The Euro zone deal agreed in the early hours of this morning might be short on financial details, but there is little doubt as to its political ramifications.
Signatories have made clear that they see the Euro as core to the peace, security and stability of the European project. With this agreement Eurozone Heads of States have crossed the political rubicon.
Make no mistake; the politics of what has been agreed will have far greater long-term impact than the economics. The economics of what needed to be done was always self-evident. The unanswered question was whether Eurozone leaders had the political will to enact the changes.
Eurozone leaders have now agreed 10 measures to strengthen the governance of the Euro Zone. These include regular Euro Summits to “define strategic orientations for the conduct of economic policies and for improved competitiveness and increased convergence in the Euro area.”
In short this means tougher controls in future on the budgets of member countries and an integration of taxation. A whole new institutional architecture has been proposed that rivals the decision-making of the European Union.
Some will say that this is all folly and to be fair only time will tell whether this is a step too far democratically and politically. But, after months of political paralysis Eurozone governments recognized that the only solution was forward.
What then of the non-Euro countries?
Interestingly, the agreement notes that “the President of the Euro Summits will keep the non-euro area Member States closely informed of the preparation and outcome of the Summits.” This seems to fall significantly short of the assurances that David Cameron gave yesterday evening that decisions made in the Eurogroup that affect the whole EU will need the consent and support of all 27 Member States. Communication seems to be one way here.
It is unclear whether any of this will require a Treaty change. The agreement sets out that the President of the European Council, in close collaboration with the Commission President and the President of the Eurogroup, will present an interim report in December 2011 with a final report on how to implement the agreed changes in March 2012.
After Monday’s debate in Parliament there will be some on the Tory backbenchers who will be licking their lips at the prospect of using the negotiations to repatriate powers back to the UK in return for allowing Treaty changes that don’t necessarily affect Britain. How this will all play out with regard to the legislation just passed by Parliament in July of this year requiring all Treaty changes to be subject to a referendum is far from clear.
Whether Angela Merkel and others will allow Britain to hold the Eurogroup hostage is another matter – one suspects not. Either way, this amounts to a major political headache for David Cameron’s coalition government.