Flip-flopping Clegg

Nick Clegg didn’t exactly come across as coherent in last night’s debate between party leaders when David Cameron challenged him on the fact that the Lib Dem manifesto still calls for the UK to join the euro.

This was the exchange:

David Cameron: "people need to know that the Liberal Democrats, in their manifesto, are still in favour of joining the euro...if we were in the euro now, your taxes, your national insurance would not be going on hospitals and schools and police officers, they would be going to Greece, and possibly other countries as well, and that's why I say one of the lessons to learn is let's stay out of the euro, let's keep our own currency and let's recognise what a massive strategic error the Liberal Democrats would have made."

Nick Clegg: [nervous laugh] "No I'm not advocating entry into the euro, I would only ever advocate it by the way, if ever, if the economic conditions were right. If it was good for your jobs, good for pensions, good for savings, and of course it always has to be only decided, if we were ever to do that as a country, on a referendum where you can vote on it." The Lib Dems' manifesto states: "We believe that it is in Britain's long-term interest to be part of the euro."

Say what? Since when, exactly, is Nick Clegg in the "No I'm not advocating entry into the euro” camp?

The Lib Dems' manifesto clearly advocates UK membership of the euro stating: "We believe that it is in Britain's long-term interest to be part of the euro."

And Nick Clegg himself has in the last decade repeatedly called for UK membership. A few examples:

When he last year said the Euro would "anchor" the economy against the "vulnerable exposure to international financial markets".

Or that "The strict rules attached to the euro could emerge as one of the best ways to persuade the markets that we will put Humpty Dumpty back together again, put the public finances in order".

(So strict that Greece managed to fudge its statistics to bluff its way in?)

Or when he said that refusing to discuss the euro was a "failure of political leadership"
(Financial Times, 21 January 2009)


Or perhaps, back in the days: "If we remain outside the euro, we will simply continue to subside into a position of relative poverty and inefficiency compared to our more prosperous European neighbours."
(Prospect magazine, 20 January 2002)

Or, in the same article: "We will gain greater control over our own affairs by joining the euro. By pooling sovereignty, we will be able to extend sovereignty over economic forces which have long moved beyond the reach of national monetary policy”.

“The single currency, far from being an agent of continental style corporatism, is probably the greatest export vehicle of Anglo-Saxon economics. The euro has done more to enforce budgetary discipline, to promote privatisation and force through labour and product market liberalisation in the rest of Europe than any number of exhortations from the IMF, the OECD, or the editors of The Economist."

(There are so many flawed predictions in that last statement that it's almost painful)

The Lib Dems insist that it is in the “UK’s interest” to join the euro. However, at the same time Nick Clegg a) recently admitted that being in the euro would have made the UK’s current economic situation worse b) now says that he’s “not advocating entry into the euro”.

Anyone else confused?

The truth is that the Lib Dems' mixed messages on the euro undermine the credibility of the entire party. Advocating a policy in their manifesto that constitutes such a fundamental change, and then not having the courage of their convictions to back it up, smacks of ‘old politics’ and dishonesty. It’s difficult not to draw parallels to their flip-flopping on the question on whether a referendum should be held on the EU Constitution/Lisbon Treaty.

If he was serious about his euro pledge, Nick Clegg would spell out exactly under what conditions he would take the UK into the euro – which would be far more honest to voters. Nick Clegg’s confusion on the euro is at best folly, and at worst a threat to the health of the UK’s economy should he get near power.

Is this what we should expect from someone who could become Britain’s next Foreign Secretary?

Inspiring confidence?

The European Commission's reaction to the Standard & Poor’s credit rating downgrade of Greece to “junk” status:

“Who is Standard & Poor’s by the way?” asked Amadeu Altafaj, the spokesman for E.U. Monetary Affairs Commissioner Olli Rehn, as he took the podium at a regular midday news briefing at the European Commission.

Mr. Tardio later appeared to try to counter any perception he had questioned the ratings agency’s decision on Greece. “I was asking myself,” Mr. Tardio said in explaining his earlier remarks. “I’m not an expert on credit rating agencies.”

From the IHT.

Getting angry at press conferences is not exactly likely to boost market confidence in Greek government bonds.

Apolitical?

Just a quick note on the second televised leaders' debate in the UK last week - in which something struck us about Nick Clegg's description of his previous working experience (see here 11'20 in):

“I worked in my previous life, before going into politics, for a while as a negotiator on behalf of all of us, on behalf of Britain and the European Union, negotiating trade deals, with the Chinese government, with the Russian government and others. And what I noticed there was that Chinese and the Russians, they only listened to what we were saying, because I was representing the largest single market in the world – of 475 million consumers.”

Something about this statement didn't quite ring true - and it was the impression that he gave that his job as a trade negotiator was somehow a 'non-political job', outside the bubbles in Westminster and Brussels. But the problem is that this job was for the European Commission - not an institution that can reasonably be described as apolitical or somehow 'above politics'.

See this interview, for example, with the President of the European Court of Justice Vassilios Skouris with the Financial Times in 2004, saying that "the Commission is a political body with the right of initiative."

And, as we've argued at length before, the Commission is the institution which takes it upon itself to aggressively promote its own ideas on 'ever closer union', and which at times more closely resembles a political lobby group with its own agenda.


Chris Huhne was also peddling the same line on the Today programme - denying that Nick Clegg was a political insider, having held "serious jobs outside politics" - which John Humphrys wasn't having any of.

It may appear a technical point - but the suggestion that working for the Commission somehow represents a job outside the political world is utterly laughable.

What would a Lib Dem government do about Ian Bailey?

The Lib Dems' recent rise is rightly leading to closer scrutiny of the party's policies. Their support for the UK entering the euro, was correctly described as "folly" by the Sunday Times. If it wasn't right to join the euro when the UK was experiencing higher growth in comparison to the eurozone, and if you're willing to admit that the current eurozone interest rates would have hurt the UK's recovery (as Clegg has recently), then when would it ever be right to join? The Lib Dems' answer, "In the long-term", is simply not good enough from a party that wants to govern the country.

But another area that has received far less scrutiny and attention is the Lib Dems' commitment to further EU cooperation on crime, justice and policing. This is extremely important because, under Lisbon, this is the area of EU policymaking that is likely to grow fastest. And for a practical example of why this is all important, we need look no further than a story reported in yesterday's Independent, and today in the Irish Times.

Ian Bailey, a British former journalist suspected in connection, but not charged, with the murder of a French film-maker in Ireland 14 years ago, has been detained by the Irish authorities under a European Arrest Warrant issued by a French judge. French lawyers argue that they have jurisdiction over the case, citing the French constitution which states that murder cases involving French citizens in any part of the world can be brought in front of French courts.

But, as Carol Coulter, the Irish Times' legal editor, points out, the Irish Director of Public Prosecutions decided not to prosecute Bailey for the murder. Therefore, in practice, the French extradition request amounts to a breach of the double jeopordy principle, enshrined in the European Convention on Human Rights (ECHR), as well as the Irish Constitution.

We've pointed out some of the EAW's failings before, but this case could potentially prove to be a huge step in a very dangerous direction. If Bailey loses his fight against extradition, the Irish authorities will have deported someone, whom they believe did not have a case to answer under Irish law, to face charges in another country. Leaving aside whether Bailey is ever found guilty or not in the future, this simply cannot be right.

