State of the (same old) European Union

It’s that time of year again, when European Commission President José Manuel Barroso delivers his ‘State of the European Union’ speech, laying out all his hopes and dreams for the coming year – few of which make it through the decision making gauntlet.

This year’s speech seems little different and, frankly, was a bit all over the place.

Barroso talked up the prospect of greater national flexibility, but, as always, within the end-goal of ever closer "political union". He said:

"The EU needs to be big on big things and smaller on smaller things - something we may occasionally have neglected in the past. The EU needs to show it has the capacity to set both positive and negative priorities."

"I value subsidiarity highly. For me, subsidiarity is not a technical concept. It is a fundamental democratic principle. An ever closer union among the citizens of Europe demands that decisions are taken as openly as possible and as closely to the people as possible.

"The European Union must remain a project for all members, a community of equals."

"I believe a political union needs to be our political horizon, as I stressed in last year's State of the Union. This is not just the demand of a passionate European. This is the indispensable way forward to consolidate our progress and ensure the future."

Therefore, despite mentioning subsidiarity, Barroso's end goal remains clear – full political union. A feature of the eurozone crisis has been that Barroso and the Commission have been increasingly sidelined when setting the agenda (which member states now dominate). This is also due to the fact that there will be a new Commission in place soon.

The Q&A session revealed that, despite Barroso's professed desire to "find ways" to "make Europe stronger", he is rather less open in practice.

In response to Conservative MEP Martin Callanan (who had said he had no interest in being European Commission President) he said:

"Let me tell you very frankly, I think that even if you were interested you would not have a chance to be elected as President of the Commission. And do you know why? I’m not saying that happily. Because I think your party, and your group, is increasingly looking like UKIP and the eurosceptic, anti-European group. And I start to have some doubts that you’re going to be elected in Britain yourself, and if it’s not UKIP that is going to be the first force in the British [European] elections. Because when it comes to being against Europe, between the original and the copy, people prefer the original. That’s probably why they’re going to vote more for Mr Farage than for Mr Callanan. And I don’t say this with any kind of satisfaction, because even if we have some differences, we have worked very constructively with the Conservatives – the British Conservatives and the Conservative group – in many areas."

Once again, it seems the Commission would rather help UKIP rather than work for reformers who don't share a belief in 'ever closer union'.

Barroso's analysis of the crisis hinted at his on-going denial of the role of the euro in causing the crisis:

"We can remind people that Europe was not at the origin of this crisis. It resulted from mismanagement of public finances by national governments and irresponsible behaviour in financial markets."

"What I tell people is: when you are in the same boat, one cannot say: 'your end of the boat is sinking.' We were in the same boat when things went well, and we are in it together when things are difficult."

There is still a sign that Barroso believes that all eurozone woes were caused by the financial crisis – though it may have been a trigger and there is no doubt that national finances were mismanaged, there can (or should) also be no denying that the structural flaws of the euro are what have caused the crisis to be as long and deep as it has been.

The Commission's hope that banking union is the eurozone cure has already come up against resistance from Germany, which is deeply sceptical of the Commission's desire to increase its own power. Barroso's insistence that the proposal be implemented in full before next year's elections will not have helped much on this front and simply highlighted how out of touch he remains with the concerns of even core eurozone countries.

So, despite some lip-service to greater flexibility, reform and acceptance of the shortcomings in the EU and the eurozone, the solutions presented by Barroso remain the same – greater political integration. Fortunately, this is very likely to be Barroso's last 'State of the Union' speech, while member states such as Germany and the Netherlands have shown themselves more open to reform.

Hollande goes on the offensive - two years to achieve political union in Europe

The French media called it François Hollande's "grand oral exam". The French President has just held a big press conference at the Elysée palace marking his first year in office. And he said a couple of very interesting things about his vision for the eurozone and Europe.

Hollande pledged to launch an "offensive" to "drag Europe out of its lethargy".

He called for an "economic government" for the eurozone,

"which would meet every month, with a real president appointed for a long term and who would be assigned this as his only task."

According to Hollande,

"This economic government would discuss the main economic policy decisions to be taken by the member states, would harmonise taxation, would start convergence in the social [policy] domain...and would launch a plan to fight tax fraud."

As if these remarks weren't controversial enough, Hollande re-stated his belief that the eurozone should have its own "budgetary capacity" and "the possibility to, gradually, borrow money". In the Q&A session he also suggested the ECB could be doing more on liquidity.

The French President concluded the EU-related part of his keynote speech by saying,

"Germany has said several times that it is ready to move to a political union, to a new stage of [European] integration. France is willing to provide the content to this political union."

With a real coup de théâtre, Hollande gave himself "two years to achieve" this political union. 

It will be extremely interesting to see what the response from Berlin will be. For the moment, Hollande's press conference is another reminder of how distant France and Germany are in the debate over the way ahead for the eurozone - with Paris sticking to its 'solidarity/integration first and supervision/discipline later' line, and Berlin insisting that things should evolve the other way around. 

François wants to chat...

