In March 2010, the European Council established a Task Force, led by Council President Herman van Rompuy, on developing an improved crisis resolution framework and better budgetary discipline for the EU. Preliminary conclusions were agreed to at the June 2010 European Council and a report was prepared for the end October European Council.
At the end of October, 2010 Germany and France agreed to a deal establishing that Member States would not face automatic sanctions if they break the new rules, but the Germans secured from the French an agreement to negotiate changes in the EU Treaty to create a permanent crisis resolution mechanism. This has paved the way in practice for a permanent European Monetary Fund to replace the existing European Financial Stability Facility (“EFSF”).
The European Council also agreed at the end of October, 2010 to the creation of a permanent bailout fund for Eurozone Member States to replace the EFSF and to be put in place temporarily in the Spring of 2010 until 2013. President Van Rompuy was given the task of working out the details on how the fund will be structured, and whether and how it will co-operate with the IMF. Key among the issues is whether private bondholders will be made to bear losses in the event of a Eurozone Member State default.
A Treaty change will also be required. It was originally felt that this could be done by a change to the Treaty on the next accession of a new EU Member State, but the view in Brussels now appears to be that a simplified Treaty revision requiring Parliament-only ratification by the Member States may be possible instead. A simplified provision, enshrined in Article 48, Section 6 of the Lisbon Treaty at present allows Member States to unanimously adopt a decision amending all or part of the main elements of the Treaty. Such a procedure would avoid the need to call a constitutional convention and also opens up possibility of streamlined ratification. (This approach has also been assisted by the fact that Germany did not win support for its calls that Member States’ voting rights should be suspended in the event of their breaching Eurozone rules as this would have required a more substantial Treaty change.)
Accordingly President Van Rompuy will now prepare changes to the Lisbon Treaty with a view to their being agreed at an EU summit to be held in December 2010.