The Irish courts still have to decide whether to action the extradition request but it will be interesting to see how much pressure is put on them by the French government. And given that the French request effectively amounts to a vote of no confidence in the Irish legal and judicial system, what prospect does this man have for a fair trial in France? And doesn't the UK, given that Bailey is a British citizen, have a duty to point this out?

Too much information Denis

In the category “too much information”, we bring you a story from former Labour Europe Minister and über -europhile Denis MacShane. Keen as ever to convince the world that a Tory victory in the general elections will end Western civilization as we know it, he apparently shared the following - somewhat disturbing - tale with Italian newspaper Il Sole 24 Ore:

When [David Cameron] was running for the party’s leadership, I met him accidentally in the locker room of the House of Commons, while we were having a shower. I had gone jogging, while he [David Cameron] was back from a bicycle ride. I told him: ‘David, once you become a leader you have to give up one of the ideological pillars of your party, like all great statesmen do. Margaret Thatcher and Tony Blair did. I wish you will get rid of all those suspicions towards the EU’. He stared at me and said: ‘My dear Denis, I’m much more Eurosceptic than you may think’.

Okay, we get it. Europe should brace itself for the most isolationist Western leader since James Monroe (slight touch of irony there).

But did we really need to know about the shower, Denis?

Would you trust this Miliband?

With the election only two weeks away now the country has turned poll-crazy as we rate the stars, ahem, politicians with every twist and turn of the election horse track.

The latest intrigue from the poll-vine comes from an interesting study released in yesterday’s FT, by market research firm Harris International. It reveals that David Miliband is one of the least trusted politicians in the UK, with a whopping 38 percent of people saying that they ‘distrust’ him in contrast to the scant 12 percent who ‘trust’ him.

The surprise must come as quite a blow to Labour’s wonder child, and to the party who widely tip him for future leadership. The question remains, what has Miliband done to upset the voters?

We think this poll shows that the public remember oh too well the failed promises that Miliband, and the Labour party, have offered and taken away from us over the years.

In his role as Foreign Minister, Miliband promised to put an end to the UK’s role in overseas torture cases, but instead ended up publishing guidance as to how to interview detainees overseas. He also presided over the financial scandal that saw the Foreign and Commonwealth Office lose vast sums of cash after the budget was left unprotected from exchange rate changes.

But in our view the most fundamental breach of trust was the reneged promise to hold a referendum on the Lisbon Treaty. Miliband was at the head of the party in the writing of New Labours' election manifestos which, as we well remember, promised us a referendum on a European Union Constitution. Strike 1 - the Constitution came and went without a referendum in the UK. Strike 2 – the identical Lisbon Treaty came and arrived without a referendum.

By also leading the defence on the Treaty in the Commons (which a clear majority of the British people didn't want) Miliband is very much synonymous with the whole insult to democracy that the Lisbon episode involved. It’s no wonder then that the people don’t trust him.

Hysterical and one-sided

It's always amusing to witness journalists and politicians with euro-enthusiastic tendencies having a go at parts of the British press for being biased on Europe, while at the same time being guilty themselves of some seriously one-sided and dubious reporting.

One of the most conspicous examples is when we caught the Independent - at the height of the debate about a referendum on the Lisbon Treaty - reprinting a Foreign Office briefing note on the Treaty almost word-for-word, but without any attribution that the FCO was the source. (Compare the Foreign Office briefing here to the Independent article here). A newspaper simply printing what the government tells it word for word is not considered quality journalism in most places.

On Friday, the Independent’s John Lichfield got a bit over excited about the prospect of a Conservative government 'spooking' Europe. Quoting a couple of French politicians, a Spanish MEP and a second-hand “source in Ms Merkel's Christian Democratic Party” he predictably got stuck on the idea that Europeans these days live in perpetual fear of the Conservatives coming to power. A potential Conservative government is now up there with global warming and terrorism as the greatest threats to humanity (we made up that last part).

The discussion about the Tories in Europe has always verged on the hysterical – and few people outside the bubbles in Brussels, Paris and Westminster pay much attention to it. But what’s arguably worse, at times it comes across as outright ignorant – despite all the lofty talk amongst commentators for the need to increase the quality of the discussion on the EU.

For example, Lichfield makes a song and a dance over the Tories’ manifesto, which spells out that the EU should be an “association of states”. In mainstream European politics, Lichfield claims, to talk about the EU in this way is “unhelpful” and is “reopening an argument that Britain lost more than 50 years ago.”

Er, say what?

That argument is alive and well around Europe – in fact, it is increasingly moving back to the fore. The German Constitutional Court used this exact phrase in its explosive ruling on the Lisbon Treaty to make clear its view on what the EU is and what it should remain (Verbindung souverän bleibender Staaten). Also the Swedish governing Moderate Party – which is at the mainstream of the mainstream of European centre-right politics – is using very similar wording to describe its vision of the EU (mellanstatligt samarbete).

It does take knowing a couple of languages, but the information is quite clearly there for anyone interested in a quality report. But then again, the need for such reporting only applies to one side of the argument, doesn't it?

The line between fact and fiction

Although Europe has been seemingly neutralised as an election issue, and the main political parties have reached a rather settled position on the Lisbon Treaty, it does not give them license to play fast and loose with the facts of what the Treaty means for the UK.

Having been inspired by the great idea behind the Channel 4 Fact Check blog, we decided to try and apply some of that diligence to recent comments by Gordon Brown about why Labour reneged on the promise in its 2005 manifesto to hold a referendum. Answering questions from readers of the Yorkshire Post (around 6 minutes into the video) he said:

"Have people really seen a huge difference in the relationship between us and Europe over the last few weeks? The reason we did not have a referendum on this is that there was no major constitutional issue that had to be dealt with. They abandoned the concept of a constitutional treaty. They actually specifically said, the European Union, that it was abandoning that idea and then they went to what is a more modest treaty, the Lisbon Treaty, where all what we called our 'red lines', that is no interference with social security or national security, we got what we wanted on policing and justice, we got what we wanted on economic development, we got the freedom to continue to have our own foreign policy - none of these things were affected."

Quite a lot of total misrepresentation there, so we will do our best to debunk some of those fallacies.

• Despite repeating his argument that the Lisbon Treaty was vastly different from the European Constitution, and therefore no referendum would be required, everyone and sundry has admitted that they are essentially the same document (as well as the PM himself). We did the side-by-side comparison proving that they were practically identical. Valery Giscard d'Estaing, author of the original Constitution, said that it still contained "all the earlier proposals" of the Constitution would be maintained in the Lisbon Treaty, even if they had to be "hidden" or "disguised". Straight-talking German Chancellor Angela Merkel said it a little more bluntly: "The substance of the Constitution is preserved. That is a fact."
  
• The Government's red lines were an absolute myth. See our research on how they crumbled, one after the other.
  
