French court set to rule on fiscal pact on Thursday


  • World
  • Tuesday, 07 Aug 2012

France's President Francois Hollande and his companion Valerie Trierweiler (L Rear) arrive at the presidential retreat of Bregancon in Bormes-les-Mimosas August 2, 2012. REUTERS/Philippe Laurenson

PARIS (Reuters) - France's Constitutional Council will decide on Thursday whether adopting the European Union's fiscal pact requires an amendment to the constitution, sources said, posing a potential headache for President Francois Hollande.

Hollande has pledged to avoid writing a budgetary "golden rule" into the constitution but jurists say the verdict from France's highest constitutional authority is too close to call.

While the risk of the pact not getting ratified is small, a call by the Council for a constitutional amendment would give Hollande a bigger parliamentary hurdle to clear and could bring old divisions in his Socialist Party over Europe to the fore.

Lawmakers in the party's left wing are calling for an indepth debate on European fiscal integration that could unnerve financial markets just as Hollande tries to convince Berlin he is on board with its road map to closer union.

"Whether or not we have to amend the constitution I think the fiscal pact will be ratified. But opinions vary. We need to open a debate as soon as possible on Europe," said Henri Emmanuelli, a veteran Socialist deputy who voted "No" in France's 2005 referendum on the EU constitution.

"You can't ask people to take a pill without explaining to them what it's for," he said.

Hollande is hoping he can adopt the fiscal pact -- which enshrines tough debt rules for Europe -- via a "super-law" that would hold governments to meeting deficit-cutting targets without needing to tamper with the constitution.

Yet the conservative UMP party supports a constitutional change, which would require a three-fifths majority in a bicameral parliament vote. Even some senior Socialist politicians have suggested an amendment is unavoidable.

"The court will sit all day on Thursday. Depending how fast deliberations go, a decision will be announced on Thursday evening or on Friday morning," said a source familiar with the situation.

If the Council calls for an amendment, Hollande would be reliant on support from centrist and conservative lawmakers to make up for any eurosceptics on the left and reach the required 60 percent majority.

The alternative, calling a referendum to pass the amendment, would trigger a fraught national debate on the push towards more fiscal and political integration in Europe, an issue that split the Socialist Party in 2005 and remains highly divisive.

Hollande is haunted by his unsuccessful campaign for a "Yes" vote in the 2005 referendum on a European constitution and would likely resist any calls from eurosceptics to hold a public vote.

LAWYERS WORK ON OPTIONS

The fiscal pact signed in March obliges governments to write into national law, preferably at a constitutional level, the obligation to restrict structural deficits to a maximum of 0.5 percent of gross domestic product under normal circumstances.

Hollande, currently vacationing on the 13th-century Mediterranean island fort of Bregancon, hopes that an organic law -- a type of law that has constitutional weight -- obliging the government to meet budget targets would suffice.

The government has a majority in both houses of parliament, meaning it could pass such a law as soon as September.

However, Jean-Jacques Urvoas, the Socialist head of the National Assembly's legal commission, said in July that he believed the EU pact required a constitutional reform.

Because the pact was not signed by Britain or the Czech Republic, it does not fall under a constitutional provision for ceding powers to the 27-nation European Union, he said.

In preparation for a negative outcome, Hollande's legal team is drafting a constitutional clause that would permit the existence of an organic law on budget targets which the president hopes could be passed with minimal debate.

Hollande, who was an outspoken opponent of German-led fiscal austerity during his election campaign, made his acceptance of the pact conditional on the inclusion of a 120-billion-euro package of growth measures, approved by EU leaders in late June.

But the Communist-dominated Left Front, as well as far-left members of the Socialist Party and some members of their Greens Party allies still oppose the fiscal pact as too rigid.

Germany's Constitutional Court is also due to rule on September 12 on the constitutional compatibility of the fiscal pact and a separate agreement to set up a 500 billion euro permanent euro zone bailout fund.

(Writing by Daniel Flynn; Additional reporting and editing by Catherine Bremer)

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