The Troubles of the New Fiscal Compact

Yesterday I wrote about the left and the new fiscal compact, and I've noted that the centre-left PES seems to be hoping that the French and German elections will help replace our current Merkozy with a PES version. EUObserver has reported that a majority of the French public (52%) are opposed to the (as yet undrafted) EU deal on fiscal union, largely following left-right lines. The Socialist challenger for the presidency, Francois Hollande:

"...announced that he would renegotiate the document.

"If I am elected president, I will renegotiate the agreement to put what it lacks today," he told RTL.

He said that he would “add what is missing”, mentioning he would push to include intervention from the European Central Bank, the creation of eurobonds and a financial relief fund.

“Finally, there must also be growth,” he added. “Without growth, we will not reach any of our objectives of deficit reduction.”

The Frenchman attacked the core concept of the new agreement, a ‘golden rule’, or balanced budget amendment that should be inscribed into constitutions, in effect preventing future governments from exercising expansionary fiscal policies.

Asked about the golden rule, the candidate said he would not vote for it “under this logic”."

While not all of the troubles fall along clearly drawn left-right battlelines, I think it's fair to say that it would be a mistake to read in a support for the UK negotiating position, as the issues seem to be based around the content of fiscal union rather than either the question of having a fiscal union or voting arrangements for regulating the financial services. Apart from the right-left divide is the concern of the non-Eurozone countries, like Hungary, that it would lead to tax harmonisation even outside the Eurozone. I don't know if this is being discussed (it wasn't mentioned in the deal produced last week), but it seems unlikely that there will be tax harmonisation even for the Eurozone, given so many Eurozone members are against it.

But the main issues will be those Hollande has highlighted: how much solidarity there should be in fiscal union. Merkel is kidding herself (or talking up the value of the deal for her domestic audiance) if she thinks that the deal on the table means political union - the greatest challenge to the deal will come from the push against the maintanence of the German sacred cows of retaining the ECB's current role and the ruling out of Eurobonds. However, it is doubtful that these ambitious goals could be won as well as removing the "golden budget rule" (who knows, maybe any financial relief fund would be sold as a counter-balance to national austerity brought about by the golden rule). The question is whether this pressure (and that of the markets) will force the negotiations to move further and further away from the starting points agreed on this month...

A new EU history. For China

China has its first textbook on the history and development of the EU: an Austrian book that was unveilled by the Austrian ambassador in China, Sajdik, who also revised and updated the book for translation. As Der Standard reports, it's apparently one of the first books of its kind in China.


Interest in the EU might have peaked lately in China now with the crisis, but I wonder what they make of us these days...

The Left and the New Fiscal Compact

The new fiscal compact is all about discipline. Eurozone states will need to keep their debt and deficits under control and this will be supervised by the Commission. The compact has come in for a lot of criticism already for two reasons - it's too austerity focused (making keynesianism policies difficult if not impossible), and it doesn't address the immediate crisis. This has lead to calls for the left to take the fight to the EU and queries over the democratic desirability of the deal. But what can the left do?

The urgency of fiscal union and the necessity of discipline

To some extent discipline is necessary. If there's going to be a currency union with fiscal solidarity (Eurobonds, the ECB playing the role of the lender of last resort, etc.), then Member states need to be relatively sure that they're not signing an open-ended agreement to support the spending plans of other Eurozone countries without any say or safeguards from the moral hazards that might arise.

The problem is that this new fiscal compact offers no real solidarity: it's essentially a Stability and Growth Pact Plus. The economic hopes behind the deal were pinned on the reaction of the ECB, and whether it would act more as a lender of last resort (it would have been better if this was part of the deal, rather than a hoped-for side effect). The deal expresses an intention for future fiscal solidarity, but it doesn't define what the possibilities are or set a time frame for them. That said, there's 3 months to negotiate the actual treaty so the crisis and negotiations could take twists and turns that force the Eurozone to look more closely at fiscal solidarity. Still, for all the urgency for greater solidarity to make the Eurozone more politically and economically credible, some level of discipline is necessary to underline the necessary trust for the system to work. Any alternative articulated by the left needs to take account of this.