• Not only did the Charter of Fundamental Rights become legally binding (Tony Blair said it wouldn't), but the Government most certainly did not get what they wanted on policing and crime. They wanted that entire policy area excluded from the jurisdiction of the European Court of Justice, but failed miserably, as well as arguing unsuccessfully for retention of unanimity in decision-making in this area. They also opposed the European Public Prosecutor, new powers for Eurojust to initiate criminal investigations, and powers for the EU to set minimum sentences...all unsuccessfully however. Only someone who has never, ever got what they asked for could attempt to spin this as 'getting everything we wanted'.
• Perhaps the EU's increased power in justice areas is what led the Lord Chief Justice Lord Judge to warn a few weeks ago, "The Treaty of Lisbon has brought criminal justice matters to the core of the EU and with it the jurisdiction of the Luxembourg court." This means that if the UK does opt into the new justice and home affairs legislation,

  decisions of the Luxembourg court on issues arising out of the Treaty of Lisbon, even to the extent that they involve criminal matters, would become binding on all of us... The development of the European Union, and the extended jurisdiction of the European court in criminal matters, will have a significant impact domestically. Twenty years down the line where will we be?

  No change, eh?
  

• Also on foreign policy, despite promising that it wouldn't be moved into qualified majority voting, this details in just how many areas of foreign policy the Government gave up their veto.
  
• As for the question of social security, read this research to see that there was no new 'red line' on the question of social security in relation to the Lisbon Treaty, compared with the original negotiations on the Constitutional Treaty.

Another real hum-dinger came when he said this in conclusion:

"But no constitutional concept was involved. There was no major constitutional or institutional change because of the Treaty, and I think everybody knows, because they haven't seen this huge difference between what happened at the end of last year and what's happening at the beginning of this year."

To suggest that the Lisbon Treaty was not a major institutional change is, of course, absolutely ridiculous and suggests that the Prime Minister has little idea of exactly what competences have been transferred to Brussels with the ratification of the Treaty.

For a comprehensive guide of what powers the Lisbon Treaty gave to the EU see our reseach here.

Moreover, some of the improvements that were promised (increased powers to deal with crucial issues such as climate change, or more scrutiny for national parliaments) have been well and truly debunked in the last couple of months since Lisbon came into force.

The scrutiny promised to Parliament over EU proposals has collapsed on various occasions (see here and here) and the EU was widely viewed as having been sidelined at the Copenhagen climate change conference.

Sadly, they may get away with not talking about it, but Labour's failure to hold a referendum on the Lisbon Treaty amounts to a clear and unequivocal broken manifesto promise. To argue otherwise is a direct insult to democracy in general and British voters in particular.

An oldie, but a goodie

As readers are hopefully aware, EU regulation has been on our minds for the last few months as we put together our latest research on the ever increasing cost it has placed on the UK economy over the last eleven years. Old habits die hard and we were therefore (rather worrying) excited to come across this remark by the then President of the German Bundesbank, Prof. Hans Tietmeyer, from a speech in London in December 1997:

“Admittedly, the European ideal is sometimes used to mask nonsense. The anecdotes about pointless regulations planned by bureaucrats would fill volumes.”

Considering that EU regulation introduced in the UK since 1998 has cost the economy £124 billion, we can only wonder what Prof. Tietmeyer would say in 2010.

The first sentence is, however, perhaps more significant. This was a remark given in a speech about the introduction of the euro and, in hindsight, may prove to be very prescient.

No one should take pleasure in witnessing the current difficulties in the eurozone, because, after all, they have the potential for much wider repercussions across Europe and the globe, but maybe eurozone leaders could do well to heed the Professor's message: European ideals are not sufficient to paper over fundamental economic realities.

Postponing the inevitable?

Eurozone finance ministers yesterday agreed on a €30bn loan commitment to Greece over the next year, as part of a three-year commitment, with the IMF potentially coughing up another €10-15 billion. The interest rate on the loans is set at five percent for a three-year fixed loan – above the IMF’s standard lending rate but below the seven percent level asked for by the markets last week. Greece has not yet asked for the loans, but if and when they do, this will mark the largest multilateral financial rescue package ever attempted.

Unsurprisingly, the European media is flooded with reactions to the deal, and a worrying number of people appear convinced that even if the plan was to be put into action, it would only serve to postpone an inevitable Greek default (see here for instance).

In the FT, Wolfgang Munchau bluntly states that "Greece will eventually default. The numbers simply look to bad." There are also suggestions that the package will have to be far bigger than the suggested €40-45 billion to have impact. A senior finance ministry official apparently told Reuters that, "40 billion for 2010 is part of a bigger amount for the three-year period. A logical amount for the three-year period would be double 40 billion."

In addition, questions are now being raised over the compatibility of the deal with the bail-out/credit line ban in the EU treaties - and whether the deal will withstand a legal test in Germany's Constitutional Court. And then there are the national parliaments in Germany, Holland and Ireland, that will have to give their thumbs up before the plans can become reality.

One thing is certain, this story is far from over.

In any case, as we've noted before, the contributions will be based on how much each eurozone member is paying towards the running costs of the ECB (see the break-down here). Britian also pays towards the ECB (albeit at a discounted rate), but will not be required to provide loans apart from via its IMF contributions. After a quick crack at the numbers, this is what we calculated that each eurozone member will contribute to a €30 bn eurozone rescue package (consistent with what is being reported here for instance):

Belgium 1.073bn
Germany 8.376bn
Ireland 491m
Greece -
Spain 3.673bn
France 6.290bn
Italy 5.527bn
Cyprus 61m
Luxembourg 77m
Malta 28m
Holland 1.764bn
Austria 859m
Portugal 774m
Slovenia 145m
Slovakia 307m
Finland 555m

Total: 30bn

"What's left of the euro?"

This question is asked on today's frontpage of Germany’s leading financial daily Handelsblatt, against the backdrop of a 50 euro note going up in flames (see picture).

The quite sensational splash is apparently a reaction to ECB President Jean-Claude Trichet's announcement yesterday that the ECB would continue accepting Greek "junk" bonds as collateral - an announcement that came as interest rates on Greek bonds rose again, giving a clear signal that the eurozone's assurances of assistance to Greece are not enough to calm the markets.

With thinly disguised indignation, Handelsblatt goes on to say,

Trichet made it obvious that he has changed his opinion under political pressure. This has suddenly given rise to questions, which at least in Germany, awake traumatic memories. What remains of the hard Euro, when the Central Bank bows to political pressure? Will the debt crisis, which all Western states suffer from, be followed by a loss in the value of money?

And being even more dramatic, a leader in the newspaper by its Chief Editor Gabor Steingart argues that

yesterday, the German Bundesbank died (...) ECB President Jean-Claude Trichet is no longer a follower of the monetary guardians in Frankfurt, who have set one big goal for themselves: never again inflation! Never again should savers and people with small incomes be deprived of the fruit of their labour...But in the Greek crisis it appears that the European Central Bank is pursuing political goals rather than the stability culture of its predecessor.

He quotes a former Bundesbank President who once said: “Those who flirt with inflation, marry her”, adding: “Trichet yesterday kissed her. For the spirit of the Bundesbank, that was a kiss of death.”

One shouldn't over-read the mood in Germany, but this is strong stuff. One of the eurozone potential flashpoints was always Germany's stern anti-inflation view and fundamentalist belief in a strong euro. This view was bound to be put to a rather unpleasant test as soon as a real crisis hit the eurozone - triggering a range of unpredictable consequences.

Well, that day has now arrived.

And the winner is...the European Commission

Remember the promise that the Lisbon Treaty would 'streamline' the EU institutions, i.e. making them simpler and more democratic? Well, if you still believe it (after this, this, this, this and this) with the risk of being bored to death, check this out:

One of the more mysterious - and tedious - elements of EU decision making is "comitology". The system works like this: after an EU law has been agreed by the European Parliament and Council (after having been proposed by the Commission), the Commission, aided by national experts, still has room for manoeuvre in amending or adding to the Directive at a later date, with limited involvement from the European Parliament and the Council (as we explain here on page 31). Whenever a Directive says that something will be decided through "implementing measures", this means that details of an EU law are hammered out in these comitology committees.

