MEPs sound alarm over fiscal pact

The European Parliament yesterday put dampers on the new fiscal treaty being considered by 26 of the EU’s 27 member states, which is widely seen as an indispensible step to saving the euro.

The EP approved a resolution, with 521 votes in favour, 124 against and 50 abstentions, warning that the current draft text of the treaty might lead to a “two-speed Europe” and would not guarantee economic growth.

The idea of a two-speed Europe emerged last month after all EU leaders except the UK agreed to establish a new treaty which would consolidate fiscal discipline in the hope of averting another financial crisis due to member states’ rising debts and deficits.

The new treaty would have member states insert a “golden rule” in their constitutions, obliging them to move towards a balanced budget and to reduce debt. They would also have to cut their structural deficits by at least 0.5 per cent of GDP every year.

Malta has agreed to sign up to the new treaty and a team of experts from the government is currently discussing the text to be agreed by EU leaders in another summit scheduled for January 30.

However, the latest draft is not going down well with MEPs, who fear the EP may be sidelined as member states are given more clout. Firing their first official warning shot yesterday, their resolution questioned the necessity of the agreement and said its key aims “could be better and more effectively achieved through the normal EU system”.

“An intergovernmental deal also risks permanently embedding a two-speed EU.” Instead of an intergovernmental treaty, MEPs argued instead for the substance of the fiscal pact to be incorporated into normal EU law within five years.Responding to this criticism before the vote on the resolution, Commission President Jose Manuel Barroso said it was not the wish of the Commission to have an intergovernmental treaty as it preferred to have a new EU treaty. However, since the UK had objected, an EU treaty, which needed unanimity, was not possible, he said.

“Let me make it clear, that in the current negotiations we are not leaving any ambiguity about the priority to see an agreement that respects a certain number of principles, namely the primacy of EU law, the necessity of democratic accountability, the importance of the European institutions and the need to integrate the agreement into the EU Treaties.”