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Monday, October 21, 2013

Is Merkel gearing up for a scrap over EU Treaty change?

The big EU related story of the day (our bumper report on EU regulations notwithstanding) is Der Spiegel's splash that German Chancellor Angela Merkel set out her proposals for giving the EU greater powers over eurozone members’ national budgets to EU Council President Herman Van Rompuy last week, a move which would require EU Treaty change. Merkel will reportedly insist on legally enforceable contracts between the Commission and individual member states, setting out their obligations for maintaining budgetary discipline and improved competitiveness. In return, Germany could agree to a eurozone budget which would amount to tens of billions. Finally, the President of the Eurogroup would become a “Euro Finance Minister” of sorts.

In one form or another, these ideas have been around for a while but many politicians and commentators asserted that the German government had no interest in opening up the EU treaties. However, as we noted in our pre-election briefing:
"German politicians and the general public are both keen on stronger central eurozone control over taxation and spending as a prerequisite for any further financial aid... Such beefed-up supervision and enforcement could well require EU treaty change in some form. A Merkel-led government may well push for a formalised 'competitiveness pact' after the elections."
This is only one Spiegel report, but it could well be that Merkel is looking to make a concerted push after all. She will have significant opposition to overcome in the form of the SPD, who will almost certainly be her coalition partners by December. The party remains opposed to any treaty change that could trigger referenda in individual member states (although the debt-redemption fund proposed by the German Council of Economic Experts, a policy broadly backed by the SPD, could have the same effect). Likewise other member states (chiefly France) and the EU institutions are far from keen on Treaty change. However, if Merkel has set her sights on something, we would not bet against her, not least because this move would be very popular back home.

This could be the opening that David Cameron has been looking for to force through EU reforms but at the very least will present another stage for a clearer definition on the separation between eurozone and non-euro countries and the necessary safeguards. That said, he too will have to contend with the SPD who have made it clear today that they oppose the return of powers to member states, as party of a new treaty deal specifically designed to fix the Eurozone.

10 comments:

Denis Cooper said...

"This could be the opening that David Cameron has been looking for to force through EU reforms"

Well, he said before the general election that he would be looking for such an opening, a "golden opportunity" was the way it was projected, but then when just such an opening came up in 2010 he made no use of it and instead gave Merkel the EU treaty change she wanted through European Council Decision 2011/199/EU of March 25th 2011.

As the Tory MP Mark Reckless put it directly to Cameron on October 24th 2011:

"The Prime Minister tells The Daily Telegraph today that we should use any treaty change to shore up the euro to get powers over employment and social policy back, yet on 25 March, he agreed to precisely such a treaty change, but did not ask for anything in return."

Rik said...

Hard to see how both the EZ set up as well as the UK membership issue can be solved (in a meaningful way) without treaty change.

Without it one EZ country can and will remain able to jeopardize the others as OEs post over Holland makes clear.
Without treaty change hard to see how the UK electorate will vote In, in a referendum.

Merkel starts to see that and undoubtedly the SPD will do so as well in due course.

It is perfectly understandable that from the not very democratic pov of many European politicians they are not in favour of referenda and alike. But sometimes reality catches up and it is either accepting a treaty change or run the real risk of things much worse and much less overseeable. Like a next EZ crisis or the UK leaving the EU.
This has become a lesser evil choice as simple as that.

Parties will have to live up to this as well and get realistic. Simply going ostrich is highly dangerous by itself. A treaty change is technically highly complicated and time consuming exercise. Last minute solutions simply in general lead to rubbish legislation plus the realistic change that something goes wrong in the process and messes the whole thing up.

The problem in all of this is simply the combination of the all time lows in credibility of traditional politics in general and the lack of a platform for further integration. Hard to see any of these two getting better in the near or middle long term. They are simply on the way down a a short, medium term and long term trend. With nothing insight that could break the trend. Well with he exception of people like LePen, Farage and Wilders getting into power but at the moment one problem would be exchanged for another.
Anyway traditional politicians would be out so little to be gained there anyway.

We have however in a lot of countries and in the EU/EZ arived in a situation where the best solution probably is being able to fight another day. This is probably the danger in the system as it presently is. The combination of being incompetent to manage the change in all sorts of fields affecting politics (and having completely loss control of events) and not seeing any other fixes than short term stuff.

Denis Cooper said...

Rik -

It should be clearly understood that the eurozone states could have as many EU treaty changes as they wanted without any of them triggering a referendum in the UK.

As became clear with the EU treaty change embodied in European Council Decision 2011/199/EU of March 25th 2011, it's only necessary to make sure that on paper the EU treaty change does not "apply" to the UK, and straightaway under Section 4(4)(b)of the European Union Act 2011 it is exempted from the requirement for a UK referendum.

