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Tuesday, December 13, 2011

Barroso's failed attempt to single out Cameron

There seems to be some continuing confusion over David Cameron’s demands at last week’s EU summit, specifically in reference to their impact on the 'integrity' of the single market. Unfortunately, European Commission President Jose Manuel Barroso, who should know better, is also doing his bit to propagate these misconceptions in a speech to the European Parliament this morning, in which he said:
“The United Kingdom, in exchange for giving its agreement, asked for a specific protocol on financial services which, as presented, was a risk to the integrity of the internal market. This made compromise impossible.

All other heads of government were left with the choice between paying this price or moving ahead without the UK's participation and accepting an internal agreement among them."
As we mentioned in passing yesterday (see here), this simply wasn’t the case.

Cameron’s first set of demands were to ensure that unanimity applies on decisions relating to: transfer of powers to EU supervisory agencies, the use of 'maximum harmonisation', issues impacting on fiscal interests of member states (taxes & levies) and the location of EU Supervisory Authorities (ESAs). In actual fact, Cameron's demands did not relate to the level of financial supervision but the rules governing the transfer of powers from member states to those EU supervisors. This is quite different to the functioning of the single market.

As is also instantly clear, there were no UK-specific demands, especially not for some form of opt-out as Barroso seems to imply. So, whether you agree with Cameron’s demands or not, it is clear that he was not seeking special treatment for the UK, these rules would allow unanimity for all EU members.

The case can, and should, also be made that, in terms of content, Cameron was defending the single market, particularly on the location of ESAs (i.e. they can't all be in the eurozone) and in defending the UK against the ECB's insistence that sizeable euro-denominated transactions only be cleared within the eurozone.

The source of the confusion seems to be that many people are conflating trying to protect a vital UK industry with seeking special treatment for the UK – these are clearly not the same thing legally or practically when it comes to the EU. All governments in EU negotiations try to protect their vital industries, for example: France with agriculture, Spain with fishing and Germany with manufacturing exports, and in some cases these countries have more protection than the UK does on financial services despite it representing a bigger share of the UK economy (see our recent report for a full discussion of this issue).

The other major misconception is that the UK's demands were to shield the City from all regulation - one major demand would have allowed the UK to impose tougher capital requirements on banks than permitted by the EU's desire for 'maximum harmonisation', for example. This was protection for taxpayers, not bankers. The Commission's logic that maximum harmonisation is necessary for the functioning of the single market is flawed and not one that it applies in other areas of EU policy. For example, on cutting carbon emissions, member states are free to go beyond the EU-agreed minimum.

Overall then, the UK did not seek any special treatment or specific opt-outs. Cameron asked for safeguards relating partly to an industry which is of importance to the UK (and other countries), but safeguards which could be accessed by all EU members. Neither the structure nor content of his demands were in anyway designed to hamper the single market, but in fact to bolster it. It can only be damaging to the integrity of the EU that the Commission President should openly encourage such a misconception.


Peripatetic Scribe said...

The Barroso viewpoint: "when you are beseiged by internal troubles, the easiest way out is to look around and place the blame on an external force". Or to put it more bluntly - when your're up to your neck in crocodiles it's easy to forget your original intention was to drain the swamp! I'm sorry, but this blame-game cuts no ice with me!

Anonymous said...

One shouldn't really bother refuting all the nonsense the openeurope blog team managed to get into such a little space. But one of the last sentences neatly reveals the complete lack of any understanding of EU integration process (or perhaps the intellectual dishonesty of the writers). "Neither the structure nor content of his demands were in anyway designed to hamper the single market" Perhaps the writers should take a look at the state of the single market before the Single European Act, when all had to be decided using unanimity. The single market only became possible after we moved to qmv, yet the writers claim that reintroducing unanimity does not hamper the single market!

Open Europe blog team said...

Thanks anonymous. But, again, Cameron's demand was about re-instating vetoes over a porcess that was established this year (but agreed earlier), i.e. the transfer of powers to, and location policy of, the European Supervisory Authorities. That has nothing to do with the Single European Act. He also wanted to re-instate vetoes over maximum harmonisation - please explain to us, specifically, how this is a threat to the single market, and if so, why the same logic doesn't apply to carbon reduction targets, foe example (and again, this was for the purpose of introducing tougher capital requirements for banks, to avoid future bank meltdowns and taxpayer-backed bailouts. Indeed, that would pose a threat to the single market). Looking forward to your reply.

Anonymous said...

Thank you for your question Open Europe. Please note I have no knowledge of the specific legislation of carbon reduction. But let me answer your first point as if this has nothing to do with the SEA: the legal base of the ESA's is Article 114 TFEU, which is former Article 95 EC, which is former Article 100a EEC as introduced by the SEA to provide the then EEC with the means to achieve harmonisation (harmonisation through QMV instead of unanimity). Without the SEA, the current Article 114 TFEU (legal base of the ESA's and an unimaginable amount of other single market legislation) would not have existed, hence all the aquis based on it would probably not have been adopted either. I hope this makes clear this has 'everything' (not really of course) to do with the SEA. As a general rule national veto's over EU legislation hamper the evolution toward a single market. Again, this was the very reason for the Member States to agree to the SEA back in the 1980's because they had found out in practice that there will always be one MS who obstructs a process (this was at the time we had 12 MS, there are 27 MS now). As regards maximum harmonisation, without getting into the merits of Cameron's demand, additional requirements (as they are called in the UK protocol) as a rule distort the level playing field which is the objective of the single market. Not that additional requirements are bad per se, they are even provided for in Article 114 TFEU, but there is no denying they go against the whole idea of a single market.