Ahead of tomorrow's EU summit, French President François Hollande has decided to give a lengthy interview to several European dailies (including the Guardian, Italy's La Stampa, Spain's El País and Germany's Süddeutsche Zeitung). The full interview - the first major foreign interview since Hollande was elected last May - is due to appear in tomorrow's print edition of these papers, but is already available on Le Monde's website.

The French President made some interesting remarks about Germany's role in the eurozone crisis:

The return to growth involves mobilising funds at the European level – which is the [growth] pact we adopted [at the EU summit] in June – but also improving our competitiveness, and, finally, coordinating our economic policies. Countries running a [trade] surplus must stimulate their internal demand through salary increases and tax reductions – this is the best expression of their solidarity.

Well, Germany is not mentioned here, but the reference is obvious...

Hollande also said,

We all take part in solidarity, not only the Germans! The French, the Germans, as well as all other Europeans within the framework of the European Stability Mechanism [the eurozone's permanent bailout fund]. Let’s stop thinking that there is only one country paying for all the others. This is false! Nonetheless, I know our German friends are sensitive about surveillance. He who pays has to control. He who pays has to sanction. I agree. But budgetary union must be completed by the partial mutualisation of debt: through the Eurobonds.

And then something specific about German Chancellor Angela Merkel,

She is outspoken, she says things…This saves time. And I have the same attitude…Indeed, we are not in the same time scale. I was elected five months ago, and the Chancellor has her elections in ten months – but this does not lead us to defer choices.

The language used is certainly diplomatic, but the message to Berlin is clear. First, Germany should bear in mind that there are other countries paying for eurozone bailouts. Second, that debt pooling remains high on France's agenda.

Hollande also addressed the issue of UK-EU relations,

I would like a United Kingdom fully engaged in Europe, but I can’t decide for the Britons. I’ve noticed that, for the moment, they want to be rather in retreat. The Britons are bound by agreements which they signed up to. They can’t detach from them. They now at least have the merit of being clear. The eurozone, the budgetary union: they are not in them. I do not intend to force them.

He added,

I’m in favour of monthly meetings of eurozone heads of state and government…This Eurozone Council will allow us to better coordinate economic policies and make, country by country, the appropriate decisions. It’s not about excluding the other countries: those who want to join the eurozone will be associated to our debates. Certain countries do not want to – it’s their choice. But why would one need them to come and tell us how to run the eurozone?

Finally, some thoughts on the next steps of European integration,

France defends the idea of ‘integration with solidarity’ [intégration solidaire in French]. Every time we take a step towards [greater] solidarity, the union – that is, the respect of common rules – must progress too.

Political union is for later. It is the stage which will follow budgetary union, banking union, social union. It will give a democratic framework to what we will have achieved in terms of ‘integration with solidarity.’

This is not new, but a clear indication that France and Germany are on opposite sides with regard to whether surveillance or solidarity should come first.

It is also rather telling that the democratic framework or political union underpinning Hollande's vision "is for later"...

Public opinion and Europe: back in the real world

Brussels is on manoeuvres. European Commission President Barroso yesterday called for a quantum leap towards a "federation of states" (see here) and today his counterpart in the European Council, Herman van Rompuy, put forth a wishlist covering a range of items that will trigger more eurozone integration (a eurozone budget, debt-pooling, etc). With yesterday's Dutch elections being interpreted as a victory for the centre over the eurosceptic fringe, and the Karlsruhe guys in red robes out of the way, the European project is breathing some fresh air again, right?

Well, as ever, it's more complicated than that. We will return to the Dutch elections in a sec, but for now, US-based German Marshall Fund published the 2012 edition of its Transatlantic Trends survey which is quite interesting.

The chart below caught our attention:

With the exception of Germany - which is not surprising given its desire to export German budget dsipcline in return for lending its credit rating - a majority of respondents in all the other eleven EU countries included in the survey is opposed to "more EU economic oversight of national finances."

Even more interestingly, the share of respondents opposed to greater EU control over national finances has increased since last year's survey in France (58% from 55%), Spain (56% from 53%), Italy (49% from 47%), Portugal (59% from 56%) and the Netherlands (58% from 55%).

As consolation, 'only' 79% of the British now think that the UK should retain control over its finances (down from 84% in 2011). A vaguely asked question about helping "countries with budgetary difficulties" - which is too imprecise to have a real meaning - also saw a declining share of the population supporting it.

A federation of states remains a tough electoral sell everywhere...

The choice facing Europe: Conformity or Diversity?

For German speakers, this op-ed from Berthold Kohler - one of FAZ’s editors-in-chief - is definitely worth a read. We've translated the key bits below.

Without lapsing into populism, Kohler nails the problem with the narrative pushed around by certain politicians that: "the only choice available to Europeans is to seek refuge in a political union". However, as Kohler argues, this is a false dichotomy:

“Among the alleged certainties was one that the organisation of Europe only ever grew in its times of crisis. However, many of the contradictions, differences, and conflicts of interest that led to the previous escalations of crises were merely pushed aside, glossed over or covered up with a lot of (German) money. These skeletons in the closet of the European house played an essential role in ensuring that the over-indebtedness of states evolved into the mother of all EU-crises.”

