Meet the new Belgian Finance Minister, an ally on EU reform

Good news for EU reform keeps coming from Belgium. After the publication of the new coalition agreement, which we've analysed here, it has today been announced that Johan Van Overtveldt will be the country's new Finance Minister. A former editor-in-chief of Belgian business magazine Trends, he was elected to the European Parliament in May with the New Flemish Alliance (N-VA) - Belgium's biggest political party and a member of the UK Conservatives' ECR group.

Van Overtveldt's pro-EU reform credentials are beyond doubt.

Last month, he said in an interview that he wanted "no political union" (see the headline in the picture), and added:

"We need a more social Europe, but first the monetary union should be anchored on a healthy basis. When national economies perform better economically, countries will start taking initiatives which go in a social direction anyway...A uniform European minimum wage, for example, is complete non-sense. It would at least need to differ for each country. A minimum wage is a sovereign competence of member states."

Furthermore, the new Belgian Finance Minister is a strong supporter of a 'capital markets union' - a key item on the agenda of the new EU Financial Services Commissioner, the UK's Lord Hill.

An expert in monetary economics (and a personal acquaintance of the late Nobel Prize winning economist Milton Friedman), Van Overtveldt also has an interesting take on the future of the Eurozone. In 2011, for instance, Open Europe hosted the launch of his book, 'The end of the Euro'. On that occasion, Van Overtveldt said he had "always been a doubter" of the sustainability of the single currency, and added:  

"The only solution for Greece is to leave the euro...in order to save itself and its democracy."

That said, Van Overtveldt has made clear that, despite his scepticism on whether the single currency may ultimately survive, he supports the efforts to keep the eurozone together. The new Belgian Finance Minister is in favour of "more economic powers for Europe", but opposes Eurobonds or fiscal transfers. This sounds very close to Germany's stance.

On banking union, Van Overtveldt wrote in April:

"The single resolution mechanism is too complex and takes too much time in order to be able to take action...The banking union as currently conceived leads to banks in weaker countries to do as much as they can to borrow from banks in stronger countries...Moral hazard is more than ever haunting the eurozone, like the Loch Ness monster."

Importantly, Van Overtveldt has also warned against a “big leap” towards fiscal union in the Eurozone, saying it would effectively create "two European Unions" - and, according to him, effectively lead to the end of the EU. Hence, we can expect the new Belgian Finance Minister to pay good attention to the concerns of the UK and other non-Eurozone countries when it comes to safeguarding the integrity of the single market.

A new Belgian government: Will Brussels control Brussels?

N-VA leader Bart De Wever and new PM Charles Michel

After less than five months, a relatively short period by local standards, a new federal Belgian government has been agreed.  In the light of our analysis in May, "Scenario 2" has materialised: a federal government which includes the Flemish nationalist N-VA, which hopes their centre-right policies may drive the Francophone socialists to return to their historic demands for more decentralisation.

The new coalition is led by 38 year-old Charles Michel, a Francophone liberal and the son of former EU Development Aid Commissioner Louis Michel, and its centre-right programme has just been revealed. Interestingly, there are a few changes on EU policy in the country which probably is the most inclined to EU-federalism. This is clearly the result of the presence of the N-VA, a party which has described itself "euro-realist" since 2011, but is part of a broader shift whereby the Francophone socialists have also dared to criticise EU policies.

Here are some excerpts from the programme which show that Belgium is now fully supporting the drive to empower national Parliaments and subscribes to the philosophy of incoming European Commissioner for 'Subsidiarity' Frans Timmermans that "the EU should do what can only be done by the EU and should leave to member states what can be better done by them":

• "To continue European integration, more legitimacy and transparency are needed. In that respect, the Federal Parliament should play its role with regards to proportionality and subsidiarity".
• "The government wants a smaller and more effective European Commission".
•  It stresses that with regards to eurozone solidarity, "this should be objective, transparent and efficient and should not encroach upon the competence of member states for social security provision".
• "The government wants the integrity of the internal market, to which all EU member states take part, to be respected" (Something the UK government can see as support for insistence that the single market shouldn't fragment as a result of Eurozone integration). 
• "In its EU policy, the government will fight over regulation and unnecessary meddling which contribute to undermining support for European integration". 
• "In order to boost democratic responsibility and to strengthen public support for the project of European integration, the Prime Minister is prepared to discuss with Parliament both ahead and after every European Council Summit in order to inform it about the positions of the government and the results of the European Council and to debate these topics. In order to support this debate, the government will as soon as possible contribute to the Advisory Committee for European Affairs" (This sees Belgium follows in the footsteps of amongst others Denmark, Finland and the Netherlands, which have similar systems, from the duty of governments to obtain a mandate and an obligation to inform MPs).

