Breaking down the maze behind EU ‘treaty change’

BRUSSELS: If there are two words that tense the jaws of European policymakers and prompt a concerned sucking of teeth, they are ‘treaty change’.

Like a nervous driver being told mid-route that he needs a different map if he’s going to get where he’s going, no one is sure whether the outcome will be road rage, a car crash or a smoother, if longer, journey.

So when German Finance Minister Wolfgang Schaeuble spoke his mind during a meeting in Dublin on April 13 and said a change to the European Union’s (EU) treaty was necessary if Europe was to build a fully-fledged banking union, there was more than a little angst in the corridors of Brussels.

In Schaeuble’s view, banking union – originally a three-step plan to create a single eurozone banking supervisor, a unified system for resolving problem banks and a single deposit-guarantee scheme – only makes sense if there are strict rules for restructuring and winding up bad lenders.

Since those were not explicitly laid out in existing law, some changes would have to be made to the fundamental underpinnings of the union, he argued.

“If we want European institutions for that,” said the lawyer, who measured his words carefully, “we will need a treaty change.”

As with all pronouncements from Schaeuble over the past three years of crisis, the first question on policymakers’ lips was whether he was speaking for himself, as he often does, or if his views were shared by Chancellor Angela Merkel and represented a new red line.

In this case, the answer remained unclear. Merkel had not expressed a definitive position on the issue, at least not in public, and senior officials in Brussels who have regular contact with Berlin said they were still unsure how to read the signals emanating from the chancellery.

But in a sign that she had her doubts about the direction policy was moving in, especially ahead of elections in September when she would seek a third term, last week Merkel ruled out the deposit-guarantee part of the banking plan ‘for now’.

That in itself was not a huge surprise.

The idea of a fund where eurozone countries effectively cross-guarantee one another’s deposits was always going to make Germany and other northern European countries queasy, as it could mean them bailing out a string of shaky, highly indebted banking systems to the south.

But it was the first time Merkel had been so explicit and again raised doubts about her overall commitment to banking union, which many see as the most important initiative Europe has undertaken to resolve the crisis.

So what does Germany want? Does it really want treaty change, or is Schaeuble just bringing it up to stall on banking union? And if Germany were to get treaty change, would it suddenly like banking union more?

When quizzed, hesitant policymakers in Brussels – after clenching their jaws and sucking their teeth – shrugged apologetically. They wish they knew what Germany really wanted.

But they do know two things: German elections are coming up and Germany’s constitutional court will probably have to be consulted, especially on the single resolution scheme.

“Germany has always had cold feet about banking union,” said one EU official, convinced that Berlin is determined to stall until after the September 22 vote, if not long beyond. — Reuters