Which also makes a nonsense of the LibDem position that we should have an "in-out" referendum on the first occasion that a referendum was triggered under that Act, as it could be that such a referendum would NEVER be triggered.

Rollo said...

No, she has partners on every side of the argument and must placate all of them. It will be a hive of inactivity.

Rik said...

@Denis
Again this is a game were national politics and international politics are senior to law.
And for both it is in Cameron's best interest to not just simply accept a treatychange with nothing to show for it.

National as all the little credibility he has on this issue will be gone. (And a total lack of credibility on one issue reflects heavily on someone overall).
Anyway he will have a massive uprising in the backbench ranks if he does otherwise. A divided party never does well in the ballotbox.

International as he will not be able to put a knife on the table lateron as he won't be very credible/believable if he does.
There has to be a knife and the other side should think it will be used.

Basically he would strategically be best served:
-internationally if he waits till the other side cannot get back and then bring the thing on: no quid no quo.
-national at least that all would have to happen before the general election. Basically a huge move to UKip in the larger picture would put a lot of pressure on the EU. And who is really interested in having MEPs (it is mainly to find a job for your party dross who are not able to find a decent job and are surplus to requirement).
On the other hand it puts UKip more on the map. From that latter angle it is a negative. But overall a not very relevant election.
While his political future depends on having a credible story re the reneg before next general election. Plus a few other things like the economy of course but hard to see if he fs this up he will get out of next elections alive. Both in nos of MPs, but also overall leadership, impossible to run a party where half the MPs would probably rather hang you as have you as their leader. Bad results combined by division (probably with people rolling over the street) makes political corpses.

Hard to see it otherwise that if Cameron's would go Hagueing he would be in serious trouble, and roughly with everyone who is relevant for his political future.
Smartass yourself out is probably worse even than simply saying get stuffed. As the issue would keep playing that way. He plays fair with the electorate or loses the little credibility he has on this and with that likely much of his credibility overall.
Smartassing (aka Hagueing) basically only works if you do it so the otherside doesnot see it (which will not happen here) or you donot need the other side anymore after that. Unfortunately every few years there are elections.

Denis Cooper said...

Rik -

"Again this is a game were national politics and international politics are senior to law. And for both it is in Cameron's best interest to not just simply accept a treaty change with nothing to show for it."

He did it last time and he got away with it, with help from a virtual media blackout on the very existence of the treaty change and with the quiet agreement of supine MPs and peers, so why on earth do you think he wouldn't attempt a repeat performance?

Rik said...

@Denis
This is whichever way you look at it a political game. And like the referendum thing and Syria shows cameron will have to act very carefully there. Or he looks again like a guy who isnot in control of his party (or worse 'leads' a split party).
Political game also means that even if you had legislation he could at the end of the day change it (as that is politics). You are too much looking for certainty that simply isnot there. While at the same time ignoring the fact that Cameron is under heavy pressure in this respect. In a for you positive direction btw.
Heavy pressure to get this right in the eyes of his potential electorate. If he does this well it will be a huge asset for him. If he messes this up (by ignoring his 'clients' he will have a huge liability to cope with.

Basically Cameron has 4 main issues on which he will win or lose the next election. He is not doing great but we have to realise that this is a relative game (compared to the competition, which has even more weak points than Cameron himself):
-economy in general;
-general credibility;
-EU;
-immigration.
Other stuff is relatively minor if he doesnot bring it up himself. And economy is a bit different from normal as it is not only growth but also how that growth is distributed. No use if you have say 5% growth and all goes to either the richest 1% or to the basketcases at the bottom. Growth should preferably end up with Cameron's potential voters.
Of course things are heavily related as well EU reneg and immigration for instance.

EU is basically a central file. It is related to the economy. Hard to see having decent growth while Europe is in a complete mess. Immigration is now pretty much an EU thing (with the Balkan brothers).
And for his credibility as well as in the eyes of a lot of people he simply has a problem there (with the EU-UK relation).

The EU issue is even more important as it is closely related to the competition. If Cameron makes IP an established his part is in big manure, not only the coming election but for the next decades (plural). Simply the vote on the right will split (and you get a German situation SPD being the permanent no 2 there because at their side the Greens came up. Which is a much bigger problem in the UK because of the way the seats allocation works.

Rik said...

@Denis2
As I see it the economy is a difficult file to influence. The distribution issue there, however looks to be properly dealt by (by Osborne mainly). The natural movement in the economy is simply that basically the middle groups will take 2 hits. One as they are way too expensive internationally seen (the Force is simply that that will be corrected).
The other that government on the expenditure side has problems largely with what are basically potential Labourr voters and the only ones that can pay for that via higher taxes or cuts in their own services are the middle groups. Entitlements are structurally on the rise simply by aging mainly.
Anyway that looks to be tackled properly by Osborne within the room he has. But hardly will be enough as as said the outcome there is likely disappointing for the potential Tory voters. Plus messing the 3 other files up would overall simply look crap anyway.