There is even a whole chapter devoted to "Introducing the principle of subsidiarity":

• "We believe strongly in the principle of subsidiarity whereby the EU focuses on domains and actions where it adds value. Policies should be efficient and at the level closest to the citizen. The Union should also be made aware of the sometimes heavy administrative burdens of regulation it imposes on member states, its citizens and companies. All of that is necessary to repair the credibility of Europe among citizens."

Of course, EU-federalist elements remain: the new Belgian government wants to scrap veto powers in foreign policy (while simultaneously supporting a "strong NATO alliance" as well) and wants more harmonisation of EU asylum and migration policy. Still, anyone supporting reform of the EU - and Belgium, which hosts the EU, seems to understand that this is in its interest, as we have made clear - can take heart.

Belgium's general election: Will we see another 541 days without a government?

This Sunday, on the same day as the European Parliament elections, Belgium will hold a general election, electing both new federal and regional assemblies to govern 11 million people. The key question is how strong the Flemish nationalist N-VA, which is already the biggest political party, will perform this time around.

Background

The N-VA, a "eurorealist"  formation, wants to reform the country, a mini-EU/Eurozone composed of Flemish and Francophones, into a confederation (although it favours splitting it up in the very long term). It became the biggest party in 2010, but was ultimately excluded from a federal government because it appeared impossible to wrap up a coalition deal with Francophone parties, resulting in 541 days without a federal government.

A coalition of six parties led by Francophone socialist Elio Di Rupo eventually emerged. One big issue was that the coalition did not enjoy support among the majority of Flemish MPs in the federal Parliament. European Council President Herman Van Rompuy, who has been Belgian PM himself, once warned that if such a government would ever be formed, this would be “dangerous for the existence of the state”. His party, the Flemish Christian-Democrats, have now pledged not to enter such a coalition again.  This Sunday, it will become clear how voters have judged this.  For more background on the complexities, we refer you to this comment piece by our resident Belgian expert. 

Post-election scenarios

Scenario 1: Business as usual (most likely)

Opinion polls are notoriously unreliable in Belgium, but suggest that, in the Flemish districts, the N-VA will improve on their 2010 showing, while the three traditional parties will remain broadly at the same level. If they again fail to command a majority of Flemish seats but, nevertheless, prefer to avoid complicated talks with the N-VA, the Flemish Christian-Democrats will need to break their promise, something which they may do if one of them becomes PM and the incumbent Elio Di Rupo is offered a job in the European Commission, for example. Di Rupo's Socialist Party is expected to suffer considerable losses, but would easily remain the biggest party in the Francophone part of the country.

Scenario 2: A federal government which includes the N-VA

Bart De Wever, the N-VA's leader, has himself indicated he's willing to enter a federal government and not make new demands to decentralise powers, if centre-right policies are implemented. The N-VA hopes this pressure may drive the Francophone socialists to return to their historic demands for more decentralisation (in his maiden speech to the Belgian Parliament in 1988, PM Di Rupo himself proclaimed that "there are no Belgians", while demanding "a confederal Belgium").

Such a federal government without Francophone socialists (who have been in power since 1988) but with Francophone liberals and Christian-Democrats is an unlikely scenario, also because this time around it would probably not command a majority of the Francophone seats in Parliament. However, if the N-VA does better than expected, this scenario could materialise.

Scenario 3: Prolonged stalemate 

Last but not least, there is the scenario of another one and a half years of stalemate, prolonged to an indefinite period without a federal government, which could result in negotiations on an eventual divorce. We rate this as very unlikely.

As you can see, it's complicated.

Can an April Fool's day story trigger a European Commission investigation?