The European Affairs Committee of the Danish Parliament has noted that the system of comitology “means that the Commission can adopt EU legislation against the will of a majority of Member States in the Council", saying “We find such a procedure undemocratic” and “Another problem with the comitology system is the short time made available for parliamentary scrutiny.”

Recently, University of Utrecht researcher Gijs Jan Brandsma found that expert bureaucrats from the Commission and member states, sitting in these comitology groups, are responsible for deciding the content of almost half of all EU regulations after the actual decision has been made by the European Parliament and the Council of Ministers. Brandsma argues that the extensive use of expert bureaucrats creates big problems for scrutiny and accountability. In his thesis, called "Backstage Europe" he also interviews one of those expert officials, who in a revealing remark sums up how much discretion these guys have in the implementation stage:

On our way to Brussels, he tells me how he has decided what his input is going to be. Nobody higher up in the hierarchy seems to be involved in his case. There are no instructions. His ministry does not take a clear position regarding his file.

Incedentally, experienced EU lobbyist Daniel Guéguen, has just published a book, titled: "Comitology: Hijacking European Power?". In it, he writes,

today, without comitology, the EU would quite simply be at a standstill. Where does the political level stop and the administrative start? (...) The system has become totally out of balance because the implementating measures have come to +/- 2500 per year while only about fifty directives have been adopted during the same period.

He concludes, "comitology represents about 98 percent of the regulatory activity of the Union in a year. And this 98 percent is the Commission's competence".

This is where the Lisbon Treaty comes into the picture. Under the Treaty, the system is being 'streamlined' (wait for the irony) and replaced by a new legal framework which seperates between delegated acts (art 290 TFEU) and implementing acts. Guéguen attempts to explain the new system:

The word comitology is going to disappear! The only common element of understanding about it is going to be removed from the dictionary. From now on, people will talk of delegated acts (which replace quasi-legislative acts) and implementing acts (which replace comitology strictu sensu).

This is murky territory, but basically, "Delegated acts" are "quasi-legislative acts" which amend Directives. They have political impact and are therefore subject to scrunity by the European Parliament (according to a deal agreed in 2006). "Implementing acts" are very similar, but classified as "administrative measures" with no political impact and therefore subject to very limited parliamentary scrunity. Confused? We are too. But it's getting worse.

According to Guéguen, the Lisbon Treaty will blur the distinction between the two even further, and interpreation will vary from institution to institution.

And MEPs are not quite keeping up. A press release from the European Parliament notes that an EP report on how delegated acts will work is due to be discussed in plenary in April. It notes that Hungarian MEP József Szájer, who is the author of the report, claims that the new system will mean a power boost for the European Parliament, arguing "The consequences of this change are considerable as the EP has achieved its historical maturity being placed on the same footing as Council."

But Daniel Guéguen disagrees; MEPs might be put on the same footing as the Council but, he says, "under the Treaty of Lisbon, the Commission will dominate the institutional trio" (page 62). He argues:

as for the Council of Ministers and the member states, they seem to have forgotten what they negotiated and what they signed in the Treaty of Lisbon (...). The new reform (...) was meant to put the European Parliament on the same footing as the Council of Ministers for delegated and implementing acts. But quite the reverse has occurred. The Council of Ministers has lost its power in the area of implementing to the Commission. It can only intervene after the event for delegated acts and has seen its power curtailed in the area of implementing acts

He concludes: "Henceforth, the institutional triangle is no longer an equilateral triangle. One side of the triangle, the Commission side, is now considerable larger than the two other sides."

Perhaps a book that should be on MEPs' reading list.

We've recently found that around 70 percent of the cost of regulations in the UK originates in EU legislation. In addition to that, 50 percent of the content of these EU laws could well be decided after the Council and the European Parliament have agreed on the actual proposal. And now the Lisbon Treaty would give the unelected Commission more powers to implement laws under the radar of public scrutiny.

This Treaty's democratic credentials aren't exactly getting stronger by the day.

MEPs response to the downturn: ban work on Sundays

MEPs are an interesting lot. As we reported in our press summary a couple of weeks ago, a third of all MEPs have signed a petition, urging the Commission to include requirements for 'work-free Sundays' in its upcoming review of the Working Time Directive. In their declaration, the MEPs stated that the Commission should “protect Sunday, as a weekly rest day, in forthcoming national and EU working-time legislation in order to enhance the protection of workers' health and the reconciliation of work and family life.”

German Christian Democrat MEP Martin Kastler has also launched an online petition, trailing the citiziens' initiative created by the Lisbon Treaty (whereby one million signatures will require the Commission to consider a request for a legislative initative in some cases), to call for Sunday to me made a work-free day across the EU. The campaign is called "Mum and dad belong to us on Sunday." The petition has received some 13,000 signatures so far.

Now, few people like to work on Sundays and it's hard to argue against the need for some good, quality time with the family at least once a week. But come on, is this really something for the EU? And is banning work on Sundays what we need right now given the economic climate?

"Twenty years down the line, where will we be?"

Over the Bank Holiday weekend the Independent and the Telegraph both picked up on a lecture given by the aptly named Lord Chief of Justice, Lord Judge, last month, in which he warned of the growing influence of both the European Court of Human Rights (ECHR) in Strasbourg and the EU's European Court of Justice (ECJ) in Luxembourg. He concluded with a question that the Government has done everything it could to avoid: "Twenty years down the line, where will we be?"

Both papers chose to focus predominantly on his comments about the growing influence of judgements from the ECHR on the UK courts and how this poses a challenge to the UK's centuries old common law legal system. The answer, Lord Judge said, is to ensure "that statute ensures that the final word does not rest with Strasbourg, but with our Supreme Court."

The ECHR falls outside the realm of the EU, although, under the Lisbon Treaty, the EU as a whole formally acceded to the European Convention of Human Rights, which the Strasbourg court was established to uphold. And Lord Judge made some very interesting comments regarding this and the EU's growing role in UK criminal law more generally. They are worth repeating here as they went largely unreported at the weekend.

Lord Judge's first point was that "the [EU's] European Court of Justice is beginning to acquire jurisdiction over matters that would normally be regarded as matters not for Luxembourg but for Strasbourg."

He didn't expand much on this but it is an interesting point to watch in the future as there are clearly concerns that, with the EU acceding to the Convention, the remits of both courts has become blurred, with a risk of ECJ mission creep. The first practical example to which Lord Judge refers is that, "The EU has recently signed up to what is called a 'roadmap' of five areas of criminal procedure which must be addressed within the next 5 years to protect and guarantee the rights of EU citizens. I thought that was the job of the Convention."

It also raises difficult questions for the UK specifically, which can 'opt out' of much of the EU's new criminal legislation under the Lisbon Treaty but at the same time remains a signatory of the Convention of Human Rights - although David Cameron has said that he wants to review the Convention's impact on the UK. How will this work in practice, which will take precedence?

The second major point is that "The Treaty of Lisbon has brought criminal justice matters to the core of the EU and with it the jurisdiction of the Luxembourg court." This means that if the UK does opt in to new EU justice and home affairs legislation "decisions of the Luxembourg court on issues arising out of the Treaty of Lisbon, even to the extent that they involve criminal matters, would become binding on us all."

