EU Economic Contracts Would Stoke Protests, Lawmakers Say

European Union lawmakers said a plan to introduce contracts that bind euro-area nations to economic reforms could provoke the kind of popular resistance to the EU already seen in bailout countries.

Forcing countries to introduce changes in areas such as labor and pension law in exchange for aid will increase antipathy toward the EU because it will be seen as an intrusion into national sovereignty, members of the European Parliament said today.

“This system of contractual arrangements is the death of Europe if you continue with that,” Guy Verhofstadt, a former Belgian prime minister and now leader of the EU Parliament’s liberal group, told the 766-seat assembly today in Strasbourg, France. “It shall create resistance in every member state where you’re doing a contractual arrangement because it shall be seen as an intrusion from Europe in a specific national reform.”

Leaders from the EU’s 28 countries are due to discuss the plan when they meet in Brussels on Dec. 19-20. The European Commission, the EU’s executive arm, considers the idea as the next step to encourage economic improvements throughout the 17-nation euro area as a response to a debt crisis now in its fifth year. It follows the introduction this year of a process of surveillance over draft national budgets.

Austerity measures imposed by the so-called troika of the European Central Bank, the Brussels-based commission and the International Monetary Fund, which carries out inspections of reforms in euro-area countries receiving bailouts, have provoked street protests in nations including Greece and Spain.

‘Soft Troika’

Contracts would be seen as a “soft troika” imposing conditions on every country that signed up, Pervenche Beres, a European lawmaker from France, told the Parliament.

“This is not a way for Brussels to make life difficult for the member states, quite the opposite,” EU Inter-Institutional Relations Commissioner Maros Sefcovic told lawmakers.

Contracts would be accompanied by financial incentives funded “from all participating member states whether in the form of budgetary support, grants, loans or guarantees, and it should reflect the level of reforms and shock-absorption capacity of receiving countries,” Sefcovic said.

The plan’s goal is to encourage reform in areas like labor policy, vocational training or the judicial system an EU official said last month.

To contact the reporter on this story: Ian Wishart in Strasbourg, France at iwishart@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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