The options for fiscal union seem to be: do nothing (which doesn't seem an option, but is the default if the deal falls apart), fiscal discipline, or fiscal discipline plus some form of solidarity (from a changed ECB role to Eurobonds and a common growth strategy). The argument runs that the bail-out countries need investment and growth plans and that the new discipline entrenches the failed austerity. But where would the money come from to invest in the bail-out countries and in the countries on the edge of bailed-out-dom? The markets won't accept the level of borrowing necessary, so there would need to be more solidarity and support across the Eurozone to encourage growth. (Not to mention rhe need for democratic controls through national and the European parliaments). There needs to be a coordinated response, and therefore any alternative has to be backed up by a political coalition that could win support to advance its solution across the Eurozone. Success in simply opposing the new fiscal compact would merely keep us in the same position we're in now: there needs to be a viable alternative.

Does the Left measure up to this?

Simply put: no, not really. The Party of European Socialists (the centre-left bloc of parties) has criticised the lack of Eurobonds and changes for the ECB:

"PES interim-President, Sergei Stanishev, argued that the important elements missing from the summit decisions are granting the European bailout fund a banking licence, introducing eurobonds, introducing a financial transactions tax, and a "real plan" for investment and growth.

[...]

The European Central Bank (ECB) has also been given the possibility to provide ‘technical support’ for the European Financial Stability Fund (EFSF) and buy bonds only on secondary markets. The European Stability Mechanism is set to start in July 2012.

In summary, this draft plan is a clear and historical signal of what a Conservative majority in Europe means for ordinary people. In the past, the European Union succeeded because any advance on the single market or on monetary union was always balanced by improvements in social Europe. This is not the case this time. The absence of a growth strategy and solidarity is striking.

There is a huge risk that the absence of proposals on Eurobonds, on an EFSF banking license, and on a coherent Investment strategy, could lead to an absence of public support."

Despite making the right noises, there doesn't seem to be a full vision for what needs to be done and what shape it will take. Though the Europarties tend to be quite coherent in the European Parliament, they have a dismal track record at forming the basis of promoting new political arguments or shaping a political coalition around established arguments.

Within the Eurozone countries discussion will turn to the benefits of the deal versus the loss of sovereignty. If the choice isn't to be between the compact and what we have now, the opposition will have to organise around a credible alternative. But then there's never been a political demand within the national parties for a stronger common platform - and even with the best will in the world it would be hard to construct one ad hoc at the moment. But perhaps the PES could act as a link between centre-left parties to transmit ideas and to help some sort of consensus emerge slowly as the crisis progresses (and it's got a long way to go yet). It will be a miracle if the left can build a common theme and European alliances they can point to form a basis to their opposition, but it's necessary to form a constructive opposition.

Anyone willing to place their bets?

Unreasonableness and the Rebate

While political battles are being waged over Cameron's veto, there seems to be at least one point of consensus within Britain: that the demands on the protection for financial services were reasonable. The Labour party hasn't set out exactly what it would have done (it says it would have stayed at the table and achieved a better deal, though it's hard to run a "what-if" scenario since the Cameron government's relations and those of a Labour government with the other 26 Member States over the last few months would need to be taken into account), but it seems that Labour basically supports the government's position on the treaty changes it was seeking, and that such changes were reasonable.

But today the Commission President Barroso told the European Parliament that Britain's demands were unreasonable and would have threatened the internal market.


Unreasonable Demands?

Financial services are part of the internal market, and are covered by Article 114 TFEU. This article provides for the regulation of the internal market, and the legislative procedure is the ordinary legislative procedure (i.e. the Commission proposes, and the Council and Parliament have an equal say in amending and passing the legislation). Britain wanted to insert a protocol which would grant every Member State a veto if the regulation was concerned with the financial services sector. Because every Member State would have a veto, the British government argues that it wasn't merely seeking to protect the City or asking for special treatment for itself.

However, this does threaten the legal and political basis of the internal market. To make it harder to regulate one sector of the internal market is to privilege one sector of the internal market over all other sectors. While it may be technically correct that Britain wouldn't be legally privileged over the other Member States, this would have created a separate legal procedure for introducing regulations for a separate sector of the market, so it would have introduced a legal division in the treaties between financial services and the rest of the internal market.

