Top-tier leaders may be holding out for a two-tier EU

Nicholas Sarkozy and Angela Merkel’s proposed debt limits for EU member states would require a referendum in Ireland.

Angela Merkel and Nicholas Sarkzoy met privately this week and proposed measures, including a debt brake, that seem like terms and conditions for their continued support of the weaker states

A MAD world run by mad people in Brussels, said Gay Byrne. He may have got the location wrong and may have been a little unfair to innocent bureaucrats.

The madness this week appeared to be confined to Paris, where, following their meeting, Nicolas Sarkozy and Angela Merkel suggested, among other things, inserting debt limits into each state’s national laws by the middle of next year in order to tackle the eurozone debt crisis.

That may sound practical. But the proposal brings immense political difficulties. Meeting such a requirement in Ireland would mean changing the constitution, and holding a referendum. We all know this country’s history with European Union referendums.

Nice I, on EU enlargement, was rejected, only for it to be put before the public a second time, when it was approved.

Lisbon I, on new rules for the EU, was rejected, only for it to be put before the public a second time, when it was approved.

On each re-run, scepticism about the EU had to be overcome with promises of what would happen if we worked with Brussels, and threats of what would happen if we didn’t.

As Libertas founder and anti-Lisbon campaigner Declan Ganley delighted in saying while acting as a stand-in presenter on TV3 this week: “ ‘Yes to jobs and recovery’ ” was the slogan of the pro-Lisbon side. The jobs and the recovery — where are they?” The question was asked of Government TD Paschal Donohoe. While he gave Donohoe time to answer, the question was rhetorical.

It is against this backdrop that Merkel and Sarkozy are suggesting measures that would require another referendum. At a time when confidence in the EU is low — its response to the debt crisis has been insufficient, the terms and conditions of its bailout for Ireland too onerous — it seems madness to think such a referendum would pass here. A second referendum could be required — unless the public proved so scared of the EU’s retribution that it meekly said ‘yes’ first time round.

Either way, the time frame and the politics of such a referendum appear ludicrous.

Following the announcement of the Franco-German proposals, Finance Minister Michael Noonan was quick to say they were merely that — proposals — and that nothing would be agreed until every member state agreed.

Noonan also said that inserting a debt brake, as it is called, into the constitution would have little immediate effect because Ireland is operating under fiscal controls laid down in the bailout agreement.

“In practical terms, [a debt brake] won’t mean an awful lot for Ireland, because we’re under very tight fiscal control already, as there are very specific conditions which we have to comply with on our budgetary programme, so that we can continue to draw money down from Europe,” Noonan said.

Nonetheless, he didn’t rule out such a referendum being held, either because he believes the debt brake is a sensible long-term proposal or he knows that what Germany and France want, they will ultimately get.

But Noonan said there was no way of predicting whether or not such a referendum would pass.

“I don’t know. It’s something that has to be discussed. I didn’t expect this to come down the road,” he said.

“If you look forward to 2025, and there’s some government in office that decides to go crazy again and borrow everything it can lay hands on, the public might be in favour of a constitutional prohibition. But it would depend on how it was drafted and what limits were set.”

As noted here earlier this week, Noonan’s answer made it clear he had no advance notice of what Germany and France were going to suggest.

His answer was also interesting for another reason: it showed that Noonan regarded the debt brake proposal as a measure to prevent a future crisis, rather than solve the existing one.

So why propose it at all? Why did Merkel and Sarkozy put forward a measure that will be difficult to implement in several member states and merely put further pressure on incumbent governments, when — as indicated by the market response — the measure will do little to solve the existing crisis?

The non-cynics will say that Merkel and Sarkozy are wisely looking to the long-term — something we often wish more political leaders would do — and putting measures in place to avoid a repeat of the current crisis.

“Germany and France consider it their historic mission, and stand united, to protect and strengthen the economic and monetary union and thus the stability of the single currency,” their joint letter to European Council president Herman Van Rompuy said.

The measures they are proposing, Merkel and Sarkozy hope, will build confidence in the euro’s future, thereby easing the short-term concerns of the markets.

“What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step,” said Merkel.

But the cynics might suggest something else, namely that Germany and France are implicitly threatening a two-tier Europe as a means to get recalcitrant member states to fall in line with their demands.

In other words, they may be signalling that their new proposals are, effectively, the terms and conditions for their continued support of the weaker states. If the latter do not accept these terms, the two-tier union will become a reality and they will be excluded from the top tier.

The decision of Germany and France to harmonise their corporate tax rates from 2013 could also be seen in that light — they will take the lead and then demand that other member states, including Ireland, follow suit or suffer the consequences.

Education Minister Ruairi Quinn revealed his displeasure this week with the way in which Germany and France had sprung the latest proposals on their fellow member states.

“They have to be told, in no uncertain terms, that this is a European problem and it has to be solved at European level, and that the old firm of the Franco-German alliance is no longer calling the shots exclusively,” he said. But who is going to tell them? Chances are, the Irish public might do exactly that if a debt brake referendum becomes reality.