“By and large, it is no longer seriously disputed that it was a mistake to establish a monetary union without having first laid the foundations for a common budget, fiscal and social policy. The participating states were not ready to accept the relinquishment of sovereignty that this would have entailed; many EU member states are still not ready… Warnings of experts were at best ignored; the euro was portrayed as a miracle healer in of itself… This belief-bubble has, like similar such speculations, burst. Yet the debris of earlier European political axioms have already clumped together to form a new dogma. There is only one choice: giving up the euro and returning to national currencies – regularly associated with the ‘failure’ of Europe and a return to the Middle Ages – or a great leap into a political union which alone can save the euro.”

“The Europeans are thereby told that in truth they have no choice, there is only one way out of the crisis – the one that the majority of them previously did not want to take. For this reason, the descriptions of the political union are made largely vague. The small print is not very popular. Any form of standardization is associated with a loss of diversity and autonomy.”

Kohler concludes that:

“Not only the economic and national conditions in the participating countries, but also their political presumptions and ideals utopias are still too disparate as to be able to be accommodated within a political union. To believe that this variability could be reduced to a common denominator with a single strike of constitutional and political genius, which the peoples of Europe will enthusiastically agree to in the face of all previous experiences, is to underestimate the strength of their cultures, collective memories, myths and mentalities – the very diversity that belongs to the essence of Europe.”

Spot-on.

Writing in Die Welt, politics correspondent Alan Posener makes a similar point:

“The crisis in Europe is not only about money but also the limits of ‘ever closer union’. Jean Monnet’s model of integration by means of the supranational [European] Commission is outdated... This is a good thing…it is time for proper democracy in Europe.”

Outdated indeed.

Germany is gearing up for a major debate on the future of Europe, so must Britain

A few weeks ago Lord Owen, the former Foreign Minister, gave a speech, reworked for the Spectator here, in which he very eloquently set out the future challenges for Britain in an EU that is rapidly changing as a result of the euro crisis.

Owen noted that:

On 7 February 2012 the German Chancellor Angela Merkel indicated very clearly her direction of travel. The eurozone crisis for her is to be the springboard to another Treaty to replace the Lisbon Treaty. She said ‘Step-by-step, European politics is merging with domestic politics.’ She called for ‘comprehensive structural reform’ of the EU with closer integration to overcome what she called ‘major shortcomings’.

She had some months earlier, barely recognised in the UK, signed up to campaigning with fellow Christian Democrats across Europe for direct elections for the posts of President of the Commission and much more surprisingly and far-reachingly for the President of the European Council.

All this might seem some way off, but in an interview with Welt am Sonntag at the weekend, German Foreign Minister Guido Westerwelle repeated that it was “important to open the next chapter of European integration”. He argued,

“I regret that it has not been possible to adopt a truly European Constitution. We’ve noted that the Lisbon Treaty has design flaws. Many decision-making mechanisms are too complicated, and there is still a lack of transparency and clarity. Europe needs a common constitution, which the citizens should decide over in a referendum.”

Westerwelle also argued in favour of a directly elected European President, and a bicameral parliamentary system, with the European Council, where EU leaders meet, becoming an upper chamber alongside the European Parliament.

What does this mean for the UK?

Well, this debate about 'political union' is likely be the next stage of the plan to salvage the euro, after the debates over the fiscal treaty have ended. Whether it can ever work is the glaring question, especially if Westerwelle is good to his word about putting it to a referendum, but, clearly, significant elements of the German political machine are thinking that this is what Europe will need to discuss in the long-term.

Here are some more of Lord Owen's thoughts:

How should Britain react? We should firstly not react! This is our EU by Treaty; it can only be changed by unanimity and we must have a credible but different design and the determination to stay at the negotiating table until there is unanimity. No walk outs, just quiet persistence. We must have the confidence to set out a new design for two Europes — a wider and an inner — that will live alongside, in harmony with each other...

...I think a dividing line along these lines in Europe will soon become fairly clear cut. It will become an inescapable choice with the pace forced by the urgent needs of the eurozone. Probably a decision in principle will need to be taken in the UK before the fixed term date for a General Election in 2015. There will, if the past is anything to go by, be for some months the usual British reluctance to face up to the reality of this German-French plan. It, incidentally, will not change much if Sarkozy loses in France in May or Merkel loses to the Social Democrats in 2013....

...Any UK political party that ignores the rapidly emerging challenge in Europe is putting its head in the sand.

Westerwelle's comments illustrate how some important people are thinking around Europe and that the UK needs to prepare itself for this hugely important conversation sooner rather than later.

Today, the Fresh Start Project, the group of MPs calling for a new approach to UK relations with the EU, will launch its first Green Paper chapter, covering EU social and employment law.

Co-leader of the group, Andrea Leadsom MP will appear on BBC 2’s Daily Politics show at lunchtime to explain that the Project is looking at the impact of the EU on the UK, and evaluating and proposing options for change. With the help of ideas supplied by Open Europe and other think tanks, this will culminate in the publication of a draft Green Paper on European Reform by July 2012 and a draft White Paper by Dec 2012.