Then there's the political concept of the internal market. That internal market legislation is passed by majority voting is not only necessary to ensure that legislation can be passed at a pace that more closely reflects the pace of innovation in the market (compared with unanimity - we don't want to return to the days of waiting years for a single regulation to be passed), but also this politically underlines the mutual trust between the Member States in each other as they work on the internal market. If legislation is passed by qualified majority vote, then everyone has to work together to get legislation passed (and can't simply oppose all legislation outright to get its way) and Member States also have to be sensitive to the needs of the others (in other words: if you outvote me here, I'll outvote you there, so let's not play the zero-sum game). By introducing special protections for parts of the market that have been identified as a key interest by one Member State, in political terms you are privileging that Member State over the others in the overall internal market negotiations, and weakening the trust that is supposed to underwrite the market.

So Barroso was right to say that what Britain was asking for was unacceptable (or at least that it would be unacceptable for other Member States). Why should the financial sector be treated differently to other parts of the internal market? Should Germany have a protocol so there's a veto in the area of environmental policy when it comes to the car industry? Why shouldn't economic sectors of interest to other Member States be more protected? Because the more you reverse the integration in the internal market, the more you break up that market. Similarly, most other Member States see the social chapter as protecting their welfare states from a race to the bottom while entrusting their economies to the competition of the internal market. Yes the UK is one of the most committed Member States to free markets and a liberal internal market. But it fails to see how these trade-offs are part of the "Single Market Pact" sometimes, and how unacceptable its position can appear to others. If you can't understand the position of those you negotiate with, then you don't stand a good chance in negotiations.

It should also be noted that there are plenty of EU regulations that only set minimum standards, above which Member States may regulate more heavily. It should be easy to negotiate this minimum standard approach, rather than pitch for a full legal division of the internal market.

Finally, Barroso claims that he tabled a motion that should have met key British demands on protecting the internal market from a Eurozone caucus:

"In search of compromise, I tabled a clause providing, in the EU treaties, that any measures adopted by the Council and applying to the euro area only, must not undermine the internal market including in financial services. Unfortunately this compromise proved impossible."

The Rebate

Joseph Daul, the leader of the European People's Party group in the European Parliament, said:

"I believe that the British rebate should be put into question. Our taxpayers' money should be used for things other than rewarding selfish and nationalistic attitudes."

For the UK, the rebate is like the EP's Strasbourg seat for France or the protection of the low corporation tax for Ireland. For Britain the rebate is a question of fairness: otherwise it would contribute more to the EU, which isn't fair as others get back more in the Common Agricultural Policy.

But times have changed since Thatcher demanded Britain's money back. Back then the EU was a club of fairly wealthy countries, but now it has expanded to include the former post-communist, Warsaw Pact countries. During the negotiations for the "Big Bang" enlargement - which the UK was a huge supporter of - the question of the British rebate was raised. With 10 new Member States joining, which would all be poorer than the then-current members, there would be greater pressure on the EU budget to cover the structural funds and CAP costs. Would Britain, who supported this enlargement so much, not either give up or reduce its rebate to help cover the costs of greater solidarity with the new members? No. In fact there was the sad situation where Poland had to ask how much more the new members would have to pay to make membership a reality. Because the EU budget cannot be based on debt, so other countries have to fund Britain's rebate.

Of course it's not as simple as saying that Britain should have surrendered its rebate at that point. It's not to say that there are not other interests that are protected in the EU budget and that these shouldn't be seriously negotiated over. But it is an odd policy to drive forward enlargement, while demanding the EU budget to remain static on the one hand, and defending the British rebate on the other. If Britain is to make the case for the fairness of the rebate, it will have to move on from the arguments of Thatcher.

The key point is that the EU is a compromise. The internal market isn't something that can be viewed in isolation, and it is a mistake of British politics that the EU is often only presented in that way. Without the solidarity with poorer regions, opening them up to the competition from the more advanced economies is a hard sell. A minimum level of solidarity is required to ensure that the welfare states and the communities in Member States won't be too negatively affected by the downsides of the internal market - and in some countries where euroscepticism is mainly on the left it is argued that the EU is neo-liberal and there isn't enough solidarity. So when discussing the internal market, social policy and the budget, we need to have a more nuanced and fuller idea of the fairness that's required in the EU for even a minimalist internal market to work.

