EU steps towards greater monetary integration

THE EU has taken the first step towards greater monetary integration when EU leaders at their summit in Brussels agreed to set up a task force to plan their next steps. That may well necessitate a change to European treaties.

Greece welcomed the decision to create a special fall-back mechanism for them that would allow them borrow from fellow eurozone colleagues and the International Monetary Fund.

It proved to be good news for the value of the euro, which rose slightly on the markets having fallen to a 10-year low earlier in the week. But on the negative side the cost of borrowing increased, including to Germany and France, the two countries that would do the heavy lifting in any loans to Greece.

German chancellor Angela Merkel declared the outcome a winner for her with its emphasis on the loan as a last resort. Greece has to pay high interest rates and there will be stiff penalties and punishments for anyone breaking euro rules in future.

Working hard to appease a German public ahead of regional elections in May, she fought to have a reference to the need for a change in the treaties put into the text agreed by the 27 EU leaders, but failed.

Taoiseach Brian Cowen was one of those that battled hard to ensure there was no such reference. Afterwards he was reluctant to comment on the likelihood of the country facing yet another referendum — possibly as early as next year.

“We will have to wait and see,” he said, adding that it could not be predicted until the task force set up to come up with changes reported at the end of the year. “We can discuss the report when we have it. It’s a very technical area that needs to be investigated by competent people and come back to us with proposals,” he said.

The Finns believed it would need a treaty change, especially if there is to be a permanent bail-out mechanism or European Monetary Fund established. But, they added, the decision on changing the treaty could be confined to the eurozone states. This would leave out Britain where any treaty change would be defeated.

Ms Merkel, whose popularity has soared in Germany in the past week, was more blase about the prospect of changes to the treaty.

“The EU needs to show its vitality and if the treaties did not stand the test of time, if they are not appropriate, then saying we do not want to touch them for the next 10 years and would rather live with an unsatisfactory situation, I do not think that is a good idea.”

Now eurozone states, including Ireland, will be hoping that their show of solidarity in promising to contribute to bail-out loans will never be called on.