reflections

May 16, 2013 | 23:15 GMT

5 mins read

Treaty Changes and Referendums in the EU

(Stratfor)
It can be difficult to separate the important from unimportant on any given day. Reflections mean to do exactly that — by thinking about what happened today, we can consider what might happen tomorrow.

The European Union may be reaching its limit on mitigating the economic crisis without amending its treaties. France and Germany agree that a modification of the European legal framework is necessary, but key questions remain on when and how to do it, and who to include in the process. On Thursday, French President Francois Hollande proposed the creation of an economic government in the eurozone, including a separate budget for the 17 countries that share the common currency and the possibility of eventually issuing joint debt. According to the Socialist leader, these reforms should be applied within two years. While Hollande did not mention it, such changes imply the reform of the EU treaties.

The economic crisis has negatively impacted support for the European Union, so the timing for these changes is significant. Some EU governments argue that this may not be the best moment to open negotiations for a new treaty for fear that the domestic populations would demand referendums. The European Union is often accused of lacking democratic accountability, since treaties in most EU member countries are approved by parliaments, without direct involvement from voters.

The European Union has a traumatic relationship with referendums. It took two referendums (in 1992 and 1993) for the Danish to approve the Maastricht Treaty, which created the European Union and set the foundation for the euro. In the meantime, Copenhagen negotiated an opt-out clause from the eurozone. It also took two rounds of voting in 2001 and 2002 for the Irish population to approve the treaty of Nice, an amendment to the EU legal framework that modified the bloc's voting system. The populations of France and the Netherlands — two founding members of the European Communities — rejected the European Constitution in 2005, thus killing the project.

Several countries are likely to hold referendums if the EU decides to amend its treaties. Ireland is constitutionally obliged to consult its population on new European treaties, and the United Kingdom approved a similar law in 2011. Traditionally euroskeptical countries such as Denmark and Sweden are likely to follow suit. Anti-EU parties in Germany and the Netherlands often argue that local populations were not consulted when Berlin and The Hague made the key decision to adopt the euro. In this context, many governments would be under strong pressure to consult their populations, especially if sensitive issues such as the issuing of joint debt are involved.

The United Kingdom could hold a referendum about its EU membership even without the prospect of a new treaty, given David Cameron's recent promise to renegotiate the country's status in the European Union. Public opinion in the United Kingdom is divided regarding the country's EU membership, but London's push for a repatriation of powers from Brussels could lead other countries to pursue a similar strategy.

The timing of Hollande's proposal is important for electoral reasons. Germany is expected to hold general elections in September, and Chancellor Angela Merkel is seeking re-election. Most Germans support her management of the European crisis and want to remain in the eurozone. But Eurobonds are generally unpopular in Germany, and voters often disagree with using taxpayers' money to grant financial assistance to countries in the periphery. Thus, no serious discussions about treaty change will happen until the final quarter of the year.

The question on how to reform the treaties is equally relevant. Germany does not necessarily reject the creation of some kind of debt mutualization scheme, but Berlin is likely to ask for more centralized control of the fiscal policies of the eurozone members in return. This could go against France's interest in preserving some degree of national sovereignty. France does not share Germany's traditional aversion to inflation, and sympathizes with the idea of reforming the charter of the European Central Bank to include growth — instead of just low inflation — as the institution's core goal.

Finally, there is the question of who to include in Europe's new legal framework. In recent years, the European Union has focused its efforts on solving problems within the eurozone, somewhat neglecting the interests of the 10 EU countries that do not share the euro. Recent policy proposals such as the creation of a separate budget for the eurozone and the idea of appointing a president for the currency union highlight this phenomenon. The European crisis has made the so-called two-speed Europe a reality, and the new treaty could deepen that division.

The European Union has managed to apply some measures to address the eurozone crisis without modifying its constitutional treaties. While intervention by the European Central Bank in debt markets is technically not allowed, Brussels decided to bend the rules to avoid an escalation of the crisis. The EU Commission has also decided to turn a blind eye on violations of EU guidelines for debt and deficit by member countries. But the European Union is reaching the limit of what it can do to mitigate the crisis without treaty revision. Whether it happens in the time frame proposed by Hollande or not, governments and populations in the European Union will eventually have to face some difficult questions about the bloc's future.

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