Nothing escapes the European Commission's severe oversight. Not even April Fool's day stories. It emerged over the weekend that the Commission's Directorate General for Competition had sent the Belgian government a request for information about, among other things, plans to build a second runway at Charleroi airport.

Fairly standard procedure, except for one small detail. The plans for the new runway had been 'revealed' by Belgian news site PagTour in its April Fool's day story this year. The funniest aspect is that, after a plausible start, the original article went on to offer a number of rather weird details, hinting at its true nature, such as:

• A secret 'Committee for Airports' of the Wallonia Region, whose members only drink water from the Belgian city of Spa;

• Jean-Jacques Cloquet, the CEO of Charleroi airport, being spotted during a meeting with "one of the major experts of Belgian aviation" in a "restaurant specialised in all kinds of fish [remember that in French an April Fool's day prank is called poisson d'avril, literally April's fish]";

• The plan for the new runway being hidden in a secret strongbox by Edmée De Groeve, the former President of the airport. 

But apparently none of these were wacky enough to stop the European Commission requesting information about the 'planned' new runway to the Belgian government, in a letter to which the PagTour article was attached as a reference.

Equally extraordinarily, before being passed on to Charleroi airport, the Commission's letter (which Belgian daily L'Echo has published here) had reportedly gone through the Belgian central government and the Walloon regional government. Both failed to realise that the request for information on the second runway was based on an April Fool's day story.

We can't help but wonder what the Commission's next investigation will be. Perhaps they could examine the Royal Mail's use of owls (as reported by the Daily Mail on 1 April 2013). Surely some violation of animal welfare laws there...

European regionalisation: do two negatives make a positive?

As we've argued before, there's a lesson for the eurozone to learn from the all the semi or full-blown separatist movements across Europe; trying to impose central control on an inherently regionalised structure is extremely difficult and artificially imposing a top-down identity remains as challenging as ever. At the same time, should a region choose to leave an EU county it could, after negotiations, be absorbed by the European structure, which in turn would have a stabilising effect on the tumultuous politics that will follow.

Therefore, separatist movements across Europe simultaneously showcase both the weakness and strengths of the European project. However, what's clear is that the austerity sweeping Europe is not only creating tensions between national capitals and Brussels, but also national capitals and regions. Just in case you thought the eurozone was on the verge of a agreeing a transfer union....

Belgium

The Flemish are as unhappy as ever about their domestic transfer union, and this weekend, local elections in Belgium saw the moderate Flemish nationalist N-VA party make substantial gains, using the €16bn a year that Flanders sends to the Francophone region as a political springboard. A leader in Belgian daily De Morgen notes that that the N-VA's objections to "the left-wing tax government of [Belgian PM Elio] Di Rupo don't differ that much from "the criticism in other countries of the [eurozone] solidarity mechanism which keeps the Greeks or Spaniards afloat".

Spain

In Spain, the Catalan independence movement is stepping up a notch off the back of Madrid (and Brussels) imposed austerity measures. In September, a pro-independence rally in Barcelona (pictured) mustered between 600,000 and 1.5 million people depending on whether you ask the Catalan or national police. The Catalan government has said it wants to hold a referendum on independence, with a majority of Catalans in favour according to some polls. A motion to permit a referendum was voted down by a majority in the Spanish lower house and could trigger a constitutional crisis if Catalan PM Artur Mas goes ahead with the plans regardless. Spanish Prime Minister Mariano Rajoy has said holding a referendum without the central government's approval would violate the Spanish Constitution.

Italy

The Lega Nord party has been calling for the separation of Italy's northern regions from the rest of the country. Possibly the main difference between the Italian case and the others, is the fact that the geographical entity evoked by Lega Nord (the so-called 'Padania', including all the regions above the Po river) has never existed as an independent state. Furthermore, Lega Nord has usually been more or less aggressive in its pro-independence claims depending on whether the party was in government or in opposition. Nonetheless, many northern Italians do feel that too big a chunk of the taxes they pay is then used to fund 'dysfunctional' Southern regions. Potentially one to watch, especially if Lega Nord (as it looks likely at the moment) will stay in opposition after next year's elections. 

