EU fiscal union scrutinised in Swiss press

Brussel's version of the Punch and Judy show Keystone

There is cautious optimism in Swiss newspapers that the “fiscal compact” agreed by European Union leaders on Friday can be effective in tackling the eurozone’s debt crisis.

However, commentators were mixed in their views of the decision by British Prime Minister David Cameron to veto the deal.

David Cameron has decided to “lead his country into isolation” by vetoing the deal, wrote the Zurich-based Tages-Anzeiger in its commentary. “Before the start of the EU summit, French President Nicolas Sarkozy warned that the risk of Europe’s explosion had never been so great…The explosion did not occur but instead there has been a dangerous separation with the decision by Britain to stand on the sidelines.”

The Tages-Anzeiger says what the 26 EU countries agreed is an important first step towards much closer economic ties. But it warns that the compromise has fallen short, due to Britain’s refusal to play ball: “To what extent can the EU Commission and EU Court be called upon to supervise budgets? Can London deny the [legitimacy] of EU institutions? Cameron would be wise to show restraint because even Britain is interested in a stable euro.”

Geneva’s Le Temps agreed with the Tages-Anzeiger that David Cameron had become “more isolated than ever”. It went on to say that the success of the fiscal compact will now be decided in each capital and parliament of the member states. And this could prove tricky.

“Hungary is debt-ridden and its population is unpredictable. In the Czech Republic, the anti-European stance is led by the president who manhandled the Lisbon Treaty. And there is no certainty about the response of normally virtuous Sweden, which is always hostile to amending treaties. The eurozone countries, and those who have committed to join, must therefore be prepared for serious discussions.”

Winston Churchill

“Let Europe arise!” was the front page title – in English – of the commentary of the German-language Neue Zürcher Zeitung (NZZ). The phrase was spoken by Winston Churchill in 1946 in his speech in Zurich supporting a “United States of Europe”.

“More than 60 years later, the now reasonably ‘united’ Europe finds itself at the precipice,” the NZZ editor-in-chief, Markus Spillmann, wrote. “If it were not for German Chancellor Angela Merkel, the fall would have been very likely… It is not German lust for power that drivers her, as is often heard in France and Britain, but the desire to see a competitive and politically stable Europe from which Germany receives a large share of the benefits.”

The NZZ added that the solution presented by Merkel and Sarkozy in Brussels goes in a direction that – faced with the alternatives – is viable. The Zurich paper said Switzerland could also benefit from an EU that becomes even more strongly divided between members of the eurozone and the rest. “A Europe moving at different speeds with varying contractual commitments provides room for a creative approach to bilateral relations.”

Taboo

The headline in Fribourg’s La Liberté read; “Taboo broken”.

“A two-track Europe has been discussed for years, if not decades. In practice, this approach has been evident for a long time. The EU has been moving forward at different speeds… Up to now, all major treaties have been ratified by all member states. But the new pact breaks with the concept of consensus.”

To make its point, La Liberté highlights the Maastricht Treaty of 1992 and the introduction of the single currency ten years later, that not all nations joined. The paper says Cameron’s intransigence may, paradoxically, provide something for everyone:

“It breaks a taboo that all EU countries are co-owners and co-decision makers of the same project. Twenty-seven members now, 30 or 33 in future – this community born in the post-war period has become unmanageable, unable to respond quickly to repeated crises such as the one that began in 2008.”

Main points of the agreement

EU leaders described the deal as based on a new “fiscal compact” and “on significantly stronger coordination of economic policies in areas of common interest”.

Eurozone states’ budgets should be balanced or in surplus; this principle will be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5 percent of GDP.

Such a rule will also be introduced in eurozone member states’ own national legal systems; they must report national debt issuance plans in advance.

As soon as a euro member state is in breach of the three percent deficit ceiling, there will be automatic consequences, including possible sanctions, unless a qualified majority of euro states is opposed.

The European Stability Mechanism (ESM), the eurozone’s permanent bailout fund, is aimed to enter into force in July 2012; the existing European Financial Stability Facility (EFSF) will remain active until mid-2013. The overall ceiling of the EFSF/ESM of 500 billion euros will be reviewed in March 2012.

Euro area and other EU states will confirm within 10 days the provision of funds to the IMF of up to 200 billion euros in the form of bilateral loans to help it deal with the crisis.

Voting rules in the ESM will be changed to allow decisions by qualified majority of 85 per cent in emergencies, although that remains subject to confirmation by the Finnish parliament.