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German Chancellor Angela Merkel has pressed EU leaders to accept the treaty change as she fears Germany's powerful constitutional court may raise objections to the €440 billion temporary European Financial Stability Facility (EFSF), agreed in May and set to provide aid to Ireland. While EU policymakers insist the temporary facility and earlier aid to Greece do not contravene the EU treaty's 'no bail-out clause', Berlin is keen to remove any legal uncertainty, with a number of legal challenges currently under examination by the German court.

The treaty change is to take place under a new procedure introduced under the Lisbon Treaty - the simplified revision procedure - allowing for limited treaty changes without the setting up of a convention, on condition that new powers are not transferred from the national to EU level. In the draft conclusions, EU leaders also call on euro area finance ministers and the commission to finalise work on setting up the permanent aid mechanism, including features that could force sovereign bond holders to accept diminished returns on their investments, should a eurozone government be forced to call for aid under the ESM from 2013 onwards. The move stands in marked contrast to aid terms recently agreed for Ireland, under which holders of Irish sovereign debt and senior debt in Irish banks were not forced to accept a 'haircut.' Instead, Irish taxpayers will indirectly pay back the €85 billion borrowed from the EU-IMF for many years to come. Analysts say this move was partially designed to prevent further instability in the European banking sector, with many firms considerably exposed to the Irish market.

A last attempt to reach an agreement for the 2011 EU budget failed on Monday (15 November) due to reluctance by member states to grant MEPs extra powers in future multi-annual budget negotiations. The EU commission will now have to draft a new proposal, while the first months of next year will be funded on the basis of the 2010 budget.

The final collapse was mainly due to disagreements over procedures and extra powers granted to MEPs under the Lisbon Treaty, the EU's new rulebook. Junior ministers from Britain and the Netherlands insisted that the only issue on the table was the budget for 2011 and declined to discuss contentious issues for the long-term budgetary perspective, such as raising more EU "own resources" through supplementary taxes or the "flexibility" of the budget when unexpected expenses arise. Shortly after announcing €95 billion in domestic budget cuts, Britain has spearheaded demands for next year's EU budget to stay frozen at 2010 levels or go up by a mere 2.9 percent, or less than half the MEPs' original request.

In the presence of a smiling Catherine Ashton, the European Parliament yesterday (20 October) approved by an overwhelming majority the last three legislative texts required to launch the European External Action Service (EEAS) on 1 December 2010, the day of the first anniversary of the Lisbon Treaty.

The Parliament in Strasbourg passed the Staff Regulation, the Financial Regulation and the EEAS 2010 budget, clearing the way for High Representative Catherine Ashton to appoint the senior managerial team of the new EU diplomatic service. The appointment of the dozen high officials is expected to facilitate the selection of candidates for some 80 middle-management positions, which are also up for grabs in a first wave of recruitment. However, the selection process so far has left a bitter after-taste, with many capitals strongly pushing for their candidates in the hope of gaining influence in the new body from the first day. When fully operational, the EEAS is expected to provide attractive employment to some 6,000 people worldwide. The ambassador of a member country, who asked not to be named, told EurActiv the EEAS was becoming "the home of the high-flying protégés of governments in power".