A new EU treaty, a December summit… Déjà vu anyone?

A key question for the future institutional arrangement of the Eurozone is whether further integration will happen at the level of all 27 member states, within the framework of the EU treaties, or whether the Eurozone will simply press ahead with an ‘inter-governmental’ deal, circumventing the acquis communautaire and non-eurozone members.

This is critical for the UK as under the latter option, Britain will have little to no leverage over future Eurozone integration, whereas under the former it’ll have a solid veto, which it can use to extract all kinds of concessions in pursuit of its national interest. Following Cameron’s veto to an EU-27 treaty change last December – which resulted in the intergovernmental fiscal treaty - a host of eurosceptics and status-quo defenders alike now tend to argue that the precedence has been set; Eurozone members can do whatever they want inter-governmentally, they say, and use the EU institutions at that. Britain has been reduced to the role of a spectator. The plot has been lost and the goose has been cooked.

From there, some eurosceptics reach the conclusion that Britain should withdraw altogether, whereas the status quo defenders say Britain should hop on the train towards more integration (at which point they cease to be status quo defenders and turn into brave souls advocating that Britain signs up to a euro superstate).

So has the goose been cooked?

Well, this week’s Spiegel magazine splashed with the news that the German governmet is pushing for a new EU treaty that will consolidate and expand Eurozone budget oversight powers – referred to in Germany under the euphemism of ‘political union’ - under a firm legal framework. Chancellor Angela Merkel is reportedly pushing for a convention – comprising representatives from national governments and parliaments, the European Parliament and the European Commission – to be formed by the end of the year, with a first meeting to be agreed at an EU summit in December. If the article is accurate, a ‘convention’ would be about a ‘full’ Treaty change, not the limited one agreed in December 2010.

One of the main changes sought is the provision for the ECJ to rule if national budgets comply with the EU's fiscal rules, with the option of credible sanctions for non-compliance, something Merkel failed to secure in the inter-governmental fiscal treaty last year – courtesy of French nervousness over loss of souveraineté.

It’s difficult to gauge how credible the story is – speaking on ARD Merkel said that “I am not calling for a convention… that’s not the point”. Though politicians’ denials count for zero these days, it’s probably right that December is not realistic as a start date for a new EU treaty. Apart from everything else that needs to be sorted first, EU leaders still remember how long it took to push through the European constitution/Lisbon treaty – which Europe’s citizens didn’t like that much (as for being a ‘crisis’ this was of course a mere prelude to what has come to pass since). And unlike the Lisbon treaty, codified central fiscal controls would be about decisions over taxation and spending – the bread and butter of national politics. Also, non-euro member states – such as Poland - oppose a new treaty at this time on the basis that it would widen the euro/non-euro divide with a negative impact on the single market.

But while it is clear that there is no great enthusiasm for it, it is difficult to escape the conclusion that at some point in the near future, the eurozone will need a new set of rules if it is to stay together in the longer term. As good as the EU is at fudging it, ploughing on incrementally with economic and fiscal integration is politically unsustainable. So the question for Britain’s leverage in Europe really becomes, how bad does the Germans want to anchor Ordnungspolitik in EU law. Well, as we argued in the Telegraph back in February:

 “The Germans in particular – ever conscious of their Constitutional Court– know that the current arrangement involving an ad hoc euro treaty is legally dubious. As long as the Germans feel uncomfortable, Cameron maintains his leverage.” 

This is key. For a range of reasons (see here, here and here), the Germans don’t have that much confidence in Eurozone inter-governmental arrangements, as it leaves them more at the mercy of the ‘Club Med’ and creates a grey zone between EU law and the German ‘basic law’ which is just too awkward to bear for many Germans. Sooner or later, there will be an attempt at EU treaty changes.

Does the UK know what it wants?

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.

Let's dare to have less Europe!

As leading UK politicians and commentators urge eurozone countries, above all Germany to take the plunge into a fully fledges fiscal and economic union (while firmly rejecting the UK’s participation), it seems they have failed to contend with quite how deep resistance to such a move might be. Indeed we are beginning to witness a bizarre spectacle in which the UK is arguing for more EU intervention while many on the continent are arguing for less, a complete turn-around from recent history.

For example, at the time of going to pixel, the homepage of Die Welt leads with a comment piece by Clemens Wergin entitled “Lets dare to have less Europe”. In the piece, he makes the sorts of arguments often made by the more nuanced EU-critical UK-based commentators, such as:

“The principle of collective responsibility should remain an exception. Therefore, we must return to a Europe in which the welfare of one nation does not depend on how others organise themselves.” 

