather complicated. It's still rather long but worth a read, the sting is in the tail:

On March 25th EU leaders agreed on a radical amendment to the EU treaties through European Council Decision 2011/199/EU. Over the past five months the UK media have hardly even mentioned that this treaty change has already been agreed, let alone discussed its potential implications. The nature of the amendment is that of a licence which the 27 EU member states as a whole would grant to a class of EU member states, the (now) 17 EU member states in the eurozone.

The fact that it is considered necessary to change the EU treaties so that henceforth the "The Member States whose currency is the euro may establish a stability mechanism ..." confirms that the stability mechanism they have already established, the European Financial Stability Facility or EFSF lacks any legal base in the present EU treaties.

And bearing in mind that Christine Lagarde, then French Finance Minister and now head of the IMF, described the actions of EU political leaders on May 9th 2010 as "major transgressions" of the present EU treaties, which are "very straightforward - no bailing out", clearly a treaty change to legitimise similar actions in the future must be seen as a major treaty change which should be the subject of significant public debate across the EU, including in the UK. The eurozone states are already proceeding to make use of their new licence, even before it has come into force, through a Treaty establishing the European Stability Mechanism which they signed on July 11th.

While few people in the UK have noticed this development it has attracted the critical attention of the economist and commentator Dr Oliver Marc Hartwich, a German and a former Londoner now resident in Australia. In a Business Spectator article entitled A poisoned chalice of EU power he writes scathingly:

“The ongoing assault on the basic rules of liberal democracy has been the defining feature of the euro crisis. The treaty to establish the new European Stability Mechanism is the best example of this fundamentally undemocratic approach … it may be European but legally it stands outside the EU. This means that the EU can formally keep its commitment to the Lisbon Treaty’s ‘no bail-out clause’ though the ESM will provide just that …

"If the ESM has thus turned parliaments into mere cash machines, will it at least be transparent and accountable? Provisions about legal privileges granted to the ESM suggest otherwise … European governments do not have the slightest interest in a thorough debate about the introduction of the ESM. They cannot risk the public understanding what this ESM treaty really is: an enabling act that undermines budget rights of parliaments; a coup d’état of the continent’s political leadership against their peoples; and the most costly piece of legislation ever put before European lawmakers. It would be crazy to explain to ordinary Europeans what their political leaders have conspired to introduce. And so they don’t."

From a British point of view, it is crucial to understand that because intra-eurozone treaties such as this would be allowed by the EU treaties as amended by Decision 2011/199/EU, but would legally stand outside the EU, it should not be assumed that integrationist measures such as "eurobonds" or a "fiscal union" or a "transfer union" would require any further changes to the EU treaties, provided that such measures were confined to the eurozone and ostensibly at least would not apply to the rest of the EU.

Therefore if anybody is fondly hoping that the need for further EU treaty changes would give the UK government a splendid opportunity to extract concessions and repatriate powers in exchange for its agreement, they would be sorely disappointed. Just as the UK is not a party to this first intra-eurozone treaty so it would not be a party to subsequent intra-eurozone treaties – unless and until the UK joined the euro - and therefore the UK government would have no veto to exercise over changes to those intra-eurozone treaties, and so no leverage for extracting concessions from the EU, even if it was disposed to do so.

All this depends on the eurozone states being granted their licence by the final ratification of the EU treaty amendment embodied in European Council Decision 2011/199/EU, and in the case of the UK that will require parliamentary approval through an Act. Is it too much to ask that our MPs will stop and think hard about the long term implications of giving their approval of that Decision, rather than just nodding it through?