He concludes, "the development of the European Union, and the extended jurisdiction of the European court in criminal matters, will have a significant impact domestically. Twenty years down the line, where will we be?"

This is not just an interesting question but a very important one. You'd have hoped that it had been debated and answered long before the Government signed the Lisbon Treaty.

Regulation: one more round

The Economist's Europe correspondent, Charlemagne, yesterday used his blog in order to launch a rather stinging attack on the state of the UK press' coverage of the EU. It seems to have been prompted by our latest report on the cost of regulation to the UK economy, and the proportion of that which comes from the EU.

It is not for us to defend the state of the UK press but we will use this opportunity to respond to some of Charlemagne's comments on the report.

Charlemagne argued the report's findings are “tendentious because the British government would have regulated in all sorts of areas even if we did not belong to the EU, and because not all regulation has benefits that can be directly costed.”

On Open Europe’s findings that, according to the Government’s own impact assessments, UK-derived laws on average produce a benefit roughly 2.5 higher than EU laws, Charlemagne argues “The EU and national governments regulate different things, because of the way legislative competences are divvied up by the EU treaties. So [Open Europe’s] comparison is between apples and oranges. It might well be that the EU regulates wastefully, but then again it might also be that the EU has powers to regulate in some expensive areas, like environmental law or health and safety law, where the main benefits are hard-to-cost public goods.”

Now, we need to be able to handle scrutiny just as we expect others to handle how we scrutinise them, so we appreciate constructive criticism. We don't claim to be disinterested, and we certainly make no excuses for highlighting where the EU goes wrong. The EU needs more, not less scrutiny by bodies not funded by the EU itself. But we do aim to produce material that is accurate. And we're trying to be critical but constructive - which we think our track record shows.

We note that Charlemagne makes no mention in his post of the 30 or so suggestions we make in our regulation report for how to improve regulation and EU scrutiny (working within the EU)...it would be interesting to see him engage with those points as well.

And to call our argument on the benefit-ratio "shocking" is a bit much, to put it mildly.

Again, when adding all the extracted data from Impact Assessments together, the fact is that the benefit/cost ratio of UK regulations is 2.35, while the benefit/cost of EU regulations is 1.02. In pure quantified terms, that gives UK regulation, roughly, a 2.5 times more favourable cost-benefit ratio. We did not make that up.

Note also that we excluded all the IAs which did not contain a quantified benefit (otherwise the discrepancy would've been vastly larger). Now, we can discuss what feasibly can be subject to quantification, the counterfactual and appropriate comparisons - we should be critiqued on all those points. But seriously, is it really 'intellectually insulting', as Charlemagne suggests, that we shed light on the fact that, according to the Government's own estimates, EU laws are more costly than UK laws relative to the benefits they generate? And given that it is the Government that includes such a ratio in its own impact assessments, surely this should be open to discussion?

Charlemagne's answer is that they regulate different parts of the economy. But this simply isn't true as a categorical statement. For one, the Lisbon treaty codifies a huge area of shared competencies. And therefore, there are a large number of comparative laws, i.e. UK
legislation: extending the scope of the right to request flexible working vs. EU legislation: preventing less favourable treatment for non-fixed employees. Quite apart from the merits of these laws, they are dealing with exactly the same parts of the economy and the labour market. Even in these areas we tend to see a similar benefit/cost ratio discrepancy, which led to our conclusion that is better, where possible, to regulate nationally.

Charlemagne also says that: "But without regulation, there would be no single market.
Some of that regulation will be designed to keep skittish, hygiene-obsessed German or Danish mothers (for example) calm about food safety, and ease their fears about dangerous salami being imported from the far corners of the EU to poison their blond-headed moppets. That may be expensive, but that fuss-potting gives political cover for the Danish and German governments to approve EU enlargement to countries like Romania or Slovakia, and that is really good for the long-term health of the EU. How do you possibly measure the costs and benefits of such things?"

Sure but, given that regulation is the principle means by which the EU is used to exercise power, if we do not debate the relative trade-offs between excessive EU health and safety regulation, for example, and what the UK gets in return through enlargement, for example, what is the point in debating EU issues at all? From a UK point of view, the question should surely be 'at what cost is the UK furthering its interests through the EU?' There is a sensible, if complex, argument to be had here.

In fact, in the report we acknowledge:

"However, there are also clear benefits stemming from EU regulations and, overall, the benefits of being part of the EU's regulatory regime - and therefore the Single Market - still outweigh the costs on pure economic grounds. Some regulations emanating from Brussels serve to free up markets, improve consumer protection, reduce costs and so forth."

We also acknowledge:

"There are EU regulations that would have been put into place anyway. However, clearly some laws would not have existed. And crucially, while the broad framework of many EU laws may have existed in the UK anyway, a whole range of prescriptive requirements contained within these laws certainly would not have [we give some examples]....And quite apart from the actual proportion, the source of regulation is vitally important both in terms of practically amending or changing it and in terms of political accountability."

The fact is that there are many more nuances to this debate - and indeed to Open Europe - than Charlemagne sets out in his blog post. And by simply dismissing our arguments without properly challenging them he risks being guilty of the same crime he accuses much of the rest of UK media of.

Setting the record straight on regulation

In case anyone has yet to see it, Open Europe has today published a new report detailing the cost and benefits of regulation introduced in the UK since 1998. Since last year's study on the same topic we have analysed an additional 320 of the Government's impact assessments, bringing the number of IAs analysed in total above 2,300.


It's not the easiest subject to traverse for those unfamiliar with the inner workings on regulation and deregulation initiatives, which is perhaps why it seems to have led to confusion in some quarters over what the report actually is.

The European Commission, for one, gave their response to our study in the Telegraph saying:

"The Open Europe study lacks rigour and is intentionally misleading. The headline figures suffer from a methodological bias. It confuses stocks and flows, it suffers from double-counting, it does not consider what repealing EU regulations would imply either in terms of foregone benefits or alternative regulatory costs."


An intriguing response. The Commission appears to have read only the first sentence of our press release and nothing of the actual report. That's a shame because:

• We presented three sets of figures, the cumulative cost of regulation, the annual cost of regulation and benefit/cost ratio of regulation. The Commission only responds to the first figure.
  

• The cumulative cost, or a cost of the 'stock' of regulation, measures the entire cost to the economy since 1998, which is £176 billion. The EU is responsible for 71%, or £124 billion of that cost. We explained that £176 billion is equivalent to 12.6% of the UK's annual GDP, and roughly equivalent to the country's budget deficit. This does not mean that the £176 billion cost of regulation occurs in one year, as we make clear, and the comparison to the budget deficit and GDP is illustrative and designed to relate a large figure to something most people are familiar with. In particular it's a useful reminder that regulatory policy deserves as much scrutiny as budgetary policy, as both have a significant impact on the economy. We can see why the Commission doesn't like that thought. We're note sure what the Commission's remark about 'double-counting' refers to.
  

• In the report, we do address the counterfactual , i.e. the costs that would have occured in absence of EU regulation. This is indeed an interesting discussion - one that the Commission would do well in seriously engaging with. We accept that many regulations - but certainly not all - would exist in national law also in the absence of the EU. However, and this is crucial, while the framework of laws may still exist at the national level, a whole range of prescriptive requirements that go with it would not. We give examples in our report.
  

