Increased stability

The "permanent mechanism" and amendments to the Lisbon Treaty

The European Union is taking another small step towards financial stability and economic governance. The meeting of Heads of State or Government of EU27, held in Brussels past December 16-17 confirmed its forecasts and closed with the adoption of the European Stability Mechanism and the green light to modifications of article 136 of the Lisbon Treaty, which states that the EU Council of Ministers can adopt measures for financial support to eurozone countries (16 up to now, 17 with Estonia next January) in case of budget deficit. The decisions. The “adjustments” to the Treaty (amounting to a few lines only), strongly requested by some States, Germany above all, enable to proceed with a new round of Parliament ratifications, thus avoiding the perilous path of referendum-sanctioned ratifications. The amount of the fund has not been defined yet, while private stakeholders’ role is still unclear: it will be defined in the forthcoming months. The permanent Mechanism should enter into force in 2013, thus replacing the European financial stability facility, a 750-billion fund, that will expire in mid 2013 and which has provided for the bailout of Greece and Ireland. “We have confirmed the important agreements reached” over the past days, said José Manuel Barroso, EU Commission President at the Justus Lipsius building, where the summit was being held. “It is necessary go on with economic governance, transparency, and national budget stability, implementing growth-enhancing reforms to boost development”. The document. The “Conclusions” – the official document presenting the summit’s decisions – bear the traditional emphasis of EU27 meetings: “Throughout the crisis, we have taken decisive action to preserve financial stability and promote the return to a sustainable growth”. Given the situation of real economy and of the public finances of half of EU States, perhaps greater caution would have been more appropriate to the current state of things. “We will continue to do so and the EU and the euro area will emerge stronger from the crisis”, state European leaders. Growth prospects “are strengthening and the fundamentals of the European economy are sound. The temporary stability tools put in place earlier this year have proved their utility, but the crisis has demonstrated that there can be no complacency”, state the Conclusions. This is why “we agreed today on the text of a limited amendment to the Treaty on the establishment of a future permanent mechanism to safeguard the financial stability of the euro area as a whole”. The Council reiterated its “commitment to reach agreement on the legislative proposals on economic governance by end June 2011 with the aim of strengthening the economic pillar of the Economic and Monetary Union”.The amendment. The phrase that integrates the Treaty and thus unblocks the impasse is the following: “The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality”. Another phrase of the official document takes on crucial significance: “Member States whose currency is not the euro will, if they so wish, be involved in this work”: i.e. for Countries which are unwilling to adopt the Mechanism, like the United Kingdom, its enforcement is not mandatory.Other themes. The Council addressed also other issues. These were highlighted by Herman Van Rompuy, EU president: “The European Union’s relations with its strategic partners were examined”, firstly those with the United States. The European Council “agreed to give Montenegro the status of candidate country”. “It underlines the conviction within the European Council that the countries of the Western Balkans have a European vocation”. Van Rompuy thus drew a balance of the first year of the Lisbon Treaty, that entered into force on December 1st 2009: this was, in his opinion, a period of transition, “ensured by the Spanish and the Belgian Presidencies”. Moreover, he declared, “both have advanced a truly European agenda. Now we expect the Hungarian rotating presidency”, due to take office next January 1st, “to further build on this experience”. What do you think of the possibility of creating Eurobonds, another theme addressed by EU leaders? “I have my own idea to this regard – Van Rompuy said beating around the bush -. But I won’t express it. All ideas, even the good ones, ought to be debated and perfected before being announced”.

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