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Analysis - Germany makes its power felt on treaty change

BRUSSELS (Reuters) - After all the talking and dealmaking was done at a two-day European Union summit to discuss treaty change, it was hard to escape the impression that Germany had come out on top. For now.

When German Chancellor Angela Merkel began publicly pushing for a change to the Lisbon treaty two weeks ago, saying it was necessary if the EU was to set up a permanent system for handling financial crises, it looked a non-starter.

It was clear the vast majority of the EU’s 27 member states were opposed to altering a charter that took more than eight years to negotiate, and many thought there were easier ways of creating a permanent crisis mechanism.

But an agreement between France and Germany on October 18 -- in which Germany backed a French bid to soften new budget rules in exchange for support on treaty change -- shifted the terms of the debate and provided the impetus that led to Friday’s deal.

It aligned the two dominant powers in the EU and began 10 days of intense lobbying in which Paris and Berlin cajoled and pressured the remaining 25 member states, insisting on the logic of creating a permanent crisis mechanism and that the treaty had to be changed in order to make that happen.

In terms of EU power politics and brinkmanship, it was a display of dominance that steamrolled reservations and managed to bring the likes of Britain, Ireland, Sweden, Italy and the Netherlands on side in what for the EU was record time.

“To achieve that sort of reversal, especially when almost every other member state except France was fuming about how this was being carried out, is a clear diplomatic victory for the Germans,” said Hugo Brady, a senior research fellow at the Centre for European Reform, a think tank.

“It shows that if the biggest country in the European Union wants something, it’s probably not unrealistic to think that it’s going to get it.”

CONCESSIONS

Germany did not get everything it wanted, however.

It went into the summit saying that as well as setting up a permanent crisis mechanism, any change to the treaty should also make it possible to suspend the voting rights of those member states who persistently breach budget limits.

That was too much for almost all other member states, particularly those with high deficits such as Greece, Ireland and Portugal, and no one was going to give ground. In the end, Germany appears to have backed down, although it may just have been using the voting issue as a bargaining chip.

“There’s going to be no suspension of voting rights, that’s been ruled out,” European Commission President Jose Manuel Barroso told reporters at the summit’s closing news conference.

“That certainly won’t be part of this limited amendment.”

It is also clear that Germany had to offer certain sweeteners to other countries in order to get what it wanted.

France was the first to secure payback, getting Berlin’s surprise backing for a watering down of the EU’s new budget rules, which introduce quicker sanctions for those who fail to bring their debt and deficit levels down quickly enough.

Britain insisted that any treaty change must involve no transfer of power from Westminster to Brussels. As a result any amendments are expected to pertain only to the 16 countries that use the euro single currency.

And Britain also appears to have secured strong French and German support for a limited increase in the EU budget for 2011, capping the rise at 2.9 percent rather than the 5.9 percent that has been proposed by the European Commission.

Poland may also end up getting its way on how its pensions reform programme is assessed under the new budget deficit rules, a major sticking point for several east European member states.

Despite those concessions -- and others that may yet come to light -- Germany largely got its way on the central issue, treaty change, that even to seasoned EU analysts looked highly unlikely only a matter of days or weeks ago.

There is still some way to go in the process.

Herman Van Rompuy, the president of the European Council, will report back on how any limited treaty change proposals might be carried out in December. The aim is to get the amendments ratified by all member states only by mid-2013.

But in the short-term, Germany has secured backing for what in EU diplomatic terms looked impossible, and this feat looks to have helped Merkel on the domestic front too.

“There was a very simple strategy deployed by Germany,” said Brady, referring to its brinkmanship. “And as a result it has succeeded in legitimising the idea of treaty change.”

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