Could another Treaty change be on the cards?

European leaders still bearing the scars of the tortuous ratification of the Lisbon Treaty are now having to contemplate the prospect of re-writing the rule-book to accommodate further fiscal integration of the beleaguered Eurozone.

German Foreign Minister Guido Westerwelle has said that Berlin believed all 27 EU member state leaders would need to convene next year to agree to a new Treaty.

This has caused alarm in Brussels. Treaty changes require ratification in each Member State – in some cases, a referendum is compulsory – in all cases, there will be a painful political process with numerous pitfalls on the way.   The Lisbon Treaty took eight years to ratify.

It seems that Germany believes a Treaty change is required for Eurobonds – something they are understandably reluctant to see introduced. The European Commission is expected to come up with proposals for Eurobonds later this year.

However, there is no reason why Eurobonds cannot be introduced through the “community method”. Of course, the community method requires enormous political will from the EU27.

It doesn’t help that the Commission is giving mixed messages. Commission President José Manuel Barroso has said the Commission is “open” to new Treaty changes but then went on to say at a high-level think tank event on Thursday this week that his 5-point Roadmap out of the crisis did not require a treaty change. He told the audience at the “Re-thinking Europe” event: “We can enhance growth without treaty change.”

But the devil is in the detail.

The five points in his plan – bailing out Greece, recapitalising banks, boosting the Eurozone rescue fund, pursuing growth policies, and building stronger economic governance – seem to be a reasonable response, but limits to the Commission’s competences will be increasingly tested.

Commission Vice President Joaquín Almunia went further and warned that the EU was too weak to go through another Treaty convention. As he put it: “We are not mature enough for Treaty change.”

Barroso spelt out his strategy at his annual State of the Union address at the end of September.  His plans are far-reaching, and he has clearly been stung by criticism that the solutions to the crisis have been piecemeal.

UK Prime Minister David Cameron wants the Eurozone to take the so-called “bazooka” approach – a one-off fix – instead of piecemeal measures. Barroso this week called it “getting ahead of the curve.”

The bazooka approach to dealing with the sovereign debt crisis is being applied to the financial services regulatory regime, including credit rating agencies and corporate governance. And he is deadly serious about his proposed financial transaction tax.

There is no real appetite among Europe’s leaders for Treaty changes – even in the UK where David Cameron resisted growing pressure from his own party to demand a referendum to repatriate some EU powers.

A referendum would be politically divisive in Germany too. It’s just a threat to ward off any attempts to bring in Eurobonds through the back door.

We shall have to wait until next week when leaders meet at the European Council and the Eurozone Summit to see whether Treaty changes are still seen as a realistic prospect.

- Kevin