• Additionally, knowing the source of regulation is vitalling important, both in terms of practically amending the law if so desired, and in terms of political accountability. Not knowing the source of the laws massively undercuts citizens' ability to hold policymakers to account. I.e. if I'm not happy with my energy bills rising as a result of regulation, who should I blame? The answer is far from straightforward.
  

• The annual cost of regulation measures the cost to business and the pulic sector arising from red tape in any given year (from existing and new regulation). We consider this to be a more useful measure than the cumulative cost as it allows us to look at trends. The Commission doesn't seem to address this figure, which is surprising. Particularly as it shows that the EU proportion of the total cost has gone down over the last three years (at 59% in 2009, compared to a 72% average), which could be a sign of the EU's 'better regulation agenda' beginning to pay off...

• But the most interesting figure is the benefit/cost ratio, showing the benefits of EU and UK regulations relative to each other. This figure is not being addressed by the Commission either. The ratio makes clear that for both EU regulations and UK regulations the benefits outweigh the costs, but UK regulations areo n average 2.5 times more cost-efficient than EU laws. This is also true in the areas where the EU and UK regulate the same parts of the economy (for example, social policy and environment legislation). This is what the Commission really should be trying to respond to if they’re concerned with relative benefits.

Additionally, a spokesman from the Department for Business said:

"The figures presented in this report are out of context as they take little or no account of the wider economic benefits that regulation can deliver. European regulation has helped open up new markets for UK business across Europe and provided important new rights and protections."

Again, we acknowledge that regulations come with benefits, and that EU laws, for example on public procurament or energy 'unbundling', can have a positive impact on the economy. The problem is that EU regulations too often are mistargeted, overly burdensome and decided at the wrong level of policy-making in the first place. That's what we're addressing.

The Department for Business added that its "Forward Programme", which details the regulations planned for next year, shows that EU regulation will only make up 31% of the total cost. The discrepency is explained by the fact that the forward programme doesn't take into account any of the existing regulations generating costs to businesses and the public sector - our estimate does.

And closer inspection of the Government's "Forward Programme" reveals that the economic impact of many of the EU regulations due to come into force next year have yet to be quantified (24 to be exact). Some are also very important, such as the proposed establishment of the EU's three new financial regulators - which could have a massive impact on the City of London. True, there are also many domestic regulations yet to be quantified but, as we have seen in previous years, a high EU proportional cost can just as easily be attributed to just a few extremely costly regulations as several put together. So, essentially, it is too early to tell until all the costs are quantified.

Interestingly, former Dutch EU Commissioner Frits Bolkstein today reaches some similar conclusions to those we spell out in our report. Writing in Belgian daily De Standaard he calls for the size of the Commission to be reduced to 12. He explains his reasoning:

"A proposal to grant independent women the right to pregnancy leave. Both in the Netherlands and Bulgaria, shouldn't we decide on that ourselves? The European Commission has apparently learned nothing from the Nos in France and the Netherlands...Under Barroso the Commission has become a presidential system. Now there are 27 Commissioners. Power is with the President and his Chief de Cabinet. The Chief of Cabinet has more power than many Commissioners. Discussions within the Commission don't mean anything any more."

"What do Commissioners want? They want to get into the picture with initiatives, smart or not...The only way to stop the stream of useless initiatives is to reduce the number of Commissioners to what is necessary to steer the EU. I think a Commission of twelve capable people is enough."

How many presidents does it take to change a...

Following the infamous "Obama snub", the ‘EU as global power’ project has suffered another humiliating dressing down this week. This time the reality check comes from the Director-General of the World Trade Organisation, Pascal Lamy, who, in his frustration with the shambolic organisation of the EU representation has set out some guidelines as to how the member states should behave at future WTO meetings:

“If one European takes the floor on one topic, and then another European takes the floor on the same topic, nobody listens. Nobody listens because either it’s the same thing and it gets boring, or it’s not the same thing and it will not influence the result at the end of the day….So the right solution, if I may, is at least to make sure that they speak with one mouth. Not one voice—one mouth—on each topic on the agenda. That would be a great improvement.”

More than a little patronising and far from the “unified EU voice” that those supporters of the Lisbon Treaty suggested. Gideon Rachman, reporting from the Brussels Forum of the German Marshall Fund on his FT blog, has offered an insight into how the EU is actually viewed by American diplomats:

“In the lobby of the conference hotel, I just bumped into some official Americans who had been to see senior people at the commission. They had delicately raised the question of which of the two European 'presidents' would represent the EU at future international summits. 'Oh that’s all settled,' they were told, 'they’re both going.' With enormous self-restraint, the Americans apparently refrained from laughing out loud, or banging their heads against the wall. Meanwhile European officials still maintain, with a straight face, that the Treaty has 'simplified' Europe's structures.

Which pretty much sums it up.

EU 'solidarity' in action

As details of a possible bailout plan for Greece, which could emerge from tomorrow's EU summit, are leaked, it is becoming clearer that 'solidarity' for some EU leaders is not a one way street.

And we are not necessarily referring to German demands for renewed fiscal discipline in exchange for financial aid to Greece.

Instead, Reuters is reporting that France and Germany are trying to land plum defence contracts from Greece. Under the headline "Broke? Buy a few warships", the article reports that, in an unexpected twist to the Greek debt crisis, France and Germany are pressing their beleaguered neighbour to buy six frigates, 15 helicopters and up to 40 top-of-the-range Rafale fighter aircraft (pictured), even as the country struggles to get its public finances in line.

The article quotes an advisor to the Greek PM George Papandreou saying: "No one is saying 'Buy our warships or we won't bail you out', but the clear implication is that they will be more supportive if we do what they want on the armaments front".

Possibly not the kind of solidarity that Mr Papandreou had in mind when he said he was expecting EU solidarity.

Not playing along

Following its succesful campaign to pressure Ireland into signing the Lisbon Treaty, the EU elite now seems set on an even bigger task: forcing Germany to accept a bailout plan for Greece. A range of selcted EU leaders hope that Germany will give in at the EU summit later this week.

So far, Chancellor Angela Merkel has (at least in public) resisted EU pressure to open her purse. She has even been forced to instruct her Finance Minister Wolfgang Schäuble to calm down a bit, as Herr Schäuble has proven a bit too enthusiastic about signing up to a Greek rescue plan.

Interestingly, Handelsblatt today reveals that Schäuble's proposal for a European Monetary Fund - which would serve as a long-term solution to the eurozone's woes - was not checked with Merkel beforehand, which apparently now has created a rift between the two. Go figure.

Apart from the split within the government itself, the country's central bankers also seem to have a bit of a beef with the politicans in charge. Througout modern German history, the Bundesbank and the Federal Ministry of Finance have often clashed, and the Bundensbank is certainly not making life easier for German politicans at the moment.

In its monthly report, the Bundesbank pointed out that it is not within the IMF's mandate to help countries to finance their excessive budget deficits. "The IMF's mandate stipulates that it may only use its foreign-currency reserves to bridge short-term balance of payments deficits", the bank claimed.

Given the stakes (a Greek default), publicly resisting an IMF solution (which would be the least painful option for all concerned in our view) seems a bit risky. The Bundesbank must be very confident that Greece will manage to cut its budget deficit, despite not being able to devalue because of its euro membership, and despite not being able to recieve affordable loans (since that's not within the mandate of the IMF, according to the Bundesbank's logic).

