David Prosser: Europe's impossible dilemma


Outlook Let's hope Nigel Farage, the easily-enraged UK Independence Party MEP, was sitting down yesterday when he heard about the European Commission's proposals for whacking fines on profligate countries. The Commission wants the fines to apply to all 27 European Union members – not simply members of the euro – and a parallel review is being undertaken by the President of the European Council, Herman Van Rompuy, who Mr Farage so memorably – and so rudely – insulted in a European Parliament session this year.

Mr Farage's apoplexy at perceived threats to UK sovereignty notwithstanding, one can see what both the Commission and Mr Van Rompuy's review are getting at. The routine way in which many EU members have flouted the commitments they once made about public debt – and all the big members breached the growth and stability pact last year – has made a nonsense of the deal.

That has had serious ramifications for the euro, with Germany and others forced, in order to save the single currency to ride, to the rescue of the most seriously indebted nations earlier this year. And since all EU members have signed up to the growth and stability pact, this is not an issue just for the eurozone. It would be difficult to operate a system where only eurozone members were penalised for transgressions, with the 11 EU nations outside of the euro, including the UK, free to break their word without fear of punishment.

The bad news for those who favour penalties binding on all 27 EU countries is that introducing such penalties would almost certainly require an amendment to the Lisbon treaty – a treacherous path down which many member states would fear to tread.

In truth, even getting agreement on these penalties from eurozone members is going to be difficult. The French, in particular, appear to have some entirely understandable reservations about the idea of giving Commission officials the power to demand France pays a fine of 0.2 per cent of its GDP if it is judged to have stepped out of line.

And yet. The eurozone crisis earlier this year made it clear that the existing pact is hopelessly out of date. German voters will not countenance their government continuing to implicitly guarantee the debts of irresponsible EU members. Sanctions of one sort or another are going to be a necessary evil. Best of luck with that Mr Van Rompuy.

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