But the economy in general will be a thing to worry as it looks now. Hard to see the UK getting back to pre-crisis growth structurally while its by far greates market is in a Euro-mess and has not even come to the question how to deal with aging. Plus competition rising mainly from the East.
Simply a difficult one with only limited possibility to influence it (especially seen the debt levels which are pretty risky as well).

With Europe there are simply more possibilities as a lot of it is negotiation.

So now compare 2 things:
-He does a credible job on Europe or he tricks his clients with another empty promise?

Former he will likely have messed up on three of the four main issues he should campaign upon. Latter looks much better in the eyes of his electorate.
This is the stuff that decides who is the 'next' PM, Cameron or Milli. This is also the stuff that decides if the Tories are a permanent no2 and have put IP permanently on the map or they remain one of the 2 main contenders.

The points I want to make is that:
a) this is a central file the coming years and in more than one way (related to everything else and related to a rise (or not) of IP);
b) if he messes this up basically he is a political goner and so is his party.

Next to you will never have the certainty you want anyway as laws always can be changed. A lot of political/electoral pressure is as good as it gets. Yes, a 27 August 2017 there will be the following referendum....., would be better, but you never are going to get that. It is public opinion and politcs.

Rik said...

@Denis3
Some point in the pheriphery.

1. It is as said a relative thing. He only has to beat Mr Ed. he doesnot have to be the greatest candidate on Earth. And Mr Ed is simply poor in an extreme form.
But not properly attacked by the Conservatives imho.

2. Complication is the fact that Cameron has to fight at home a 2 front war. One with Mr Ed the other with IP. Usually this is a huge complication. Less so here as I see it.
The EU file takes the attention away from the economy at least discussion wise. That would have meant a 2 front war.
By a proper reneg (and handling of this file) he simply hits IP with their main issue (and shows that he has the leverage to do things that IP not has).
At the same time he works on his credibility with the middlegroups. If he solves this complicated long term issue he looks totally superior to Mr Ed who has different views on it roughly every day. And shows time and time again that he is noleadership material (especially when put under pressure, which the Tories not do enough).

3. I donot think Cameron does a good job on the communication issue both towards his electoral market as well as towards the EU.
Similar towards business where a lot of people are still think that an EU exit will mean no freetrade zone anymore.

4. Just to show how things work another recent example.
The immigration vans.

Bloody obvious that the outcome in illegals sent home would be marginal.

Pretty clear that the non-Tory voters (Guardianistas) would get furious. But why should Cameroin care they will vote Mr Ed anyway.

But also that this will get a lot of media exposure in the target countries (Balkans) that simply says in a very hard (and cheap) way:' You are not really welcome' and 'If you decide to come anyway better have a job as we will do everything in our power to assure you will not drain or welfarestate'.
Works as I see it absolutely marvelous in that respect. 40K 'commercial that brought the message through to the target group (Balkanians) in a very effective way as well.
Now the media novelty is gone it has become useless of course.

This is how these things work. Yes, he could try to smartass/legal juggle the electorate on the referendum and/or treatychange. But that would mean that has present clients were given a very good reason to move to the IP competition and the ones that are already gone would not come back. He would also do the best thing to put IP permanently on the map.

This a a dynamic play with a lot of interconnected aspects. Much more complicated that simply if there is a clear legal provision a referendum will happen in 2017.
And seen from that angle (and as I said before imho that is the way to look at it) Cameron has very little or no choice.
Yes he has as alternative to basically hang himself and his party. But look at similar situatioins nobody makes those kind of choices. May be Hague would as he makes a lot of slips, but that is why next to little appeal to the voterbase Hague is not in charge. And Cameron has already had 2 reminders (Syria and the referendum) plus has already shown as well that he understand the basics of this.

So he will go for it hard to see otherwise. But as said earlier i am not very fond of certainaspects of his strategy.
And of course there is no guarantee he will succeed. 2017 Simply looks pretty early in EU terms. But the EU has to change or is doomed. Not like NATO it is simply central stage and you cannot have permanent failure (what we see now and with a trend of it simply continuing) when you are there in democracies. Go on like that and somebody will pull a plug. Who and which plug is a guess but there are so many likely candidates and plugs to pull that another outcome is totally unlikely. It will have to change or it is a goner and Cameron can simply use that moment. Things are differnt now in that respect.

Denis Cooper said...

A lot of words there, Rik, but I don't see any to effectively refute my own comments.