“[The moves towards a fiscal and banking union] mean even larger intervention rights for the European institutions in national budgets. At the same time it would also mean that the inability of Italian and Greek officials to persuade their wealthy citizens to pay their taxes would be compensated by fees from the dutiful North. It would be the perfect recipe for Europe-wide organized irresponsibility.” 

“This type of deepening is not wanted by the citizens, it will not work and it drives a wedge of division into the continent. It is also further evidence of the implacability with which the political elites of the continent run in the same direction. When it comes to European issues, there is a form of ‘group-think’ that is far too rarely questioned. According to this creed, only he or she who calls for more integration can be considered to be a good European. Meanwhile, it has long been the opposite.” 

Surely these are the sort of sentiments that constructive UK EU-reformers ought to be embracing?

Have the Germans been good Europeans this week?

Earlier this week, German Foreign Minister Guido Westerwelle held a meeting with a number of his European counterparts dedicated to 'conceptualising' the political composition of Europe after the crisis has passed and provide some though leadership.

Ahead of the meeting, the German Foreign Ministry released a Communication entitled “Explaining Europe, Discussing Europe”, which put Germany’s EU policy into ideological context, including statements like:

“Our country is prospering in the united Europe. The fact that we have closer ties with our European neighbours today than ever before is a tremendous enrichment for us... Europe is the definitive answer to 'the German question'. That is why we bear a particular responsibility for ensuring that European integration is carried forward with our neighbours in France, Poland and the other member states."

To what extent Westerwelle's initiative enjoyed support from across the German Coalition government, including the Chancellery, as well as the Bundestag and the German public as a whole, is an open question.

However, as we have pointed out on numerous occasions, the above rhetoric is a reflection of Germany’s ideological commitment to European co-operation in the post-war era. However, modern Germany also has a number of other important ideological foundations such as a commitment to low inflation and restrained monetary policy, a strong system of political checks and balances via the Basic Law, and a strong tradition of individual rights and liberties. The realities of EU integration often clash with these other key principles, as a number of stories from Germany this week have served to illustrate. We will briefly cover these in turn:

1. The size of the Eurozone bailouts

While opposition to the bailouts is hardly a new development in Germany, we learnt this week that the German government looks to have finally dropped its opposition to running the eurozone’s two bailout funds, the temporary EFSF and the permanent replacement ESM in parallel, or possibly even combining them. The government decided its position had led to Germany being isolated within Europe, however as Handelsblatt reports, many MPs within the Coalition are unhappy and could rebel on the issue.

2. The EU’s Data Retention Directive

This has always been the subject of a long-running dispute between the EU and Germany after Germany’s Constitutional Court (often an inconvenient truth for EU laws) ruled that the Directive was incompatible with the Basic Law. Consequently, the government repealed the legislation but has not to date put forward a replacement, meaning it is in breach of EU Law. Germany has failed to heed the Commission’s reprimand back in October, and this week EU Home Affairs Commissioner Cecilia Malmstrom (whose native Sweden has so far also failed to transpose the Directive into national law) insisted that Germany issues a commitment to doing so within the next four weeks. The Directive is very unpopular in Germany, as yesterday’s Süddeutsche comment cartoon shows:



3. The ‘VW’ law

Another long-standing dispute between the EU and Germany concerns the so-called VW law, under which the state government of Lower Saxony controls a blocking minority of 20% of Volkswagen shares. The EU has long contested that the law illegally restricts the flow of capital in Europe, but despite being amended in 2008 following an ECJ ruling, the Commission announced this week that it would again seek to challenge it prompting German Economy Minister Philipp Rösler to say that the government stands by the law and intends to “aggressively defend” it.

4. Revision of the Posted Workers’ Directive

Another story in the German press this week argued that the Commission’s revision of the Posted Workers’ Directive could make it far harder for member states to crack down on black market labour, clearly a big issue in Germany’s large construction sector. An editorial in Die Welt argued:

“Brussels should not regulate every aspect of life to the smallest detail…member states constantly get the feeling that the democratically barely legitimised EU commission interferes in things which are none of its business, and, what is worse, their interventions only make things worse.”

As the four examples illustrate, when rhetoric clashes with realities of EU integration, Germans are often very keen to defend their own way of doing things - just like all other member states...

