10 September 2015

Open Europe’s briefing argues that if three non-euro states vote against a proposal, the EU should aim for consensus. If this cannot be reached within six months, the proposal should either be dropped or only be pursued by a smaller group of member states. Such a mechanism would not only ensure the rights of non-Eurozone states and protect the single market but continue to enable the Eurozone to take the steps it needs to tackle its enduring economic crisis.

You can view the full briefing here or read it directly in the PDF viewer at the bottom of the page. 

Why is a non-euro safeguard so important?

Eurozone countries now have an in-built majority under the EU’s new voting rules, meaning they can override non-Eurozone countries. The risk of caucusing is far from hypothetical. This was driven home this summer when an EU-wide bailout fund was used to provide bridging loans to Greece despite a clear and concrete agreement in 2010 that it would no longer be used for Eurozone bailouts. The current voting rules meant that Eurozone states were able to push through the loan against the wishes of non-Euro states. Furthermore, they did so because it was more politically convenient to row back on this agreement with other EU states than face their own national parliaments and voters. Both precedents highlight the urgent need for stronger non-euro safeguards.

As the Eurozone pushes ahead with deeper integration – which has been given fresh impetus by the so-called Five Presidents Report and high profile members of the French and German governments in recent weeks – there is a greater risk of Eurozone dominance becoming engrained. The UK’s renegotiation is a huge opportunity for the entire EU to develop a more sustainable relationship between the euro-ins and euro-outs.

Furthermore, the idea that all EU states will join the Eurozone in the short to medium term is misplaced. The depth of the crisis has reduced the appetite of those inside and outside the single currency for enlargement of the Eurozone. There will be a significant group of countries outside the Eurozone for at least a decade, if not indefinitely.

What should be done?

1) Joining the Single Currency should no longer be compulsory

The EU is currently established on the principle that all member states, with the exception of the UK and Denmark which have permanent opt-outs, are bound to join the euro. This risks relegating non-euro states to second-class membership. There should be formal recognition that the EU is a ‘multi-currency union’ – this means removing the obligation for all current and future EU states to join the euro.

2) Introduce new voting rights for non-euro states

Open Europe proposes that if three non-euro states object to an EU proposal on the basis that it would undermine the integrity of the Single Market or breach fundamental EU principles such as non-discrimination, proportionality or subsidiarity, national governments should delay the decision-making process and aim for consensus. If consensus cannot be reached within a six-month time period, the proposal should either be dropped or move to ‘enhanced cooperation’, a mechanism already established in the EU Treaties, whereby a smaller group of member states can proceed without the others. Therefore, the new mechanism would not prevent deeper Eurozone integration.

3) A right to appeal against Eurozone proposals that would discriminate against non-members

Where the Eurozone acts without non-euro states, under ‘enhanced cooperation’, the latter should have a ‘right of appeal’. This would be triggered if three non-Eurozone member states registered objections to any legislation set to be adopted under enhanced cooperation if the resulting law would undermine the single market or discriminate against non-participants. Only a simple majority of both Euro and Non-Euro states would be able to reject such an appeal, allowing a check that could work in parallel to any legal challenge in the European Court of Justice (ECJ).

How could this be achieved?

New voting rights for non-euro countries could be agreed without EU treaty change. They could be written into the existing EU voting procedures in the Council of Ministers and via a separate intergovernmental legal agreement. The changes would require unanimity among national governments, but could only be undone by unanimity (i.e. with the UK’s consent).

Formal recognition of the EU as a ‘multi-currency union’ and a new right of appeal for those not taking part in enhanced cooperation would be best achieved by treaty change but could be subject to a political agreement and a separate intergovernmental legal agreement, pending subsequent treaty change.

The recent comments from the French and German governments suggest that a Eurozone reform process, potentially involving profound treaty changes, could be on the agenda as soon as 2017-2020 and would provide an opportunity to incorporate these reforms in the EU treaties. Nevertheless, the ability of the Eurozone to delay should not be underestimated. No matter what happens this safeguard will allow the rights of the UK and other non-euro states to be protected for the foreseeable future.

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