Anonymous said...

This time from a different Anonymous.

If you keep this up, you will be asking your readers next to believe that water flows uphill. Your argumentation is specious. The purpose of the "protocol" was to give the UK a veto on various developments in relation to financial services and, indeed, the euro, by re-introducing unanimity where all the other countries, as far as one can judge, were of the view that to do so would be inimical to their interests.

Wiser behaviour by Merkel would have seen her call for a break in discussions until the following day with a view to seeing whether young Cameron might be persuaded of his misjudgement.

I agree, however, with your point in relation to Barroso. He seems incapable of grasping that the role of the Commission is that of intermediary, not of partizan participation.

Such is the resulting mess, however, that the intervention of the Christams holidays, and the quickening pace of the French election campaign, may see everyone draw back from the brink.

Of course, the markets may not have the patience to allow them to do so.

Douglas said...

Hi. I'm off topic but while I can read the views and comments of politicians and individuals all across the internet, I am particularly interested in majority opinion within the various EU nations.Can anyone direct me to where I might find out those nations in which opinion polls are conducted and the most recent poll results from them?

Peripatetic Scribe said...

Douglas - I think most countries have a National Bureau of Statistics where such information may be available. I live in Croatia which signed up last Friday and will enter the EU in July 2013. I believe their Statistics Bureau maintain records of work in this field, so I can imagine most other countries do similar. Also, and only if you feel brave, there is an EU Statistical Service - but it does takes effort to get to the right data.

Anonymous said...

From a 3rd anonymous:

Any state that doesn't acquiesce to the demands of Germany and France is de facto hampering the interests of the single market. Who cares about domestic interests of the individual member states, there are technocrats trying to get things done!

Sheona said...

The first two words of your title say it all. The fact that Barroso has to fudge the truth demonstrates this. He must be quite a scared man, regardless of the ins and outs of Cameron's veto, since nothing has been done to solve the eurozone's current problem.

Anonymous said...

One thing that appears to have been sidelined is the fact that David Cameron was right in applying the veto. In him we have a political leader who is prepared to stand up for this country. I did read in the popular press that other countries also wished their own leaders had shown the same tenacity in supporting their own countries.

Norman Utton said...

Just a few short days ago the “press” was saying that by the Cameron veto the UK would be isolated from Europe. Cameron was right to apply this veto, because it prevented powers from being relinquished from London to Brussels.
Now in the cold light of day it seems that the parliaments and governments in countries like Denmark, Sweden, Poland, the Czech Republic, Finland, Eire, and others are all realising the true impact of these proposals. They have woken up to the fact that their governments could loose the democratic right to decide their countries financial budget, unless they submit their plans to the EU first. Greece, Italy, and Spain have provisionally signed up to this Merkel / Sarkozy plan, but they have yet to sell this to their voters, not exactly an election winner.

Sarkozy claims to be annoyed at Cameron’s veto, but in truth France never wanted a treaty enforced by the European Commission and the European Court of Justice that was backed by Germany, and in fact he argued with Merkel against this, preferring governments to run their own affairs.

So, this December’s “final summit” is now to be followed by yet another final, final summit? Surprise, surprise, Cameron will be invited to that summit.

All this ducking and diving is aimed at one thing – to keep the single currency alive, when in fact the single curency is dead. You just cannot have a single currency across so many countries with such diverse economies, and needs to control their finances. O.K. so they can use bank rates, but that on its own will not do the trick. I feel that I am far from alone in this view, because the financial markets read this problem the same way. Whether we like it or not, these people set the value of stocks and shares, and the value of currencies across the world. This is why the value of the euro has dropped so much relative to other currencies.

It seems to me that European countries have two choices, one, to accept the Merkel / Sarkozy plan, and face high taxes, austerity measures, cut backs in spending, job losses, and having their countries budgets scrutinised by the EU before release to their voters ( where is democracy in that), along with the worlds credit rating agencies reducing their credit rating, making borrowing more expensive, thus forcing them into deeper debt, or two, revert to using their old currencies, thus allowing them the one tool denied to them by the single currency, namely to re-value their currencies, and create growth, which is the one thing is needed in Europe.

Jagman84 said...

It matters not one iota who is right of wrong, truthful or dishonest. The EU (and its illegitimate child, the Euro) is in a slow-motion 'Car-crash'. The wise EU members will be preparing for the end, not re-arranging the deckchairs,etc...

terderry said...

Lets not forget what the real problem in Europe is ...... Sovereign debt in the Eurozone.

Everything else is simply European Commission politics.

At every turn the Commission is trying to pick the pocket of the UK, through tax harmonisation or regulation, when the ECB cannot or will not support or protect it's own currency.

Those countries within the Euro should sort out their own problems with their own resources.

The UK should watch the other pocket picking ruse via the IMF.

If they can't get more money from the UK one way then they will try another

Colin said...

The euro was never a serious currency but a political construct solely for the purpose of furthering 'ever closer union'. The 'EU' is a political construct almost devoid of democratic legitimacy. We shall see its messy end soon, but sadly millions of its victim citizens will suffer. When the history of this tragic farce comes to be written I hope it will become clear who we should blame.