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Friday, July 19, 2013

Double majority: the way to avoid the EU becoming a political extension of the euro?

In our 2011 report Continental Shift, we came up with the idea of "double majority", requiring a majority both amongst eurozone members and non-eurozone ones for a proposal to pass. We developed the idea further in a briefing last year.

We were told at the time that the idea was dead in the water since, as one Brussels-based journalist put it, it looked like "a straightforward veto” for the UK. We disagreed at the time, as a) there are plenty of ways to organise the double majority principle to make it easier to swallow for eurozone countries and b) the political case for safeguards against eurozone caucusing is strong - Berlin and others know that they are the ones changing the rules of the game, not the UK. Britain has the right to respond.

And sure enough, in December 2012, EU leaders did agree to introduce a double majority principle in the European Banking Authority. A reminder that those who bang on about the UK being permanently isolated or that change in the EU is impossible aren't always 100% right...

Next week, the UK government will publish its first six reports in its "balance of competence" series, one of which will be the single market. A key question which we hope will be addressed is how do you safeguard the single market in light of further eurozone integration.

As we have said repeatedly, the crisis has led (or is potentially leading) to greater integration within the Single Currency, in financial market regulation and supervision in particular. This phenomenon has raised concerns, by us and others, about the potential for the eurozone to ‘caucus’ and impose eurozone solutions on the rest of the EU-28, which could both undermine the single market and/or simply disenfranchise non-euro countries entirely. The exact extent of that risk is unknown - euro countries have their own internal disagreements and there's no clear cut example to date of euro countries caucusing against the UK (bankers' bonus caps, a fight which the UK lost, was more a European Parliament-driven issue). However, even with some eurozone integration, not least with the banking union, the risk is real enough to start thinking about how to be safe, rather than sorry. The ECB, after all, has already demanded that certain transactions cleared in euros must take place within the eurozone, rather than through the City of London.

The agreement reached by finance ministers to introduce double majority voting  was a good deal for the UK and, again, evidence that reform is possible when pitched as a means of protecting something for all – in this case, the integrity of the single market.

It is time to consider whether this principle of double majority voting might be applied more widely, not simply in one EU regulator which interprets and enforces regulation but in the much more powerful Council of Ministers which decides regulation. One way to organise this would be to expand double majority to all laws. If a given proposal going through the Council is seen as either undermining the single market - for example by pushing euro-denominated business inside the eurozone - or discriminating against a country on the basis of euro membership, the double majority principle would kick in.

A majority amongst both the "ins" and "outs" would be required for a proposal to pass.

How it would work organisation-wise would need to be worked out. For example, who triggers the vote - is it enough for one country to object and trigger the double majority vote?

What's clear is that this would be a very effective way to avoid a "not in the euro but run by the euro type scenario" - and again, there may be support for this on both sides of the eurozone divide.

We fear that the BoC reports, whilst highlighting the risk, will stay well away from exploring this type of measure (in fact, there won't be any firm policy recommendations).

However, we'd be surprised if something along these lines isn't a priority in a future government's renegotiation package.

6 comments:

Rollo said...

If we ever accept that any form of majority voting can over-rule our decisions, we have lost our right to rule ourselves. Obviously our political class has already given away our right to govern ourselves in many spheres. There is no way any foreign power should ever over-rule our parliament, unless of course we have been conquered and colonised by a superior entity.

Rik said...

Looks still like very ad hoc stuff to me. Allthough it is much better than the present situation.

Looking at polls I get the impression that the UK population want some sort of freetrade plus scenario. With loose arrangements for other international stuff.
This also makes a lot of economic sense. The freetrade plus is an asset. Could even be a much bigger asset if the energy is put mainly into that. The rest mainly centralised political and Euro is simply an often huge liability.

Starting from there the most logical way to arrange that is via 'normal' treaty arrangements. Not the Lisbon way.
From there no double approval, in what form it may be, is necessary.
And no EP (parliament). And only an ECJ with limited jurisdiction.

Having a similar VAT systems is likely an advantage. Being part like now of a customsunion is imho more likely a disadvantage. Imports are done for a disproportionate percentage via the Benelux (Bene part) with duties falling there. Practically that can be solved via a new customs regime (export to the UK or export from the UK to the rest of the EU for reexport to outside the EU). It also means that protective measures for agricultural stuff designed for France and co also are applicable in the UK. Read cheaper non EU imports are made much more expensive.

Of course you start from a present situation and not from scratch. And a reneg is give and take.
But if you want 2 systems. One system Euro plus could work as it is with probaly even some further integration. And a parliament with a stronger footing with the public.
But as far as the UK goes like 'normal' treaty rules would be (much) better. As said keep the freetrade plus part the assets and dump the liabilities that are hugely unpopular and ineffective anyway. The only thing necessary is a different decisionmaking system for the freetrade plus part.

Same story with the ECJ. The standard pro-Europenasation should be changed one way or another. The thing has to be fit for the 21st century, with not ever increasing European powers and degrees of membership anyway.
As far as the UK is concerned it simply is driving straight into a new collision with the UK population on Europe. Any funny stuff (like voting prisoners or revisions of lifesentences or protecting hate preachers) will be blaimed on the government. The one that signed up on it as well the sitting one (like the economy when there is a problem thare is where the buck stops). And on a lot of things the present set up has no added value (be it on human rights, one top court, etc).

