France behind secret plan for breakaway euro zone

FRANCE is drawing up plans to create a breakaway organisation of euro zone countries with its own treaty, parliament and headquarters.

By InvestSMART · 12 Nov 2011

By InvestSMART ·
12 Nov 2011

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FRANCE is drawing up plans to create a breakaway organisation of euro zone countries with its own treaty, parliament and headquarters.

The creation of a formal "union within a union" would undermine the European Union and lead to a significant deterioration in Britain's influence in Europe.

British Prime Minister David Cameron is working on plans to stop Britain being "railroaded" into agreeing to decisions taken by the new euro zone bloc.

London's Daily Telegraph understands that France and Germany want to strengthen the union between euro zone countries with new taxes and legal measures to stop nations borrowing and spending too much.

Weaker countries such as Greece could even be barred from the new euro zone, under radical suggestions from some of those involved in talks about the plan.

It comes amid growing concerns that France could be the next nation to become embroiled in the single currency crisis.

Gordon Brown, the former British prime minister, said France was "in danger of being picked off by the markets in the coming weeks and months".

Pressure on Italy eased yesterday after it appeared that former EU commissioner Mario Monti would be installed as prime minister by the weekend, while in Greece his fellow technocrat Lucas Papademos emerged as the leader.

Jean-Claude Piris, a former senior EU official, has come out of retirement to "help the euro zone in the current crisis" by working on a blueprint for the new union and its separate institutions.

"Willing euro members would conclude an additional treaty compatible with international and EU law," he wrote last week. "This would contain additional obligations for them . . ." The emphasis by Mr Piris on "willing" members and "additional obligations" has stoked rumours, denied in Paris, that Nicolas Sarkozy, the French president, is trying build a smaller euro zone without the highly indebted or bailout countries of Greece, Ireland, Portugal or Italy.

The collapse of the euro area of the 17 member states would cause a crash that would wipe out half of the value of Europe's economy, the president of the European Commission, Jose Manuel Barroso, has warned.

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Frequently Asked Questions about this Article…

What is France’s plan to create a breakaway euro zone and what would it look like?

The article says France is drawing up plans for a ‘union within a union’ – a breakaway organisation of euro‑zone countries with its own treaty, parliament and headquarters. A former EU official, Jean‑Claude Piris, is working on a blueprint for separate institutions and additional legal obligations for willing members.

How could a new breakaway euro‑zone bloc affect the broader European Union?

According to the article, forming a formal union within the EU could undermine the European Union itself and reduce Britain’s influence in Europe, creating political and market uncertainty for investors focused on the region.

Are weaker or highly indebted countries likely to be excluded from the proposed euro bloc?

The article reports radical suggestions that weaker countries such as Greece could be barred, and there were rumours (denied in Paris) that leaders might try to form a smaller euro zone without highly indebted or bailout countries like Greece, Ireland, Portugal or Italy.

What fiscal and legal measures are being discussed to strengthen the euro zone?

France and Germany reportedly want stronger rules including new taxes and legal measures to stop nations borrowing and spending excessively, and the proposed additional treaty would contain extra obligations for participating euro members.

How are UK leaders responding to plans for a separate euro‑zone organisation?

The article says British Prime Minister David Cameron is working to stop Britain being ‘railroaded’ into agreeing to decisions by a new euro‑zone bloc, and former PM Gordon Brown warned France could be at risk of market pressure in coming months.

What recent leadership developments eased pressure on Italy and Greece?

Pressure on Italy eased after reports that former EU commissioner Mario Monti was likely to be installed as prime minister, while Lucas Papademos, another technocrat, emerged as the leader in Greece, according to the article.

Who is Jean‑Claude Piris and what role does he play in the plan for a new euro union?

Jean‑Claude Piris is a former senior EU official who came out of retirement to help the euro zone by drafting a blueprint for the new union and its separate institutions, proposing an additional treaty for willing members.

What warning did EU officials give about a potential collapse of the euro area and why should investors care?

The president of the European Commission, José Manuel Barroso, warned that a collapse of the 17‑member euro area would trigger a crash wiping out half the value of Europe’s economy – a stark systemic risk that investors tracking European markets should be aware of.