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Policy Paper

The ESM Treaty: some critical remarks


Author: Antonio Padoa-Schioppa
Date: April 2012




In spite of its great importance, far less attention has been paid to theTreaty establishing the European Stability Mechanism (ESM) than to the Fiscal Compact: to put a permanent organisation in place for ensuring stability in the Eurozone is a positive decision and it is to be hoped that the new Treaty will be promptly approved by every Eurozone country.
This Paper aims at pointing out some defects in the ESM Treaty. There are two main problems with it: the first relates to the decision-making procedure, and the second to the constitutional basis of the new mechanism.
For the decisions and actions of the new body, the first drawback is in requiring a unanimous vote in the essential decisions, and the second is in having a weighted vote rather than a headcount vote. The power of veto means a de facto denial of a real union, as well as a very poorly functioning procedure. 
The second basic drawback of the ESM Treaty is due to the fact that it completely omits any mention of the European Parliament.  This looks unjustified and a huge political mistake. There are at least two areas in which the EP should have a role in ESM.  The first is the power to confirm by a vote the appointments of the Managing Director and the other members of the Board of Directors. The second regards the potential future developments of the Union’s economic governing.
It is essential not to forget the strategic objective of achieving a true European fiscal union, in any case among the Eurozone countries. The  sole intergovernmental cooperation has shown over recent years its limits and drawbacks. A stronger supranational approach is more and more required, and the solidarity principle should not be forgotten, being a pillar ofEuropean integration.


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