Anyway this looks as well a better starting position than Dave is taking now. Being the nice intermediary is ok but an approach like: I am not an idiot that goes against the wishes of a majority of my population', would likely have been more effective.
Membership first has to be sold in 2017. What is now more urgent is that the exit-phobes is told that exit doesnot mean leaving a freetrade zone. As that is what many businesspeople think at the moment. The freetradezone breaking up being the by far main source of their worries. Thery couldnot care less if prisoners can vote.

Denis Cooper said...

Agreed, Rollo, transnational double majority voting is still transnational majority voting and totally unacceptable. What we need is not something which may look like a veto to a journalist, what we need is a veto. That is what we were promised in the government pamphlet for the 1975 referendum, it formed an essential part of the basis for the popular consent given in that referendum, and that is what we want back.

Denis Cooper said...

"... the potential for the eurozone to ‘caucus’ and impose eurozone solutions on the rest of the EU-28 ..."

Except that in the longer term it won't be "the EU-28", but "the EU-n", where n could be in the region of 40, and thanks to the treachery of John Major "the rest" could end up being just the UK.

The Labour MP Gisela Stuart realises this; she wrote in an article earlier this week:

http://www.telegraph.co.uk/news/worldnews/europe/eu/10180235/We-must-answer-the-100000-euro-question.html

"The Government has repeatedly argued that a stable euro is in our national interest, without explaining what institutional architecture it envisages in an EU where, apart from us and Denmark, all other countries either already are, or by treaty obligation will become, members of the single currency."

Well, that may be because they don't care to explain their long term plan that eventually when the UK is heading towards becoming the sole EU member state still in the "outer circle", and all the other EU member states are already in or are about to be absorbed by the federalised eurozone "core" they say should be created, then a future government of whichever party or parties will declare that our increasingly "isolated" position is no longer tenable and announce its decision to take us into the euro, and not necessarily after asking us for our consent through a referendum.

Jesper said...

How easy/difficult should it be to introduce legislation affecting 500 million people?
Legislation that currently is practically impossible to remove...

The olive-oil debacle needs to be brought up again. A decision was taken to decide what olive-oil containers could be used. The decision was taken centrally by a few unelected people and they did not break any law (to the best of my knowledge) when they took that decision. Even EU-insiders agree that EU-bodies should not have the power to take that kind of (intrusive) decision but it passed the subsidiarity check so...
Will the BoC include that people should be allowed to decide themselves what kind olive-oil containers they'd like on their table and it will not be decided by some knowitalls in Brussels?

Streamlining decisionmaking can be very dangerous. Removing the veto removes an important check and completely tilts the balance of power.

With a veto it is possible for the citizens in a country to decide what a country should do. Without a veto then those same citizens will have to rely on the kindness of strangers if they want to change the laws in their own country. Supposing that the olive-oil legislation had happened, then people in the UK would not have been able to change/remove the legislation unless some foreigners agreed...

The EU needs to be reformed.

Anonymous said...

Hi, this is an old discussion, but few quick comments. I think that the "double majority" will not work:

1) It gives the UK de facto veto over small non-euro countries. Imagine that there are just 2 or 3 countries in the "non-euro" block. One really big (UK), the other small (Czech Rep.). As the number of non-euro countries decreases, the power assymetry WITHIN the non-euro block sharply increases. The good thing with EU-28 is its size. In the enlarged EU, the power of big states is "diluted". The "non-euro 3" (UK + some small member states) would be a nightmare for any small member state.

2) The "double majority" helps to consolidate the eurozone as a voting block.

What you are saying: "We fear that the eurozone may act as a voting block (have a common position). We will help them become a voting block. But simultaneously, we will establish a second voting block ("non-eurozone") that would balance the eurozone".

That is insane...

3) You prevent the non-euro countries from building coalitions with members of the eurozone.

The strength of the UK (or any other country) is in its "coalition potential". The current institutional set up allows us to build various coalitions across the euro/non-euro divide. Some of them are short-lived, some of them are unexpected, often confined to a limited policy area. But the ability to be a member of different coalition schemes (even a member of opposing groups of states :-)) gives you strength. The "double majority" severely hampers our ability to build coalition.

4) the "double majority scheme" does not deal with the crucial problem: the ability of the eurozone to step out of the EU primary law. Of course, you can put your "double majority" into the EU treaties. So the eurozone can not use EU secondary law to impose financial transaction tax on non-eurozone countries. Hmm, very nice. But what if the eurozone decides to bypass the EU (its primary law and its institutions)? You know, they did that in the past. Fiscal compact was outside the EU framework, because the UK overplayed its hand. ESM treaty is outside the treaties, because it was much faster than an EU treaty revision. The proposed single resolution mechanism of the banking union will also be established through intergovernmental treaty. It is easy and legal to bypass the EU. Why it is legal? Because each EU member state remains sovereign. Since all eurozone member states remain sovereign, it is perfectly legal and legitimate for them to conclude separate international treaties. You should now that. The Uk always insisted that EU members should remain sovereign... There is only one limitation: EU's exclusive competences. You can not bypass the EU in an area of exclusive competences (trade treaties etc.). Does the UK really want to safe the single market from eurozone's inference? Do you want to prevent separate international treaties that would compromise the single market? The only viable solution is to declare that single market is EU's exclusive competence. Give the EU "sovereignty" in the sphere of internal market. But you need to wake up and put off your ideological blinders...

But still, even such solution would not be 100% secure. Each state can leave the EU. In the extreme case, it is perfectly legal and legitimate for the 18 euro states to leave the EU altogether and establish completely new organization. That would be quite interesting "nuclear option" how to bypass the veto of non-eurozone member states. But these days, nothing should be ruled out.

Have a nice day

Vit from Prague