Berlin Plans to Streamline EU but Avoid Wholesale Treaty Change

German Chancellor Angela Merkel, speaks in front of a flag of the European Union
Sean Gallup | Getty Images
German Chancellor Angela Merkel, speaks in front of a flag of the European Union

Berlin is drawing up plans for treaty changes to streamline decision-making in the euro zone, while stopping short of any wholesale renegotiation that would allow the UK to repatriate powers from Brussels.

Although Angela Merkel, German chancellor, has expressed her desire to keep the UK inside the EU, the move being discussed in Berlin would thwart a plan by David Cameron, UK prime minister, to piggyback on euro zone reforms to renegotiate the British relationship with Brussels.

The strategy would take as a model two recently adopted standalone treaties – one creating the new €500 billion euro zone rescue fund and the other enshrining budget discipline in a "fiscal compact" – that were written and ratified in a matter of months.

(Read More: EU Battle Heats Up: '50% Change UK Out in 5 Years')

Mr. Cameron had hoped to exploit renewed interest in Berlin for wholesale EU treaty changes as a way to renegotiate the UK's membership terms. But Berlin's strategy for a new, narrowly focused treaty could force the UK premier into a repeat of the dilemma he faced in December 2011, when Mr. Cameron rejected the fiscal compact treaty but most other EU countries went along without him.

Wolfgang Schäuble, the German finance minister, has been increasingly public about his desire to change the EU treaties to provide better legal underpinning for the bloc's new "banking union" – particularly a new Europe-wide bank bailout system, which Mr. Schäuble said cannot be completed without a treaty-based shift in power to Brussels.

Some EU officials suspected that Mr. Schäuble's stance was a negotiating ploy that did not have the backing of Angela Merkel, the German chancellor. But senior German officials said the finance minister's foray was actually part of a larger push for new treaties that has the full backing of Ms. Merkel, who is increasingly frustrated with the slow pace of euro zone decision-making.

(Read More: UK Has Everything to Lose From Europe: Grillo)

Senior German officials acknowledged that they were isolated on treaty change, which is fraught with political landmines in several countries – particularly France, which would probably require a national referendum if major changes were made to EU law.

More From The Financial Times:

Q&A: Treaty Moves Promise Fraught Debate
Irish Business Warns Fractious UK Debate on EU Will Hurt Investment
Inside Business: Don't Wait to Fix Europe's Banking Crisis

But the officials said Ms. Merkel increasingly believes that the euro zone's governance structure is not suited for the pace of globalization, where competitors in other economic blocs can move more quickly to respond to economic changes. German leaders believe that only by consolidating power in Brussels through a new treaty can the euro zone become efficient enough to compete.

Under the EU's Lisbon treaty, major revisions to the bloc's rules can only be done by convening a convention made up not only of member governments but also the European parliament and national parliamentarians.

In a full convention, Mr. Cameron would be able to force the issue of repatriating powers on to the agenda.

But by examining a new treaty outside the Lisbon requirements, Berlin hopes to avoid such a time-consuming and freewheeling process. Germany officials noted that other "basic laws", including the German and U.S. constitutions, can be amended without a debate on all aspects of national governance.

(Read More: Why 'Merkelvellianism' Could Backfire for Angela)

EU treaties do provide for "simplified" changes that do not require a full-scale convention. But such procedures can only be used to change the internal running of the EU and not to transfer powers from national governments to Brussels.

The timing of treaty changes remains a matter of debate but it could come as early as next year, after elections to the European parliament in May. The way ahead is due to be discussed at a summit next month.

Ms. Merkel is sympathetic to Mr. Cameron's desire to improve European competitiveness. But the chancellor is convinced that this can only be done by improving the process of European decision-making and not simply by repatriating powers to national capitals.

Berlin and London agree that some Brussels legislation is unnecessary, such as the working hours directive enforcing a 48-hour week across the EU. Berlin also recognizes the need for more measures to liberalize the EU market in services, although that is a sensitive issue in Germany. But the Germans want to reinforce the single market, rather than dismantle it.