Europe’s leaders are expected to change the Lisbon Treaty today – a year after it was hailed as the last EU Treaty for decades to come.
After Ireland finally backed Lisbon at the second attempt in October 2009, eurocrats and politicians promised an end to arcane institutional discussions and revisions and more focus on creating jobs and growth.
But the scale of the economic crisis changed all that.
British Prime Minister David Cameron joins his EU counterparts in Brussels later, ready to back a “limited” treaty rewording to copper-bottom the creation of a permanent eurozone bailout fund in case more single currency countries hit the economic rocks.
If approved, the “European Stability Mechanism” will replace the temporary emergency rescue arrangements under which massive sums have been injected into Greece and Ireland to help prop up their economies and bolster the flagging credibility of the single currency itself.
Mr Cameron will back the treaty revision because it affects only the eurozone member states, who will fund the new bailout mechanism and because the change uses procedures which do not increase EU powers – avoiding any realistic EU referendum challenge from eurosceptics.
A report being considered at the summit says the proposed treaty change “does not increase the competences (powers) conferred on the Union”.
It goes on: “Operations of the mechanism cannot create liabilities for the EU budget nor for member states not participating in them.”
France and Germany proposed the treaty change just weeks ago, not least as a signal to financial markets about the long-term stability of the eurozone and the strength of its back-up systems.
Ahead of their summit, a UK Government spokesman commented: “Our position has always been that we are not in the eurozone and are not intending to join the eurozone, so it is right that we should be excluded from the bailout mechanism.
“But equally, we want to see this put in place because it is in our interests that the eurozone can deal with its own problems.”
Another British official emphasised: “The UK wants it clear that we are not bound by any future mechanism, and also that no liability accrues to us if the mechanism is used.”
If agreed, the change will need national ratification through Parliaments by the end of 2012, to come into force at the start of 2013.
The issue seems simpler than many summit deals, but EU leaders are wary about spooking the financial markets by setting the wrong tone:
“The message has to be that the eurozone is strong and capable of supporting itself,” said one EU official. “But there is concern about what – if anything - the summit should state publicly about the longer term economic outlook. Everybody knows from recent experience that casual remarks, even positive ones, can produce unpredictable and unhelpful market reactions.”
The EU’s forthcoming long-term budget negotiations are not on the summit agenda, but Mr Cameron intends to make the case for national-style restraint in Europe’s long term financial plan.
“We want to see a budget that demonstrates the same reticence and which reflects the financial position of member states – a sensible budget that is spending on the right things,” said the Government spokesman.
Conservative MEP Timothy Kirkhope urged EU leaders to focus on bolstering political will to reform their economies rather than triggering a new institutional debate about treaty changes. “Having just finished a major reform treaty process – a reform package that we were told would close the book on treaty change for a generation – we are now, just a matter of months later, apparently to embark on another.
“We are of course reassuringly told that the changes need only be ’limited’.”
But Mr Kirkhope warned: “However, that is not what some in the European Parliament believe and it doesn’t even appear to be what the German government believes. The German finance minister, Wolfgang Schauble, seems to have opened the door to a new round of integration leading to a fiscal union and ultimately a political union.”
Shadow foreign secretary Yvette Cooper warned the summit could be a missed opportunity to boost jobs and growth. “Europe is still facing real economic and political challenges, which will hurt Britain’s exports and growth,” she said.
“David Cameron should be arguing this week for a strategy to support jobs and growth across Europe – that would boost the British economy too.
“Instead he is ducking the big questions because he is too paralysed by his own economic dogma and his fear of the eurosceptics in the Tory party.”
But Labour says a permanent crisis mechanism is a sensible idea – as long as it is designed in a way which does not make short-term economic crises more likely.