- The Washington Times - Friday, March 25, 2005

France and Germany have managed to refashion the eurozone’s economic rules in their flawed image, just as passage of the EU constitution appears to be in serious peril. At the center of the pact’s demise and flagging support for the constitution is a sense of entitlement in France and Germany to have it both ways: defending the right to make sovereign decisions while advocating integration, and the relinquishing of that sovereignty, for other countries.

The EU Growth and Stability Pact, which was originally championed by Germany when it was established in the late 1990s, established economic criteria that EU members adopting the euro had to, in theory, comply with. In reality, the pact has been repeatedly breached, and France and Germany have been serial violators. Both countries run the risk of exceeding the deficit cap of 3 percent of gross domestic product for the fourth straight year.

EU leaders Wednesday backed a plan, approved by EU finance ministers Monday, to essentially scrap the pact’s economic benchmarks. Although the benchmarks in theory would continue to apply, the deal has introduced a grab-bag of exceptions that allow countries (especially the European Union’s heavyweights) to avert penalties for failing to meet them. In effect, the pact is dead — an outcome France and Germany had lobbied for.

The gutting of the pact was strongly criticized by the European Central Bank. Indeed, finance ministers failed to heed the advice of former EU Monetary Affairs Commissioner Pedro Solbes, who last year recommended a tighter set of criteria for waiving penalties against eurozone countries that break the deficit ceiling. Mr. Solbes recommended a country’s debt levels, long-term health of public finances and the need for investment could be considered.

And even though France got what it asked for, French voters could be on the verge of rejecting a draft of an EU constitution in a May 29 referendum. Although France has long been a bastion of support for EU integration, recent polls have indicated that, for the first time, a slim majority in France is opposed to the EU constitution.

French voters are opposed to a bill that would allow for greater competition in the EU service sector. The result, interestingly enough, has been that EU leaders now favor scrapping the liberalization of the EU service sector. France’s prerogatives have unsurprisingly carried the day, once again.

The decisions by EU leaders to so conspicuously bend to the wishes of France and Germany could seriously threaten the EU “experiment.” Although French support for the constitution may be restored by May 29, it could come at a price.

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