Posted on 07/13/2004 2:01:56 AM PDT by ScaniaBoy
EUOBSERVER / BRUSSELS - The European Court of Justice in Luxembourg will on Tuesday (13 July) hand down what may be the most significant ruling in its 46 year history.
The case may not sound like much (Judgement C-27/04 Commission v Council), but at stake is who is in control of the EU economy - Brussels or member states.
The European Commission took the Council of member states to court over its decision in November to suspend disciplinary procedures against France and Germany for repeatedly breaking EU economic rules.
Brussels had recommended that France and Germany take measures to bring their budget deficits below the maximum EU permitted level of three percent of gross domestic product (GDP).
But Paris and Berlin persuaded enough of their colleagues to vote down these recommendations and place the procedure "in abeyance", effectively killing off the rules that underpin the euro.
The Commission argues that the Council had no right to suspend the procedure it recommended - a disciplinary procedure that could result in fines of billions of euro. But the Council maintains that the final decision rests with member states. What happens if...
Whichever side wins, there are serious consequences for decision-making in the EU economic sphere.
If the Commission wins and the Court decides that the member states had no right to suspend the disciplinary procedure, then it could annul the member states' declaration and the member states would have to go back to the Commission's recommendations to France and Germany that they suspended in the first place.
"We would be back to where we started", says Guillaume Durant, an expert on economic governance at the European Policy Centre in Brussels.
"But as the same people would be around the table, it is hard to see why there would be a difference".
If the procedure were to be re-started and carried through to its conclusion, Germany and France - who this year will have exceeded the limit for three consecutive years - could in theory next year face fines of up to 0.5 percent of their GDP. If these fines were indeed dished out, Germany would face a sanction of just under 10 billion euro and France could expect a fine of just over seven billion. In practice, though, few analysts believe the fines would ever actually be levied.
Death to the pact However, France and Germany are not the only member states currently in breach of the rules. The Netherlands, Greece and Italy all have deficits over three percent of GDP and could face similar punishment.
If the Court decides that the member states acted within their legal rights to suspend the procedure, it effectively buries all claims from the Commission to be the supervisor of EU economic policy.
And with another huge row brewing between member states and the Commission over the EU budget for 2007-2013, it would give EU capitals the upper hand in an ongoing power struggle.
Power struggle Some analysts believe that winning this power battle is more important than the actual implications of the result. Mr Durant says that the case is "a largely symbolic issue" and that the row is really about control.
"It's more for the Commission to show the Council that they can not just do what they want", he says.
And Jorgen Mortensen, an expert at the Centre for European Studies argues in a recent paper that the crisis over the economic rules, "brought into the open a conflict that had been brewing ever since the creation of the EEC in 1958: the sharing of competences for macroeconomic policy-making between the national governments and the EU institutions".
Neither side involved in the case was prepared to speculate on what implications the result might have.
A spokesman for the EU Presidency said, "we will have a reaction tomorrow" and a Commission spokesman said that he would not like to comment on "hypothetical questions".
This may lead to a lot of squabling within the EU.
Whatever the Court decides it is going to create problems.
If it decides that the it was ok to suspend the disciplinary procedures written into the "Growth and Stability Pact" that is the cornerstone of the EMU / euro, then the pact is essentially dead.
True, in economic terms it was a disaster - to rigid by half - but once it is gone there will be nothing to prevent any country to "free load" on others with a more stringent budget policy and better overall economics.
(Actually the markets have already accepted this. There is hardly any spread between Italian and Finnish government bonds, despite the fact that Finland's debt is 45% of GDP and Italy's is 106%. According to the Maastrich treaty the European Central Bank is not allowed to bail out a country that is close to default - but if one can break one rule, one can break another.)
On the other hand if the ruling goes against Germany and France there will be an almighty uproar. And then Italy, Greece, the Netherlands are in for the axe as well.
Sounds like fun....
I hope whatever happens their system just collapses.... the EU needs to die
I think Euroland faces difficulty taking its baby steps... the individual states don't want to cede their economic decision-making authority to Brussels. There is a central European currency called the Euro and in theory, Brussels could withold enough money to punish the miscreants. In reality, its never going to happen. An all powerful Euroland? When pigs can fly...
bring back soveriegnty in Euro-peon land
Agree with you on both counts.
Sounds like an EU powergrab, powergobble anyway
With France and Germany running the EU, who needs Hitler.
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