Poles go cold on the euro

In our daily press summary this morning we covered an interesting Polish CBOS opinion poll which found that support for eurozone membership had fallen to an all time low: only 32% of respondents declared themselves in favour, compared with 60% against. Over the past decade therefore support for joining the euro has halved; an all time high of 64% was recorded in July 2002. Given that the stated goal of the Polish government is to join in the euro in the next few years – indeed it is bound by the EU Treaties to join at some point in the future – the rising public opposition is significant.

However the poll also had a number of other interesting findings which are worth highlighting:

• 42% support Poland’s accession to the intergovernmental ‘fiscal treaty’ vs. 35% against
• 57% are opposed to Poland lending an additional €6.3bn to the IMF to possibly support vulnerable eurozone members vs. 32% in favour
• 62% believe that further European integration would be beneficial for Poland vs. 26% who believe otherwise
• 81% believe EU membership is beneficial for Poland vs. 12% who believe otherwise

Clearly a bit of a mixed bag with the strong opposition to contributing to the IMF for the purposes of bolstering the eurozone showing the limits of the ‘European Solidarity’ that Polish politicians often espouse.

The poll result could serve as another reminder to those who argue that the euro is an integral and necessary component of the EU and further integration, and that rejecting the euro would signal the death knell for the European project as a whole. Ultimately this poll and other like it are good news for supporters of a more flexible EU arrangement, where countries can integrate more closely together if they wish, but can also remain outside of some common structures – such as the single currency.

Polarised Poles unite in fear of Franco-German run EU

Yesterday witnessed a heated and fractious debate (a former Foreign Minister walked out in protest) in the Polish Sejm concerning the conclusion of the Polish Presidency of the EU and last week’s EU summit. Polish PM Donald Tusk kicked off the proceedings by stating that there is still a long way before the future of the euro, and consequently the EU, will be any clearer:

"I would be a happy person if I know the answer to the following question: What is the future of the European Union?"

Tusk added:

“The attempted steps taken in Europe reveal not only the dysfunctionality of certain institutions and European principles, but how strong the disintegrative tendencies in Europe are…Poland can not become a part of the second or third ring… The biggest risk for Poland is the silent division of Europe…that the eurozone fixes itself and turns inward forgetting about the 27, soon to be 28."

Tusk also emphasised that the decision about the new shape of the Union must not be a result forced through by three European capitals (he said it was not necessary to specify the capitals concerned, because everyone knew which ones he had in mind), but a decision made by the community as a whole.

The Law and Justice and Solidarity Poland parties accused the government, and in particular Foreign Minister Radoslaw Sikorski (following his controversial speech calling on Germany to play a more active role in Europe) of betraying Polish interests and sovereignty. They were also very critical about the possibility of Poland offering financial assistance via the IMF to countries with a higher standard of living than that enjoyed by Poland.

The clash of approaches was perfectly captured by the fact that Law and Justice MPs wore badges with the Polish flag, while MPs from the pro-integrationist Palikot’s Movement wore badges with the EU flag (pictured). Janusz Palikot, the flamboyant leader of Palikot’s Movement (yes he really did name his party after himself) well known in Poland for his use of props to illustrate his political arguments, want as far as to present Sikorski with the pen used by late President Kaczynski to sign the Lisbon Treaty in order to keep him on the path towards European Integration.

Looking at the bigger picture, it is clear that, on both sides of the debate, Poland sees the main challenge as one of avoiding Franco-German dominance of the EU, which circumvents the EU institutions and crowds out smaller member states. Polish daily Rzeczpospolita featured an analysis of the Polish Presidency which concluded it had been a “façade”, given that:

“as a result of the crisis, not only was the EU’s centre of leadership not in the country holding the Presidency, but not even in the EU Council, the European Commission or the European Parliament, but in two capitals – Berlin and Paris.”

The unease about the future direction of Europe is spreading fast.

Why the 26 vs 1 narrative is simplistic (Part 2)

On Tuesday, we set out a country by country guide looking at the limited support in cabinets and parliaments around Europe for the main points of the deal agreed last week highlighting that the European match-up is far more complicated than "26 vs 1". The FT had a similar piece on its front page yesterday, and the Independent featured almost the exact same story on its front page today (which goes to show that you should sign up to our press summary if you want to stay ahead of the curve).

So what about reactions from politicans and media around Europe to the veto? To be honest, there's been quite a bit of Cameron-bashing in the European press - some justified, but there's been plenty of ranting too. It's almost as if politicans and commentators finally saw a chance to divert some attention away from the constant fire that eurozone leaders have been under since the crisis started two years ago.

