Increasingly apparent over recent weeks is that some national parliaments at balking at ratifying Europe’s fiscal compact. In France, Socialist opposition leader Hollande has already promised that he will seek to renegotiate the pact should he be elected in the upcoming Presidential election; he currently leads Nicolas Sarkozy in the polls by a comfortable margin although the gap is narrowing. Ireland has decided to hold a referendum on the treaty closer to mid-year and in the Netherlands there is opposition to the treaty from both of the contenders for the leadership of the Labour Party. Spain’s Prime Minister Rajoy tested the EU’s mettle almost immediately by announcing a revised fiscal deficit target for 2012 of 5.8% of GDP, well above the 4.4% target mandated by Brussels. This resulted in a flurry of activity, with the EC ultimately relenting; Spain’s revised deficit target for this year is 5.3%.
Even German politicians are having their doubts. Some senior members of the SPD are wanting extra concessions as the price for their acceptance, in particular the implementation of a financial transactions tax, a policy beloved by French President Sarkozy. Chancellor Merkel needs the support of the Social Democrats, because the fiscal-compact legislation needs to pass the Bundestag with a two-thirds majority.
Despite these inevitable bumps in the road, it is still highly likely that the pact will ultimately be enshrined into European law. In the end, only 12 of the 17 members of the eurozone need to vote in favour of the legislation. Right now, some of what is transpiring is mere political posturing.