‘Ratify the Treaty of Nice to Clear up the Mess it Created’

‘Did the leaders of the European Union know what they were doing in Nice at 4.30am on 11 December last year?’ The answer is probably ‘No’. Yet the Treaty should still be ratified since it is ‘repairable’ and failing to pass it would delay Eastern enlargement. This is the conclusion of four leading economists in a report in the series Monitoring European Integration, just published by the Centre for Economic Policy Research.

Every parliament in Europe has to vote on this flawed Treaty and the report is aimed at informing these decisions. The authors argue that ‘The Treaty of Nice was no better than a ‘nice try’. It failed to adjust EU decision-making to the realities of a Union with 27+ members, but it did open the door to enlargement. It should be ratified and then repaired.’

The report identifies four critical areas where the Treaty fails:

• Council decision-making reform actually made things worse. ‘The EU’s ability to act post-enlargement would have been greater with no reform at all.’

• Commission reform was makeshift, temporary and postponed the hard decisions.

• Extension of qualified majority voting was little more than a house-cleaning exercise with little or no change in sensitive areas.

• The ECB’s ‘numbers problem’. Enlargement gives the European Central Bank’s Governing Council the same ‘numbers problem’ as the European Commission. The Treaty did not fix this problem, so enlargement (without reform) will hinder the ECB from taking difficult decisions at the right time.

In spite of these grave problems, the authors say, ‘Institutional reforms can wait; Eastern enlargement should not…’ The East-West division of Europe is the last relic of the cold war and only Eastern enlargement can remove it. ‘Enlargement is a historical imperative. Council voting weights will be a historical footnote.’

Moreover, the report argues that the Treaty is repairable. The two most important ‘emergency repairs’ that should be agreed are:

• The IGC in 2004 should re-adjust Council of Ministers’ voting procedures, lowering the majority threshold from 74% of votes to two-thirds. This would restore the Council’s ability to act.

• The ECB’s numbers problems should be fixed soon. The report recommends that interest rate setting power be transferred to the Executive Board.

The report adds that killing the Treaty ‘would recreate the situation that led to the Nice mess in the first place’. By contrast, if the Treaty becomes law, enlargement will happen and this will focus minds on the need to repair EU decision-making. Moreover, if the new members are allowed a say in the repairs, the agreed reforms are likely to be more sustainable.

Notes for Editors:

CEPR is a network of over 500 Research Fellows based throughout Europe, who collaborate through the Centre in research and its dissemination. CEPR helps its Research Fellows to develop projects, obtain their funding, administer them and disseminate their results. The Centre’s research ranges from open economy macroeconomics to trade policy, from the economic transformation of Central and Eastern Europe to regionalism in the world economy. For further information about CEPR, please contact Rita Gilbert, Tel: (44 20) 7878 2917 or email: rgilbert@cepr.org, or contact James Morgan, Tel: (44 20) 8225 7262. Visit our website for a copy of this document or for additional services: http://www.cepr.org

Richard Baldwin is Professor of Economics at the Graduate Institute of International Studies, Geneva and is also a Programme Director in CEPR’s International Trade research programme. Erik Berglöf is Director of the Stockholm Institute of Transition Economics (SITE) at the Stockholm School of Economics and is also a Research Fellow in CEPR’s Financial Economics and Transition Economics research programmes. Francesco Giavazzi is Professor of Economics at IGIER, Università Bocconi in Milan and is also a Research Fellow in CEPR’s International Macroeconomics research programme. Mika Widgrén is Professor of Economics at the Turku School of Economics and Business Administration, Turku and is also a Research Fellow in CEPR’s International Trade research programme.   

Nice Try: Should the Treaty of Nice be Ratified?
Monitoring European Integration 11
Richard Baldwin , Erik Berglöf , Francesco Giavazzi , Mika Widgrén

ISBN 1 898128 56 1    Price:  £25

 
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