Germany’s plans for treaty change – and what they mean for Britain

Last year, German leaders talked of the need to strengthen the eurozone through changing the EU’s treaties. One person who listened carefully was David Cameron. The British prime minister may have assumed that what Germany wants in the EU these days, it gets. When he made a big speech on Europe in January, Cameron predicted that the EU would need a new treaty in the next few years. He implied that Britain would be able to extract concessions from its partners, in return for signing the treaty – all in time for the referendum on UK membership that he promised in 2017.

But Cameron’s strategy is based on a false premise. The mood has changed in Berlin. Recent meetings there with government officials and politicians have convinced me that Germany will not push for the kind of treaty that Cameron wants, at least not in time for his 2017 deadline.

The Germans, it is true, are keener on treaty change than most of their European partners. When they encounter a problem, they look to contracts, laws and treaties, rather than to political fixes. And they may have a preference for treaty change rather than mere legislation, since politicians can easily change the latter. German officials also worry about the constitutional court in Karlsruhe, which has expressed concern about some steps taken by the EU to manage the eurozone crisis. The court could block further moves unless they are backed by new treaty articles.

In Berlin people talk about two sorts of treaty change – big and little. Proponents of a big new treaty want it to establish a ‘political union’. The first step would be a ‘convention on the future of Europe’, including MEPs and national parliamentarians, of the sort that met in 2001-03, before the drafting of the constitutional treaty. The second step would be an inter-governmental conference to draw up a treaty introducing changes like more power for the European Parliament, direct elections for the Commission president and tighter co-ordination of economic policy. Guido Westerwelle, the foreign minister, and Wolfgang Schäuble, the finance minister, have at various times supported big treaty change. Some Bundestag members and Foreign Ministry officials share their federalist sentiments.

But Chancellor Angela Merkel is in overall charge of EU policy. And she told a conference of the Trilateral Commission in Berlin on March 15th that Europe does not need a major new treaty in order to become competitive. She and much of her government have cooled on the idea of big treaty change for four reasons.

First, the government thinks – notwithstanding the imbroglio in Cyprus – that the eurozone crisis is more or less under control. The risk of the currency union breaking up has receded, and with it the need for dramatic moves towards greater integration. Second, the Germans understand Cameron’s tactic of using treaty change as a tool for extracting concessions from Britain’s partners, and they have no desire to give him that leverage.

Third, France and most other member-states do not want a big new treaty. They worry about the difficulties of ratification: some, such as Ireland and perhaps France, would have to hold referendums. The Germans have listened. As one German official commented: “If we embark on another major EU treaty, it could take us about ten years to get the whole thing negotiated and ratified, just like it did with the Lisbon treaty.”

Fourth, the more that some Germans have thought about political union, the more wary they have become. French officials often make the point that the Germans can easily enthuse about political union because they have never had to define precisely what it means. But if EU leaders sat down to draft a text for political union, the Germans would have to acknowledge that greater economic and political integration would cost them money, whether through a eurozone budget, eurobonds or some other mechanism for helping poorer countries.

Even if Germany’s general election in September produces a new coalition, there is little chance that any German government will pursue big treaty change in the foreseeable future. However, many German officials want minor amendments.

In the Chancellery they are keen on changing one or two articles that would allow stronger co-ordination of economic policies. They want to give the old ‘Lisbon agenda’ of economic reform – which ran from 2000 to 2010, with only limited success – some teeth. Their proposed mechanism is a system of economic contracts between particular member-states and the EU. After a dialogue between the government and parliament of the country concerned, and the Commission, the member-state would commit to certain reforms – for example of labour markets or pension systems – in a contract. Discipline would come through penalties for non-compliance, or rewards for good performance, perhaps via a eurozone budget. German officials acknowledge that such economic contracts could be drawn up under the existing treaties, but reckon that either penalties or a eurozone budget would require them to be amended.

In the German Finance Ministry, officials are unenthusiastic about the contracts, but supportive of a different treaty change. They worry that the board of the European Central Bank will be responsible for both monetary policy and banking supervision, and could therefore face a conflict of interest. So they want a new article to entrench the independence of the supervisory system (most other member-states think that legislation can ensure the necessary independence).

Until recently, German officials wanted a minor treaty change to strengthen fiscal discipline. They liked the Dutch idea for a ‘super-commissioner’ with the power to tell national governments to amend budgets. But German officials now realise that tighter budgetary rules than those already set out in the fiscal compact treaty and in recent EU legislation would be unacceptable to many member-states. Furthermore, German attitudes are shifting slightly: though most officials still support strict budgetary targets, they now place a greater emphasis on structural reform as the best way to put the eurozone on a sustainable footing. So they have dropped the idea of a treaty change to enforce greater fiscal discipline.

Some Berlin officials think that a small treaty change to cover economic contracts could be pushed through quickly, without a cumbersome convention, but others disagree. The current treaties allow amendments to be made without a convention in two ways. First, through the ‘simplified procedure’, which cannot be used for changes that increase the EU’s competences. A new article on economic contracts might increase those competences. Second, through the ‘ordinary procedure’. This normally involves calling a convention, but need not if the European Parliament deems it unnecessary. Two recent changes to the EU treaties – to enable the creation of the European Stability Mechanism (the bail-out fund), and to alter the number of MEPs – used the ordinary procedure without a convention. However, the Parliament would probably be unwilling to waive through economic contracts without a convention, given its current support for big treaty change.

Some German officials are quite relaxed about the prospect of a convention. They believe that the European Council would give the convention a specific and limited mandate, to discourage it from attempting to rewrite all the existing treaties. And even if the convention exceeded its mandate, they say, the governments could ignore any unpalatable proposals when, after the convention, they meet in an inter-governmental conference.

Though some German officials are eager for the EU to amend the treaties to underpin economic contracts, they are pessimistic about their ability to persuade the French to agree. The French say that they would not accept the contracts – which they consider unnecessary – without other amendments, for example to allow the mutualisation of sovereign debt, which Germany would balk at. The context for this bargaining is that, as one German official put it, “in more than 20 years of working on Franco-German relations, I have never seen them in such a bad state”. Other countries, too, could seek to balance German demands by asking for new articles that could trouble Germany. So German officials are resigned to the eurozone muddling along without treaty changes for the next few years.

It is possible that at some point France and the other member-states will give the German government the small treaty change it desires. But that would still not solve Cameron’s problem. If the British government wished to, it could probably block a major revision of the EU treaties; the others would find it very hard to bypass a British veto. But if Britain’s partners wanted to change just one or two articles affecting eurozone governance, they could probably get round a British veto as they did in December 2011, when 25 member-states committed to the fiscal compact that was technically not an EU treaty.

If a future Conservative government wanted to renegotiate the treaties, and the other member-states did not, it could not force them to open an inter-governmental conference. The calling of such a conference requires a simple majority – and any ensuing treaty changes would have to be ratified by every member-state. In practice the only option available to Britain would be to activate the Lisbon treaty article that allows a country to quit the EU. That would lead to a negotiation that could, conceivably, conclude with the UK and its partners agreeing on changes that would leave the British inside the EU.

Evidently, moods can change quickly in the EU. A profound crisis in the eurozone could revive talk of a quantum leap towards political union. A new German government could push more forcefully for treaty change than the current one. If France fell into severe difficulties it could become less resistant to German pressure for treaty amendments. And the European Parliament to be elected in May 2014 will certainly – alongside the Commission – press for a federal future. But on current trends, David Cameron will be denied the major treaty change that he seems to be counting on.

Charles Grant is director of the Centre for European Reform