Is it implicitly advocating the solution which involves voluntary bilateral loans from eurozone member states? Or maybe it has a different solution in mind? Interestingly, the Bundesbank also pointed out yesterday that it saw the expulsion of a eurozone member as fully possible, since the Lisbon Treaty neither mentions such an option nor excludes it...

Axel Weber, who is now head of the Bundesbank, deserves credit for his boldness (but we're not sure his high profile will help his bid to become the next ECB President).

With an internally split Government, a more assertive Bundesbank and with the meticulous judges at the Karlsruhe court waiting in the wings, this plot is certainly thickening.

Does anyone still believe that Germany is a unitary actor in EU affairs?

Left waiting

It seems that the lack of scrutiny for Parliament since the Lisbon Treaty came into effect is not restricted to the SWIFT agreement.

Documents from the European Scrutiny Committee point that three additional measures have been limited to only four weeks scrutiny time because of the failure of Ministers to deposit the relevant documents with the Committee.

Two different agreements on the sharing of passenger-name records (with the US and Australia), and an extradition agreement between the EU and Iceland and Norway have both seen their scrutiny time cut short in January.

The Committee points out that this "contravenes the undertaking in Baroness Ashton's statement on JHA opt-ins that the Government will place an Explanatory Memorandum before Parliament 'as swiftly as possible and no later than ten working days after the publication of the proposal.'"

Maybe the relevant department took a holiday on 17 December, when the Memorandum was due to be deposited, but that doesn't explain why they failed to do so until 19 and 20 January respectively. While these measures are not as controversial as SWIFT, it would be nice to see the Government adhering on all these proposals to the assurances it made on Parliamentary scrutiny when it was ramming the Lisbon Treaty through.

This is important stuff, as it strikes at the very heart of national democracy and scrutiny in the wake of the Lisbon Treaty (which, on the whole, reduces the role of national parliaments in EU decision making).

A shame so few people are paying attention.

We've been here before

The Spanish EU Presidency yesterday decided to shelve a vote on the proposed AIFM Directive on hedge funds and private equity due to "a last-minute intervention by Gordon Brown", according to the FT. The talks apparently stalled on British concerns over the protectionist elements of the Directive, which could see barriers put up to non-EU funds trading in the EU.

We have estimated that the industry contributed €6.1 billion in tax revenues in the UK alone and €9.2bn overall - an amount that could be under threat if a flawed directive is passed. We have also consistently warned that the protectionist provisions entailed in the proposal would cut off offshore managers and funds from the EU market. This will have at least two negative consequences: less choice and value for money for EU investors (including pension funds and charities) and less capital for European firms struggling to rebalance their books in the wake of the economic downturn. Therefore, the British Government's focus on the protectionist dimension is in principle welcome.

The FT reports that Paris "agreed to defer a vote" in order to avoid appearing to inflict "a defeat on Britain". A vote could have been forced on the UK because this Directive will eventually be decided by qualified majority voting. The question is will anything have changed when ministers next look at the Directive in either May or June.

There are also worrying parallels with what happened with the Temporary Agency Workers Directive in 2007. Then, as today, the FT reported that Brown had "personally intervened to defend Britain’s flexible labour market" and delay agreement on the Directive when it looked as though the UK would be outvoted. However, within a year the UK had been out-foxed and was forced to accept the Directive with only minor concessions. In addition, the UK almost lost its separate opt-out from the EU's 48 hour cap on the working week, entailed in the Working Time Directive, as a horsetrading deal involving the two Directives came dangerously close to backfiring at the hands of the European Parliament.

The Government will no doubt portray yesterday as a victory. And although the postponement of the finance ministers' vote on the proposal leaves UK negotiators, the industry, investors and others with some extra room to find allies and bolster the case for a radically amended Directive, today's developments provide no guarantee that this is going to be straightforward. A vote in the Council is now expected at the finance ministers' meeting on May 18th, meaning that for the time being all eyes will be on the European Parliament (whose economic committee will vote on a draft proposal on April 22nd). The key for MEPs is now to resist protectionist urges.

The postponement of the Council vote also adds another dimension to what already is a very complex amendment process. The British general elections will take place on May 6th, meaning that should the Conservatives win, they will be faced with a major showdown in Brussels after less than two weeks in office.

Whether this is a good or a bad thing for the fate of the AIFM Directive depends on a number of factors, including how much energy and political capital a Conservative government considers it can spend on this (the Tory treasury team is not short of challenges as it is); and how willing European partners are to give concessions to a Conservative government early on, in order to secure its future constructive engagement in EU affairs. This, in turn, depends on what a Conservative government is willing to concede in return, i.e. future concessions on agricultural spending, social legislation and so forth. In Brussels, as ever, nothing is free.

One thing is for certain, this is not a good time for the UK government to let its guard down on the AIFM Directive. Indeed, we've been here before.

Nightmare Lisbon Treaty

Today, the Lisbon Treaty has been in force for 100 days. The result? A more democratic and open EU? A Union which voters have an easier time understanding and identifying themselves with? Simpler and more 'streamlined' institutions? Not quite.

On it's 100th day in force, the fundamental flaws of the Lisbon Treaty - which many of us warned against - are beginning to hit home around Europe.

Le Figaro has an article in today's edition (not online) bashing the confusing institutional set-up created by Lisbon. The article notes,

Did the authors of the Lisbon Treaty fool themselves? A hundred days after the birth of the 'newly formulated' union, Europe is struggling to make its voice heard, and the confusion – 'cacophony' according to Jose Manuel Barroso – has increased at the top.

The article goes on to say that "the twenty-seven had hoped to end what we in Paris call institutional navel-gazing", but quotes an unnamed Commissioner saying, "The treaty has not simplified life; it has complicated it and wasted a lot of energy”.

Strong stuff. It goes on along the same theme,

Coincidence or not, the disorientating climate idealism at Copenhagen, the withdrawal of Barack Obama from a planned [EU-US] summit and…the attacks against the euro coupled with the collapse of Greece, all add to the gloom.

The double mess-up surrounding Catherine Ashton and the European diplomatic service adds to the disenchantment… In Brussels and beyond, lawyers and diplomats concede that the inventors of the Treaty were mistaken in its institutional mechanics. Even if the EU was at its best, its foreign policy would still be jammed today.

And on Tuesday, FT Deutschland featured an equally critical leader with the headline "Nightmare Lisbon Treaty”. It argued,

Europe has its celebrated Lisbon Treaty, its new constitution. However the Union has not become simpler for outsiders. What an anticlimax. The Member States fought long and hard for the treaty. So many thought that it would allow Europe to reach decisions faster, become more democratic and appear more united to the rest of the world. However, three months after the agreement came into force, the euphoria has evaporated. The EU Commission under Jose Manuel Barroso, the Parliament and the member states are fighting over their powers. This is because the treaty revolves around Brussels - those affected by it are finding this out little by little.

Taking a swipe at German Chancellor Angela Merkel, it noted:

Even as early as the middle of December, Chancellor Angela Merkel was certain that now the EU could concentrate all its efforts on the big, political challenges. 'Instead of being concerned about ourselves, we can now tackle the challenges and problems of our time' said Merkel. This has turned out to be only a pious wish. A new phase of navel-gazing has effectively begun, the institutions are having a go at each other; everyone thought that they would have more influence over Europe....The losers are becoming more and more evident. The Foreign Ministers were the first ones..."

