Cameron outmaneuvered by Merkel

Berlin plans to streamline EU but avoid wholesale treaty change 

By Peter Spiegel and Quentin Peel in Berlin

Berlin is drawing up plans for treaty changes to streamline decision-making in the eurozone, while stopping short of any wholesale renegotiation that would allow the UK to repatriate powers from Brussels.

Although Angela Merkel, German chancellor, has expressed her desire to keep the UK inside the EU, the move being discussed in Berlin would thwart a plan by David Cameron, UK prime minister, to piggyback on eurozone reforms to renegotiate the British relationship with Brussels.

The strategy would take as a model two recently adopted standalone treaties – one creating the new €500bn eurozone rescue fund and the other enshrining budget discipline in a “fiscal compact” – that were written and ratified in a matter of months.

Mr Cameron had hoped to exploit renewed interest in Berlin for wholesale EU treaty changes as a way to renegotiate the UK’s membership terms. But Berlin’s strategy for a new, narrowly focused treaty could force the UK premier into a repeat of the dilemma he faced in December 2011, when Mr Cameron rejected the fiscal compact treaty but most other EU countries went along without him.

Wolfgang Schäuble, the German finance minister, has been increasingly public about his desire to change the EU treaties to provide better legal underpinning for the bloc’s new “banking union” – particularly a new Europe-wide bank bailout system, which Mr Schäuble said cannot be completed without a treaty-based shift in power to Brussels.

Some EU officials suspected that Mr Schäuble’s stance was a negotiating ploy that did not have the backing of Angela Merkel, the German chancellor. But senior German officials said the finance minister’s foray was actually part of a larger push for new treaties that has the full backing of Ms Merkel, who is increasingly frustrated with the slow pace of eurozone decision-making.

Senior German officials acknowledged that they were isolated on treaty change, which is fraught with political landmines in several countries – particularly France, which would probably require a national referendum if major changes were made to EU law.

But the officials said Ms Merkel increasingly believes that the eurozone’s governance structure is not suited for the pace of globalisation, where competitors in other economic blocs can move more quickly to respond to economic changes. German leaders believe that only by consolidating power in Brussels through a new treaty can the eurozone become efficient enough to compete.

Under the EU’s Lisbon treaty, major revisions to the bloc’s rules can only be done by convening a convention made up not only of member governments but also the European parliament and national parliamentarians.

In a full convention, Mr Cameron would be able to force the issue of repatriating powers on to the agenda.

But by examining a new treaty outside the Lisbon requirements, Berlin hopes to avoid such a time-consuming and freewheeling process. Germany officials noted that other “basic laws”, including the German and US constitutions, can be amended without a debate on all aspects of national governance.

EU treaties do provide for “simplified” changes that do not require a full-scale convention. But such procedures can only be used to change the internal running of the EU and not to transfer powers from national governments to Brussels.

The timing of treaty changes remains a matter of debate but it could come as early as next year, after elections to the European parliament in May. The way ahead is due to be discussed at a summit next month.

Ms Merkel is sympathetic to Mr Cameron’s desire to improve European competitiveness. But the chancellor is convinced that this can only be done by improving the process of European decision-making and not simply by repatriating powers to national capitals.

Berlin and London agree that some Brussels legislation is unnecessary, such as the working hours directive enforcing a 48-hour week across the EU. Berlin also recognises the need for more measures to liberalise the EU market in services, although that is a sensitive issue in Germany. But the Germans want to reinforce the single market, rather than dismantle it.