EU leaders set for clash over financial reforms, Lisbon Treaty

At a two-day meeting in Brussels that opened today, Germany is set to make a high-stakes bit to amend the EU's Lisbon Treaty in order to make financial checks permanent.

By , Staff writer

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    German Chancellor Angela Merkel, right, arrives for an EU summit in Brussels on Oct. 28. European Union leaders, opening a two-day summit Thursday, are at pains to inject more financial discipline into eurozone nations to prevent another debt crisis from gutting confidence in Europe's single currency.
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The German government of Angela Merkel plans to make a bold and highly controversial bid at a European Union leaders summit today.

It will push for amending the unifying Lisbon Treaty to create a permanent “automatic” stability mechanism that would sanction eurozone countries that do not keep their finances in order. Offenders would lose EU voting power until they are compliant.

The German bid, which is to be officially presented Thursday and Friday, has already been met with plenty of gnashing of teeth. It's also raising fresh questions about a new harder-line approach to the EU by Germany, Europe’s most powerful country.

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Germany, the financial engine of Europe, has lost some of its ardor for the euro – and it no longer appears willing to pay for the excesses of other members, such as Greece.

The German proposal, which also has the backing of France, has raised the ire of smaller EU countries since it comes as emergency debt measures are also to be considered. European Commission deputy chief Viviane Reding called the move “irresponsible.” Leaders in Ireland and Luxembourg also oppose the plan.

The Franco-German idea is a permanent and legally binding mechanism that requires state government deficits not to exceed 3 percent of gross domestic product (GDP) and public debt not to exceed 60 percent. One irony, at the moment, is that most EU members are now out of compliance.

As the euro began to visibly melt last spring, Mrs. Merkel finally agreed to a $1 billion aid or bailout fund. Germany put in $200 million. But that fund expires in 2013.

It's unclear now whether Merkel’s bid is a high-stakes attempt to keep the alarm bells ringing over the Greek economic crisis this past spring or whether the German chancellor will actually try to reopen the Lisbon Treaty, which Europe sweated over for eight years before it finally took effect last year.

Prior to her trip to Brussels today, Merkel sounded undeterred. "There are no two ways about it, in clear terms – this will only succeed with an alteration of the European treaties," she told German lawmakers.

“The Germans are ready to pay the price to put the decision back into the disarray we just got out of,” says one European diplomat in Berlin. “If this were to go smoothly by some strike of magic, then OK. But it may not go smoothly since it opens up broad questions. Will Ireland hold a new referendum? What about the Danes?”

Jean-Dominique Giuliani, president of the Robert Schuman Foundation in Paris, says that France and Germany needed to take a strong hand at a time when the completion of a euro stability mechanism is dragging.

“Because [EU president Herman van Rompuy] has troubles finding a consensus and smaller states keep delaying … in reality there is no proposition on the table,” he says. “The future of the euro is at stake and the two main continental economies have a right to take the initiative.”

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