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Less than one year after the watershed ruling from Germany’s Federal Constitutional Court that empowered Germany’s parliament to trump EU law, Germany is using the ruling to force the EU to conform to its will. The issue Germany has chosen to test this extraordinary power not given to any other EU member nation is Iceland’s bid to join the EU. The EU’s decision to consider Iceland as an official candidate was expected to be made in a late March summit, following a favorable recommendation from the EU commission. It was delayed, however, to give the German parliament time to examine the commission’s opinion. For Iceland to be considered as an official candidate for EU membership, several German parliamentary committees must consent to the move.

It is interesting that the first time Germany has forced the EU to consult the Bundestag in an expansion of EU power is in the matter of enlargement—not even if a nation will become an actual member, but in such a trivial matter as whether it will be considered an official candidate. Just look at Turkey’s bid for membership to see how meaningful being an official candidate is. This area of EU power typically doesn’t have a direct impact on any of the current EU members, and so Germany chose to try out its new power in an uncontroversial way. This is apparent by the lack of headlines devoted to Germany’s first use of its national “supremacy clause.” The other heavyweights of the EU, France and Britain, are not calling foul, and none of the other member nations seem concerned that the EU’s enlargement policy was just hijacked by Germany.

Eurozone finance chiefs have backed new rules for stricter fiscal discipline, including automatic penalties. Meanwhile, France and Germany have spoken out in favour of a permanent bail-out fund that would require a change to the EU treaties. Under the previous set-up, eurozone governments which flouted rules limiting the size of their public deficit could only be sanctioned following a majority decision by their peers. As a result, scofflaws regularly got away without punishment.

The new "reverse majority" system agreed in Brussels on Monday (18 October) flips the framework on its head, with penalties automatically applied unless a majority of states oppose the move. Governments will be given a six-month period of grace in order to fix their excesses in a softening clause pushed through by France. Paris, as well as Warsaw and Rome had initially opposed the idea of automatic sanctions, while Germany insisted any reforms would not be credible unless they had some teeth.

This move would require an EU treaty change agreed by a fresh inter-governmental conference, coming hot on the heels of the newly-agrees Lisbon pact.

Just one year after the second Irish referendum on the Lisbon Treaty - one of the most bitter political battles in EU history - France and Germany are coming into an EU summit ready to pitch the idea of rewriting the legal pact. As the premiers and presidents of the bloc's 27 states arrive in Brussels on Thursday (28 October) for a two-day summit intended to endorse new fiscal rules, a last-minute deal between two of the EU's most powerful countries has caused shocked and anger across the continent.

Last week at a bilateral pow-wow in Deauville, France, President Nicolas Sarkozy and German Chancellor Angela Merkel cut a deal in which Berlin backed Paris in its desire to water down sanctions to be imposed on excessive-spending EU countries. In return, Paris endorsed Berlin's push for a change to the EU treaty in order to set-up an EU bailout fund and default mechanism. Ms Merkel is adamant that her country cannot endorse a repeat of the emergency bail-outs cobbled together this spring. Germany is the main bankroller of the €110 billion loan to Greece and of the European Financial Stability Fund (EFSF), the yet-to-be-tapped €440 billion rescue mechanism for the eurozone as a whole. Both of these funds have an expiry date of 2013 and Berlin is looking to see that something more substantial replaces them before then. The default mechanism would signal to investors that they, rather than taxpayers alone, would be on the hook for at least part of the costs of the bankruptcy of a country. The mechanism is designed to deal with sovereign defaults without setting off a cascading panic in the markets similar to the Greek debt crisis that shook Europe in spring. The idea is highly controversial, with even the reticent European Central Bank chief Jean-Claude Trichet voicing steadfast opposition.

Britain and other European Union countries put their weight behind Franco-German calls for tougher eurozone rules at a summit today (29 October), agreeing on "limited" changes to the EU's main treaty in return for a cap on the EU budget.

