EU LEADERS early this morning unveiled a deal to reopen the European treaties, after a push by German chancellor Angel Merkel for the creation of a permanent rescue scheme for distressed euro countries.
The agreement to work towards a "limited" treaty revision, less than 11 months after the enactment of the Lisbon pact, raises the prospect of the Government having to decide whether to call another EU referendum.
Although Dublin hopes any change will be modest enough to avoid a vote, Taoiseach Brian Cowen accepted yesterday that this could not be ruled out. “It’s certainly a headline-grabber,” he said.
Mr Cowen added, however, that a referendum would not automatically follow any treaty revision and said any change would have to be examined on its merits.
In the face of massive pressure from Dr Merkel, the leaders of the 27 member states resolved to give European Council president Herman Van Rompuy a mandate to examine the case for treaty change to strengthen the single currency system.
Mr Van Rompuy told reporters this morning that "the absence of a crisis resolution mechanism almost brought down the euro zone as a whole" last spring. He had been asked to undertake consultations on a limited treaty change without modifying the no-bailout clause already enshrined in the treaties.
He will also examine a potential role for private sector investors in the new mechanism, a reference to Dr. Merkel's demand for a system of "orderly national insolvencies".
Mr Van Rompuy will also examine the role of the International Monetary Fund (IMF) and the requirement for "very strong conditionality" to be built into the permanent scheme.
In addition, the European Commission has been asked to develop technical proposals for such a mechanism.
Both Mr Van Rompuy and the commission must report back to the EU leaders at their next summit shortly before Christmas.
The specific requirment is for Mr Van Rompuy to limit his examination marks a preference among EU leaders to deploy a "simplified revision procedure" in the Lisbon pact, which would would not necessitate a convention to recast the treaty.
Dr Merkel's call for governments who violate EU voting rules to be stripped of their voting rights remains in play, but only in the long-term and was resisted by most EU leaders, including Mr Cowen.
Although the Government believes the question of a referendum on a permanent rescue mechanism is an open one, it hopes that a limited treaty change could be made without a referendum.
Mr Cowen told reporters that a permanent rescue scheme was required, but expressed no firm view on Dr Merkel’s demand for the mechanism to include new procedures for “orderly” national insolvencies.
This aspect of her proposal is highly sensitive, as many leaders believe it would increase the borrowing costs of weaker countries. They also fear an adverse market reaction to the prospect of sovereign debt writedowns in extreme cases.
The Taoiseach said any treaty change should be executed “in as narrow and as simplified a way as possible,” a clear reflection of the Government’s position that any revision should be made in a manner that would not require a referendum.
“Our concerns in that area aren’t unique to Ireland, they’re shared by many other member states.”
Dr Merkel has been pressing her European counterparts to make permanent the temporary scheme for euro countries, as she fears Germany’s constitutional court will rule against it next spring on foot of a challenge to the scheme’s legality.
She is also concerned about a renewal of market turbulence if the present scheme expires in June 2013 with no replacement, a date that comes three months before the next scheduled German election.
At the summit, Dr Merkel stressed the importance of including insolvency procedures. She reiterated her demand for new powers to suspend voting rights from countries that persistently defy EU budget rules.
However, European Commission chief, Jose Manuel Barroso, declared the notion unviable, saying it would never be accepted - as required under law - by the unanimity of member states.