But there have been a lot of more nuanced reactions. For example, as you will have heard, speaking to the Bundestag yesterday, Chancellor Merkel said that the UK will remain a strong EU partner, despite its decision not to sign up to an EU summit deal. In an interview with Rheinische Post, Frank-Walter Steinmeier, former German Foreign Minister and current parliamentary leader of the opposition SDP party said that he feared that the decisive step towards a British exit had already happened, but warned this would be a damaging scenario:

“I too am often annoyed by Britain’s special interests! But we must be aware that with the loss of Great Britain we would give up a historical element of the European integration story. I do not want to imagine writing the future of Europe without such a strong partner as the UK.”

Even Nicolas Sarkozy, who it is alleged could not even bring himself to acknowledge Cameron at the summit, struck a more concilliatory tone this week, emphasising that:

“We need Great Britain! It would be a big impoverishment to see its departure which, very happily, is not the actuality”

Unsurprisingly, the Swedish and Irish Prime Ministers, have also both indicated that there are still plenty to discuss regarding the future of Europe, and that they expected the UK to be involved in this process.

And here are some other reactions from around Europe that you won't hear on tomorrow's Today Programme:

In Poland, Arkadiusz Mularczyk, a senior MP for the Conservative Solidarna Polska party, went as far as to argue that:

"[Polish PM] Tusk should learn from Cameron's diplomacy"

A leader in Welt am Sonntag entitled: “Britain: Please come back!” argued that:

“Should the UK actually leave the EU, the Union would lose not only the cradle of European democracy, but also one of its founding members - and the most important financial centre of the old continent”.

On Monday, in Sweden's main daily Svenska Dagbladet, EU-expert Roger Älmberg wrote that:

"[Sarkozy and Merkel] Needed to identify Cameron as a scapegoat to paper over their own conflicts...the details that will emerge [from the EU deal in March] will most likely lead to more than the UK feeling excluded.”

A leader in Sweden’s largest tabloid, Expressen, noted that Cameron may have ended up outside the EU’s core structure, but that it was also “hard to find arguments” for Sweden to join Merkozy’s pact, since:

“There are no plans or political majority for joining the euro. Besides, Sweden doesn’t like that the euro countries go off on their own outside the Treaties.”

Meanwhile in Belgium, Baroness Mia Doornaert, a well-known Belgian commentator and former advisor to the former Belgian PM, Yves Leterme, argued in De Standaard:

"David Cameron says no to a new European treaty, while listening to his English voters, and is accused of being someone who "blackmails" Europe. Twenty six other government leaders and heads of state don't give their parliaments but European bureaucrats control over their budgets...this kind of top down integration carries the risk that democratic support for the Union shrinks. Europe and democracy: for now they don't seem together. Unless you consider it democracy that elected leaders in Brussels agree upon common measures which they can't or don't dare to push through in their own countries."

There was also nuanced remarks from Dutch magazine Elsevier’s EU correspondent Carla Joosten, who commented that:

"[Cameron's] fear of European rules which would hit the heart of the British economy, the financial sector in London... isn't unjustified. It wouldn't be the first time that France and Germany are trying to get rid of competition elsewhere in the Union. French President Nicolas Sarkozy keeps on repeating that the City of London is at the heart of the crisis. It isn't of course that simple. The British have already cleaned up their banking sector better than the French and the Germans together."

The Irish Independent's chief critic, Bruce Arnold yesterday wrote a piece somewhat dramatically entitled "We need to strengthen UK ties before EU strangles us", in which he argued:

"That is now overshadowed by the darker figures of Angela Merkel protecting German interests, Sarkozy protecting French interests, and doing so with greater skill and duplicity than we have seen before. David Cameron has seen what this would do to British interests and backed away. We should do the same."

This theme continued this week, with Tuesday's Handelsblatt's editorial arguing that:

"Even under normal circumstances it would have been hopeless to expect Cameron to approve the EU's conversion into a fiscal union as a first step towards political union without receiving anything to show for it at home. But given that the justification for this step was the rescue of a currency the logic of which the British still doubt today it was utterly impossible…It would be better now to focus on what the two sides still have in common and what can serve both their interests instead of ranting against the Britsh. And a functioning common market is right at the top of the list here."

While worrying about the UK’s ‘departure’ an editorial in El Pais claimed that:

"From development cooperation to a European research area, many European projects would look very different today without the UK's influence. And it's difficult to imagine that without the UK the EU would have dared to break up hugely influential national monopolies like the telephone companies or airlines. If the UK leaves, the EU will lose not only military, academic and financial clout but also a country that has demonstrated that it is much better able to renew its public administration and policies than continental Europe"

Spanish regional paper Las Provincias argued that:

“Despite doubts, the UK contributes much to the EU in economic and political reforms, and one should avoid reading the pact as a new battle between Europeans, with winners and losers.”