It conluded quoting a "high-ranking member of the Council", saying "A lot of the Ministers fought for the Lisbon Treaty, but did not read it properly."

We rest our case.

Threat or opportunity?

The German-led calls for an IMF-style bailout fund for the EU have caught most people on the hop, including the French, and the lack of detail suggests that the practicalities are only now being worked on inside the German Finance Ministry.

French officials have said that there are two fundamental issues still up for debate: whether the European Monetary Fund would cover only the eurozone or all of the EU's 27 member states, and whether the EU treaties should be amended to create the fund. Plainly, there is a long way to go before the EMF gets off the ground and the current debates are highly speculative.

But as far as the first question goes, if the proposed EMF were to include all 27 member states, rather than just the eurozone, this would obviously have significant implications for the UK as British taxpayers would be asked to underwrite other EU governments’ debts. It would also draw the UK into a system of EU 'economic government' that would potentially give the EU greater powers to interfere in monitor the Government's handling of the economy.

For both of these reasons, any UK government is likely to stay well clear of any participation in the EMF.

The second issue, over whether an EMF would require treaty change, is far from clear but there are a few hypothetical scenarios.

Paris appears cautious about any proposal for an EMF that would require treaty change. French Finance Minister Christine Lagarde reportedly said that "Other avenues should be explored" that are in line with the existing Lisbon Treaty. This suggests one of those creative legal EU solutions which confuses everyone (possibly involving the Lisbon Treaty's ratchet clause which allows for amendment of the Treaty without it being considered an actual treaty change).

However, Chancellor Angela Merkel yesterday made it clear that she thought that the creation of a bailout fund would certainly require changes to the EU treaties. "Without treaty changes we can't form such a fund," she said. And given that it would amount to a breach of the current 'no bailout' rules in the treaties, it is hard to argue with her.

Commentators are already suggesting that new EU treaty negotiations would present both Labour and the Conservatives with big problems. Gordon Brown promised MPs that after Lisbon there would not be any institutional changes in the next Parliament:

I can confirm that, not just for this Parliament but also for the next, it is the position of the Government to oppose any further institutional change in the relationship between the EU and its member states. [Hansard, 22 October 2007]

Similarly, the Conservatives announced last year that they would give voters a referendum on future transfers of power to the EU.

However, depending on how this plays out, an EMF that didn't include the UK could actually present the UK with a sizeable bargaining chip, particularly a future Conservative government. Treaty change would require the Government's consent, whether the UK is involved in the EMF or not. In other words, this could be an opporunity for an incoming Conservative government.

The Conservatives have said they want to renegotiate areas of the UK's membership, notably opt-outs from costly EU employment regulation and intrusive justice and home affairs legislation. In addition, an incoming UK Government has a lot of work to do on the EU budget and the single market issues, including financial legislation.

There is possibly a deal to be done here – the Tories could say "if want to go ahead with the EMF and closer economic integration of the eurozone you need to give us something that we want in return." In Cameron's own words, it would be the ideal opportunity to argue and demonstrate "that European integration is not a one way street and that powers can be returned from the EU to its member countries".

The tricky issue is of course that the Conservatives' promised - or at least are now percieved to have promised - that any siginficant treaty change leading to further integration would trigger a referendum in the UK. And the establishment of an EMF would be a big change, as it would create a whole new EU institution and a lender of last resort at the EU-level. This, in turn, is a clear step towards fiscal federalism, regardless of whether the UK takes part.

At the same time, if not involving Britian at all, the argument can be made that it does not involve a transfer of powers from the UK to the EU per se. Indeed, if put in the right context, it could be presented as a method of regaining powers from the EU, by taking the creation of EMF 'hostage' in EU negotiations.

The critics were quick to say that Cameron's policy was unrealistic and undeliverable, but if the proposal for an EMF gains speed he may be presented with an early opportunity to prove them wrong.

If all the pieces fall into place, he should take it.

Merkel backs IMF-style fund for eurozone

More news on the eurozone front this weekend as we learned that France and Germany are preparing plans for an IMF-style European Monetary Fund (EMF). German Finance Minister Wolfgang Schäuble has said he will "present proposals soon" for a new eurozone institution that has "comparable powers of intervention" to the International Monetary Fund.

Schäuble has today received backing from his Chancellor, Angela Merkel, who said, the EU's current tools "are not sufficient." She added, "The European Union must be able to respond to the challenges of the moment" and if establishing an EMF required revising the EU treaties it would be a price worth paying becasue "we’re saying we want to solve our problems ourselves."

However, it seems that the German government may meet strong resistance from the German political and economic establishment. Juergen Stark, a German Executive Board Member at the European Central Bank, has chosen to write in tomorrow's edition of Handelsblatt that "Such a mechanism would not be compatible with the principles of the monetary union". He has also warned that "public acceptance of the euro and the European Union would be undermined."

Stark's column argues that establishing an EMF would risk over-politicisation and further increase the eurozone's susceptibility to 'moral hazard' or free-riding from certain member states. "Countries which have not abided by the rules, which profit unilaterally from the euro, without taking their duties seriously, should not be rewarded," he writes.

Given Merkel's obvious unwillingness to sign up to any Greek bailout, such public support for the EMF proposal is a little surprising. Given that Germany would be the biggest contributor to such a fund, surely it amounts to a very similar thing: a German guarantee for the eurozone.

Certainly one to watch...

The Karlsruhe factor

As riot police today were forced to use tear gas against violent crowds in Athens protesting against further Greek spending cuts to narrow the country's budget deficit (and save the eurozone), we recieved another reminder of German opposition to any cross-border rescue operation.

Travelling to Germany today to meet with German Chancellor Angela Merkel, Greek PM George Papandreou insisted that Greece is not seeking money from the EU. According to Le Monde, German Economic Minister Rainer Brüderle said in response: "Papandreou has said that he doesn't want a cent. In any case, the German government will not give a cent".

Meanwhile, German daily FAZ looks at another obstacle to a Greek bailout: the German Constitutional Court. Based in Karlsruhe, this Court is very much the X-factor in EU integration, as evidenced by the extrordinarily sceptical ruling it delivered on the Lisbon Treaty. Apparently, a spokesperson for Angela Merkel has let it slip that the Chancellor privately fears that a bailout would provoke the country's Constitutional Court to take action, possibly blocking the whole operation. It's article 32 of Germany's "Law on the Federal Constitutional Court" (Gesetz über das Bundesverfassungsgericht) that is the sticking point.

This article says that,

In a dispute the Federal Constitutional Court may deal with a matter provisionally by means of a temporary injunction if this is urgently needed to avert serious detriment, ward off imminent force or for any other important reason for the common weal.

In plain English, a bailout operation of Greece could become Karlsruhe territory. Specifically, the Court could interevene against what it considers a breach of the law - in this case the EU Treaties' ban on bailouts and extending credit lines to other member states.

Former federal judge Paul Kirchhof is quoted by FAZ saying that "If parliaments and MPs feel that their rights have been violated, they can appeal to the Constitutional Court." Based on such an interpretation of Article 32, notes FAZ, the Karlsruhe judges can block Merkel if she decides to help financially.

All of this is speculation of course, but an interesting indication of the forces at work in Germany at the moment - and the massive opposition that a bailout could provoke.