Merkel-Sarkozy Writes Open Letter To EU President For Treaty Overhaul

French President Nicolas Sarkozy and German Chancellor Angela Merkel have submitted a joint letter to European Union President Herman Van Rompuy, in which the pair called for changes to be made to EU treaties so as to allow for tighter rules on deficit spending as well as for centralised governance of national budgets.

The decision to amend the treaties must be made by the end of the upcoming EU summit, said the letter, adding that the new measures must be ready for implementation by March 2012.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have submitted a joint letter to European Union President Herman Van Rompuy, in which the pair called for changes to be made to EU treaties so as to allow for tighter rules on deficit spending as well as for centralised governance of national budgets.

The decision to amend the treaties must be made by the end of the upcoming EU summit, said the letter, adding that the new measures must be ready for implementation by March 2012.

Should any of the 27 member EU governments choose not to participate, the 17 countries in the euro zone would press ahead with a more integrated union by signing a new agreement outside EU treaties, added the French and German leaders.

Here are some of the key extracts from the letter, as cited by Reuters:

“Mr President, to overcome the current crisis, all necessary measures to stabilize the euro area as a whole will have to be taken. We are confident that we will succeed.”

“We are convinced that we need to reinforce the architecture of Economic and Monetary Union going beyond the indispensable measures, which are urgently needed to cope with immediate crisis resolution. Those steps need to be taken now without further delay. We consider this as a matter of necessity, credibility and confidence in the future of Economic and Monetary Union. The current crisis has uncovered the deficiencies in the construction of EMU mercilessly. We need to remedy those deficiencies.”

[quote]”To build a lasting Stability and Growth Union, which allows us to preserve our unique European model combining economic success and social responsibility, we have to substantially reinforce the foundations of EMU. Alongside the single currency, a strong economic pillar is indispensable, building on enhanced governance to foster fiscal discipline as well as stronger growth and enhanced competitiveness. In order to achieve these objectives, we need a renewed contract between the Euro area Member States.” [/quote]

“We propose that those new rules and commitments should be enshrined in the European Treaties as. Alternatively, the Member States whose currency is the Euro will have to go ahead.”

“The main building blocks of the new Stability and Growth Union are: A strengthened institutional architecture Euro area governance needs to be substantially reinforced. We should provide for a more integrated and more efficient institutional set-up without duplicating existing European structures or institutions. This set-up should be based on:

– Regular summits – at least twice a year – of the Euro area heads of State and Government with a permanent president…

– During the crisis, the Euro summit should meet on a monthly basis: each meeting should focus on a precise agenda regarding governance and policies to foster growth, competitiveness and fiscal stability…

– A ministerial Euro-group and a reinforced preparatory structure to prepare and implement the decisions taken by the summit and ensuring the current functioning”

 

“We need a comprehensive framework on prevention consisting of strengthened co-ordination, surveillance and enforcement as well as positive incentives, building on current arrangements (new macroeconomic imbalances procedure, EU 2020-Strategy, Euro Plus Pact, a greater focus of structural- and cohesion funds on competitiveness etc.) and developing them further. This framework should comprise in particular:

– The adoption by each euro area member state of rules on a balanced budget translating the objectives and requirements of the Stability and Growth Pact into national legislation at constitutional or equivalent level…

– Commitment of national Parliaments to take into account recommendations adopted at the European level on the conduct of economic and budgetary policies.”

 

“A new common legal framework, fully consistent with the internal market, should be established to allowing for faster progress in specific areas such as:

– Financial regulation;

– Labour markets;

– Convergence and harmonization of corporate tax base and creation of a financial transaction tax;

–  Growth supporting policies and more efficient use of European funds in the euro area.”

 

“A reinforced procedure to enforce sound fiscal policies to complement the preventive arm of the Stability and Growth Pact and in particular the goal to achieve a structurally balanced budget and ex-ante examination of draft budgets, a new procedure should be established to correct breaches of the 3 percent deficit of GDP ceiling. As soon as a Member State is recognized to be in breach with the 3 percent ceiling by the European Commission, there should be automatic consequences unless the Euro-group, acting by qualified majority, decides otherwise. Exceptional circumstances should be taken into account:

– The obligation for the Member State to conclude with the Commission and approved by the Eurogroup by reversed qualified majority on behalf of the other Member States, a “European Reform Partnership” specifying the concerned Euro area Member States’ fiscal and structural policy measures to overcome its difficulties and assisting them in those efforts.

– A sequence of interventions of increasing intensity into Euro area Member States’ rights should be allowed as a focused response to continued infringement. Steps and sanctions proposed or recommended by the Commission should be adopted by the Council unless a qualified majority of the Euro area Member States decides otherwise.”

 

[quote]“Building on the provisions for a numerical benchmark for debt reduction in the “six-pack” (1/20 rule), the procedure for debt reduction by Euro area Member States with a public debt of more than 60 percent of GDP needs to be enshrined in the new treaty provisions.”[/quote]

“We will accelerate the setting of the permanent intergovernmental European Stability Mechanism which should be effective in 2012 to better address any future threats to the stability of the Euro zone as a whole, including through the risk of contagion for other Euro area Member States, thus assisting them in situations of emergency.”

“In order to maximize the efficiency of the ESM and its capacity to take decisions, specific super majority rules (85 percent of signed ECB-Capital) should be implemented.”

[quote]“As far as the private-sector involvement is concerned, the ESM treaty should be revised to make clear that Greece required a unique and exceptional solution.[/quote]

“On the occasion of the 50th anniversary of the Treaties of Rome we reiterated solemnly together with all Member States of the European Union our resolve to protect the achievements of European unification for the good of future generations. To this end, we committed ourselves to always renewing the political shape of Europe in keeping with the times. It is in this spirit that we submit our proposal to our European partners. We are convinced that we need to act without delay. We need to take a decision at our next European Council meeting in order to have the new treaty provisions ready by March 2012.”

 

Read the full letter on Reuters