In this week's Spiegel magazine, London correspondent Marco Evers criticises Cameron’s decision to veto EU Treaty change, but concludes that:

“Despite all the anger, [the British] might soon be missed… ironically enough, it might just be the Germans who regret losing the United Kingdom. London's dedication to free trade, to the rule of law and to having things run in an orderly manner is not so easy to replace. Berlin is losing a partner who was a dependable counterweight to the club of those slack states in southern Europe whose freewheeling financial policies the restrained Germans have always abhorred.”

All in all then, to paraphrase Mark Twain slightly, it could be said that reports of the UK’s death in Europe have been greatly exaggerated.

I want this much EU integration

In a speech in the European Parliament today, Commission President Jose Manuel Barroso noted that the "Future of single currency depends on closer integration of monetary and economic policy". To illustrate exactly how much more EU integration he wants to see - and to avoid any mis-representation by the EP's interpreters - Barroso appears to have resorted to body language.

Trichet: I have a dream (an EU finance minister)

Jean Claude-Trichet is reaching the end of his term as ECB President, which is probably the reason why felt able to say this today:

"In this Union of tomorrow, or of the day after tomorrow, would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union?"

In a provocatively political speech in Aachen, Trichet set out some ideas on what 'fiscal union' inside the eurozone might actually look and feel like, particularly for eurozone governments that call on their neighbours for financial help in future.

Trichet argued that there should be a "second stage" - a point at which recipients of bailouts are no longer able/willing to implement prescribed conditions, such as austerity - where other member states i.e. those stumping up the cash for the bailout "take themselves decisions applicable in the economy concerned":

"One way this could be imagined is for European authorities to have the right to veto some national economic policy decisions. The remit could include in particular major fiscal spending items and elements essential for the country’s competitiveness."

Given that a growing number of people are realising that the mid-to-long-term future of the eurozone is likely to require the 'twist or bust' choice between some form of fiscal union or some countries exiting, the question for the likes of Trichet is how do you sell 'fiscal union' to the general public.

Trichet dressed up his core message with various quotes from European philosophers and 'fathers of European integration' but this is unlikely to cut the mustard with the ordianry voters in Athens, Lisbon, Munich, or Amsterdam. As the FT's Martin Wolf noted this week, "How will the politics of these choices now play out? I truly have no idea. I wonder whether anybody does."

Under the influence?

The public affairs firm Waggener Edstrom issued their first ever study of the influence of EU affairs blogs yesterday, ranking the Open Europe blog 7th overall.

Here is the top ten:
BBC | Gavin Hewitt’s Europe
FT Brussels Blog
The Digger
Fistful of Euros
Jon Worth / Euroblog
Stanley’s Blog
Open Europe blog
Julien Frisch | Watching Europe
ECJ Blog
Neelie Kroes

The full study is available here:
http://www.openeurope.org.uk/docs/Waggeneredstromindex.pdf

We attended the launch yesterday and the discussion sought to compare the EU blogging culture with the vibrancy of political blogging in the US.

Unsurprisingly, everyone concluded that it is nowhere near as advanced and there was also much lament that the 'tone' of debate was rather tame in comparison. But more interesting was some people's assumptions rather than their analysis.

The complexity of the various institutions and the fact that there tends to be more interest in national personalities were cited as temporary obstacles to a more US-style cut-throat "democratic debate" or clash of ideas, which could be overcome with time. Someone suggested that blogging could provide the glue to create the "dream of a European public space" for political debate.

It was hard not to leave the room feeling that a rather fundamental point had been missed but it was also a striking reminder of how (some of) the people who have been in Brussels a little too long have cut themselves off from the outside world.

The "politics of EU integration" (more or less Europe) is an entirely different species to "EU politics" (how the EU policymaking machine works). Understandably, Waggener Edstrom, a public affairs firm, is only really interested in the latter because its business is to serve clients who are seeking to influence the outcome of EU policy, and this means targeting MEPs or the people drafting legislation in the Commission, for example.

The impression was that most people in the room either live in denial that there is a distinction or are simply too caught up in the 'Brussels bubble' to recognise there is a debate about the former.

The real 'clash of ideas' is to be found in the debate about the future path of EU integration (Should the euro crisis be used to further greater political and economic integration? Should EU taxpayers be bailing out other member states? etc). If the Brussels elite really want a democratic debate it should surely start by engaging with these rather more fundamental questions.