Officials struggled to deliver the message that legal tricks could accommodate both Germany's push for treaty change and conflicting calls from several other countries which had rejected the idea. Regarding treaty change, the key word is "simplified", officials explained. A simplified provision, enshrined in Article 48, Section 6 of the Lisbon Treaty, allows member countries to unanimously adopt a decision amending all or part of the main elements of the Treaty on the Functioning of the EU (TFEU), which governs how the Union carries out its work. Such a procedure would avoid the need to call a constitutional convention, experts explained. In addition, the European Parliament would only be "consulted" instead of enjoying full voting rights as part of the normal co-decision procedure. The changes to the treaty are to be settled by mid-2013, before the expiry of the present emergency fund agreed earlier this year to deal with crises such as the one that hit Greece. The objective is to replace that with a permanent mechanism. The simplified treaty change procedure will not enter into force until it is approved by member states in accordance with their constitutions. Most EU countries are expected to ratify the decision by a simplified procedure in their parliaments. As for Ireland, it remains unclear whether a change effected in this way would require another referendum.

UK Prime Minister David Cameron appears to have been instrumental in forging a deal, lending his backing to Franco-German calls for treaty change in return for keeping a lid on the EU's 2011 budget. 11 member states, including Britain, France and Germany, will send a letter to the European Commission and Parliament today saying that their plans to increase the EU budget by 5.9% in 2011 are "especially unacceptable at a time when we are having to take difficult decisions at national level to control public expenditure". The letter was signed by the leaders of the UK, Germany, France, the Netherlands, Sweden, the Czech Republic, Denmark, Austria, Finland, Slovenia and Estonia. The bloc's finance ministers had earlier voted for a limited increase in the EU budget of 2.9%. "We are clear that we cannot accept any more than the 2.9% increase proposed by the finance ministers," the leaders say in the letter. Cameron argued that a planned increase in the EU budget would cost his country's taxpayers the equivalent of one billion euros. The 2.9% rise would still cost them £435m (500m euros). Parliament to fight back By agreeing to cap the budget, EU leaders set themselves on a collision course with the European parliament, which has the power to approve or reject the proposed budget. Negotiations between the European Parliament and the Council, which represents the 27 member countries, over the EU's 2011 budget kicked off on 27 October (see 'Background'). "If Cameron is prepared to give up the British rebate [...] then we can for sure discuss a reduction of the budget," said Martin Schulz, leader of the Socialist & Democrats group in the European Parliament, speaking to EUX.TV, the European policy news channel powered by EurActiv. "The European budget is not to be compared with national budgets," said Schulz. "There are no own resources. We have no European taxes. We have no own money. It is money coming from the member states. We can make no debts. The British budget must be reduced because there is enormous debt. Europe has no debts," he said.

German finance minister Wolfgang Schaeuble has said his country is willing to discuss greater harmonisation of eurozone tax policy, adding that the next decade is likely to see Europe take significant steps towards closer political union. The remarks, made in Germany's mass-selling Bild am Sonntag newspaper on Sunday (12 December), come as EU leaders look set to agree a limited EU treaty change this week in order to set up a permanent crisis mechanism to provide financial support to struggling eurozone states.

Meeting in the German town of Freiburg on Friday, French President Nicolas Sarkozy and German Chancellor Angela Merkel also said eurozone leaders must draw a fundamental lesson from the ongoing debt crisis and take steps towards political integration, including the harmonisation of tax policies or labour law. These initiatives would foster greater convergence of eurozone economies and "show this is not just about currency issues but also about political co-operation, which has to be deepened," said Ms Merkel.

Germany has successfully won its demand for the permanent mechanism to include the private sector sharing in future bail-out costs, reports the BBC. Such a decision could significant raise the borrowing costs of 'peripheral' eurozone states, as investors demand extra yields to cover the costs of a potential debt restructuring under the new mechanism.