Germany

While there is no talk in Germany of an independent Bavaria just yet, in July the regional government announced that it will launch a complaint at the German Constitutional Court against the German system of "Equalization payments" between richer and poorer German Bundesländer. Bavaria is the main net contributor to this system with €7.3bn, sharing the burden with only three other states - Hessen and Baden-Württemberg and Hamburg). The rhetoric of Bavarian politicians on the eurozone crisis has also been notably tougher than that of other German politicians as we've noted here. Meanwhile, a recent Bild poll found that 46% of Germans were against the separate West-East solidarity income tax levy compared with 42% in favour.

United Kingdom 

In Scotland the Scottish National Party has won its battle for a independence referendum with Scots being given a single Yes/No question on independence to be held in 2014. The prospects of Scotland becoming independent have however, in contrast to other regions, been damaged by the eurozone crisis with previously favourable comparisons with Ireland and Iceland being turned into examples of the problems of small economies with oversized financial services industries. Other questions that are beginning to be asked are whether an independent Scotland will use the euro (decreasing in popularity) or retain the pound, remain in the EU or have to have border controls. It has also been noted, including by the EU Commission, that Scotland would have to negotiate its EU membership afresh rather than opting in by default off the UK's entry in 1973.

Meanwhile in Brussels...

European Council President Herman Van Rompuy has presented a report calling for a central eurozone 'Treasury' with a shared budget and eurobonds - very close to a full-blown trasnfer union.

In Brussels, the logic seems to be that two negatives make a positive.

Wie Kent Olli Rehn?

Not everyone in the newly formed (and long awaited) Belgian government seems to be happy with the new supervisory powers the European Commission has gained under the "Six-Pack" on economic governance.

As we reported here, Belgium was forced to withhold €1.3 billion of planned spending in its 2012 budget, after the Commission said that Belgium's estimates of its public deficit (2.8% of GDP at the end of this year) were "too optimistic."

Well, this is what Belgian Enterprise Minister Paul Magnette had to say about that (from today's interview with Flemish Belgian newspaper De Morgen),

"The Commission is today going too far with its measures. Who knows [EU Economic and Monetary Affairs Commissioner] Olli Rehn? Who has ever seen Olli Rehn's face? Who knows where he comes from and what he has done? Nobody. Yet he tells us how we should conduct economic policy. Europe has no democratic legitimacy to do this."

Incidentally, Magnette (see picture) is a fellow party member of Belgian Prime Minister Elio Di Rupo. Unsurprisingly, Di Rupo has promptly distanced himself from this statement. However, an important political message has been sent. Perhaps eurozone countries were not fully aware of the practical effects of the loss of sovereignty they were agreeing to when they rushed towards stricter economic governance - it wouldn't be the first time.

In light of Monsieur Magnette's reaction, we wonder what would happen if similar "recommendations" were made to France and/or Germany. You know things are changing when even Belgian Ministers resort to anti-Commission rhetoric...

"Euro-realism" on the march...even in Belgium

In De Standaard, Bart De Wever (photo), leader of Flemish nationalist party N-VA - Belgium's biggest party – has defended his decision to give an introduction to a speech made by Czech President Václav Klaus during a Belgian state visit. Klaus, as you know, isn't exactly the most popular head of state in Brussels circles.

But De Wever writes:

"Whoever expresses criticism of the europhile mentaility of the political elite is being labelled an ideological ally of the far right.

In an infamous speech at the European Parliament in 2009, Klaus committed the cardinal sin by sharply criticising the lack of democracy at the EU level, even comparing the EU to the Soviet Union. When someone who has physically experienced the struggle for political freedom and sovereignty of the people, speaks about Europe in such a way, we should at least be expected to take his criticism seriously. Instead of taking advantage of an opportunity to engage in a big debate on the European project, Klaus was being dismissed as a political pariah."

De Wever concludes:

"whoever honestly believes in European integration, will need to learn to listen to its critics. Lashing out at anyone who doesn't believe in the europhile dream of a United States of Europe, advocated by smooth statesmen and journalists, really doesn't cut it any longer if we wish to convince public opinion. In order to counter the opinion of Klaus and to avoid the European project from turning into something resembling not much more than a free trade area, we need euro-realist answers. And we need grands messieurs et mesdames willing to sell those ideas."

Not the usual stuff coming out of Belgium, to say at least.