30 June 2008

EZA 850 Report:

EURO AREA – LISBON TREATY

Responses to the Irish "No!" – keep on pedalling or prepare for a marathon?


· Rejection of the EU's 'Lisbon' Reform Treaty by the Irish electorate triggered conflicting responses among Europe's politicians – whether to push the treaty through regardless, inviting Ireland to like it or leave it, or taking it off the agenda entirely.

· Wiser counsel prevailed at the Summit of heads of state and government, with a decision to defer substantive debate about what to do next until October, when Ireland's prime minister has been invited to suggest a way forward.

· It seems unlikely that he will be able satisfy the disparate concerns of the Irish people without unstitching the compromises enshrined in the Lisbon text and endorsed by all 27 member governments.

· More likely, the EU will put Lisbon on ice and soldier on for some time with the existing, unsatisfactory but manageable, provisions of the Treaty of Nice.

This would mean putting ambitions of enhanced international influence and further significant enlargement (Turkey) on hold and making do with the present, by now unwieldy, EU policy-making procedures.


Asset conclusions: short-term negative for the euro and for non-German government bonds, since the overall coherence of the EU might suffer, with a corresponding impact also on the euro area.

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