German Foreign Minister Guido Westerwelle has said Bosnia would had a clear European Union membership perspective - if its ethnic leaders could stop arguing and focus on reforming the country’s constitution. “Bosnia and Herzegovina has a clear European perspective, but the road to Europe leads through internal dialogue and the unity of the country,” Westerwelle told journalists after meeting top Bosnian officials in Sarajevo, on the third leg of his three-day tour of the Balkans. Westerwelle said Germany expected all political actors in Bosnia to “start working on constitutional reform with courage, energy and good will” immediately after October 3 general elections in the country.

Exasperated Turkey slammed its fist on the table this weekend saying Europe is dragging its feet on EU entry talks, while the 27-nation bloc sought to boost ties with a nation whose worldwide weight is on the rise.After sitting down for talks on Saturday with the 27-nation bloc's foreign affairs chiefs, Foreign Minister Ahmet Davutoglu said: "I expressed our dissatisfaction with the speed of the negotiations, I expressed it clearly."

Since the kickoff of entry talks in 2005, movement has been sluggish, due to the deadlock over Cyprus, the slow pace of reforms in Turkey and, more fundamentally, because France and Germany are wary of seeing the Muslim-majority nation of 75 million join the bloc.

But Ankara can bank on the support of other EU states in its bid to join.Britain, which in July publicly expressed its opposition to France and Germany on the question, this weekend reiterated its willingness to see progress on the entry talks."It would be good to see those talks speed up," said Foreign Secretary William Hague, as with Turkey inside the EU "there is a very powerful combination to have.""It's very important to show some momentum on this and the UK will be trying to make sure that that happens before the end of the year," he said.Sweden's Carl Bildt took an even stronger tack.

European leaders have given way to German demands for a change to the European treaties, but the procedure for the change and its size has been calculated explicitly to avoid the danger that it could provoke referendums in some EU states.

Viritually all EU member states had vehemently opposed any treaty change going into the summit, but in the end they were convinced by Germany's need for the change in order to avoid a legal clash with its Karlsruhe-based Constitutional Court. The leaders agreed to construct a permanent crisis mechanism to fill the void left when the existing but temporary €110 billion bail-out package for Greece and €440 billion fund set up for the eurozone as a whole expire in 2013. According to diplomats, it is currently unclear whether this new mechanism would involve participation of eurozone members alone or the full 27 EU member states, including those who do not use the euro. Germany is worried that any permanent structure could run afoul of treaty rules forbidding EU bail-outs of member states and be struck down by the country's strict Constitutional Court, thus opening the euro once again to an assault by markets as occurred in the spring. Caught between the need for a structural change and their fear of both the activism of Karlsruhe and the growing euroscepticism of citizens, the other leaders signed off on the move only so long as the change envisaged was "small, small, small - the smallest possible ... in order to ensure there is no possibility of referendums," in the words of a Danish diplomat speaking to EUobserver. The method EU leaders chose to achieve the change will be via what is called the "special revision procedure," introduced by the Lisbon Treaty, under which the treaty can be amended by the European Council alone, so long as there is unanimity and the changes do not extend the competences of the European Union.

European Commission President Jose Manuel Barroso was cheered in the European Parliament on Tuesday (23 November) when he outlined plans to publish an official proposal on EU self-funding before the end of June 2011. A fresh draft of next year's budget is also expected before 1 December.

Parliament has said debate on the controversial 'own resources' issue is a key demand in the ongoing battle over next year's annual EU budget, but France, Germany and European Council President Herman Van Rompuy have all indicated they oppose the idea of an EU tax. "We will use our right of initiative to put forward formal proposals as to own resources before the end of next June," Mr Barroso told MEPs in the Strasbourg plenary chamber. "The proposals ... will make large endeavours to achieving a consensus in the future. We're open to any ideas," he added.

"I am against the introduction of an EU tax," German Chancellor Angela Merkel said earlier this month. "I do not think that redesigning the way the EU get its revenue is a top priority," Mr Van Rompuy said a week later. Reacting to Mr Barroso's announcement, non-attached UK MEP Diane Dodds called on British Prime Minister David Cameron to clearly state that proposals for an EU tax would trigger a referendum in the country.