Nirj Deva and the European Parliament Presidency Campaign

The British European Conservative and Reformist candidate for the Presidency of the European Parliament, Nirj Deva, has gained support from far-right MEPs despite not seeking it:

"A nomination paper leaked to Hope Not Hate, a UK anti-fascist watchdog group, and seen by EUobserver shows the signatures of Griffin, Gollnisch and five other MEPs from the far-right of the chamber, one immediately after the other, suggesting the document was passed directly between these MEPs, all of which maintain close ties with each other.

The anti-federalist European Conservatives and Reformist grouping in the parliament, which backs Deva’s bid for the presidency, was quick to distance the candidate from his nationalist supporters.

“He has been nominated by the ECR and nobody else,” the group’s spokesman, James Holtum, told EUobserver."

Martin Schulz, the leader of the Socialists and Democrats group (the centre-left group), will probably win the contest as there is an agreement between the European People's Party group and the S&D that they will share the presidency during this parliament. The current president, Jerzy Buzek (EPP) will soon stand down, and Schulz will be officially backed by the EPP and the Liberal group. However, Schulz isn't the most popular MEP, and British Liberal MEP Diane Wallis is running as an independent against him.

With two challengers to the EPP-S&D carve up, it will be interesting to see who will do better. Wallis is officially acting without the support of her Liberal group, but she could attract those liberal and EPP MEPs - and perhaps even some S&D MEPs - who can't bring themselves to vote for Schulz. But how will it compare to Deva's support? Though the ECR group doesn't attract a lot of good will, and therefore is handicapped when it comes to building parliamentary coalitions, Deva is a well respected MEP who, according to EUObserver, has won "MEP of the year" in the area of development last month.

It's good to see the ECR contesting the election. The EP presidency is more political than the role of most parliamentary speakers/chairpersons as the EP President has to stick up for the Parliament in inter-institutional battles. So while I don't support the ECR, this is exactly the kind of election they should be contesting: institutional politics and questions of integration are a major reason for founding the ECR in the first place. Will Deva present himself as more than just a candidate hoping to force an election, and run on a more ideological campaign? It would be a lost opportunity if he doesn't, even if it makes it harder for him to build alliances.

Post-Veto Politics

Britain has lost influence and friends in the EU due to the veto, but it doesn't mean that the UK won't get another chance to sit around the negotiating table because the new fiscal compact is far from a done deal.

Isolated Britain

First of all, how Britain has isolated itself needs to be recognised. When it comes to treaty renegotiation, Britain has a bad hand to play. Though the Tory right have talked up the crisis as an opportunity to renegotiate the UK's EU position and the possibility of leading a group of non-Eurozone countries. Both ideas are - and have proven themselves to be - ridiculous. The crisis makes it more likely that governments under pressure will try to circumvent an obstructive Britain in the rush to save the Euro than waste time opening up non-Euro areas of the Treaties. Most of the non-Eurozone countries either see themselves as future Eurozone members (most of them are legally obliged to eventually join), or see buying into the deal as a cheap way of ensuring influence (it has no affect on non-Eurozone members after all.

Second, though Britain wasn't arguing for major renegotiation of the treaties (e.g. on social policy powers), the UK's demands weren't as reasonable as they are now being presented. Under the present Treaties there is already a veto on introducing measures such as a financial transaction tax, so Cameron's veto doesn't add any extra protection in this area. On other financial regulations (decided by qualified majority voting, but in practice never previously passed without UK consent) we need to be clear that the UK was asking for special treatment of the financial services compared to other parts of the internal market. Why should financial services be treated differently and not any of the countless other economic interests of the other 26 Member States? Ironically France ending up standing up for the integrity of the internal market against Britain! In any case, Britain's demands could have probably been accomodated in practice during the normal legislative negotiations rather than tampering with the internal market as a concept.

It's not hard to see why the UK found itself without support for its position at the summit.


The New Fiscal Compact

Though Britain has damaged its own interests and alliances, it could try to repair them and it could find itself at the negotiating table again soon. The new fiscal compact only focuses on fiscal discipline, and doesn't touch on the role of the ECB or on the possibility of Eurobonds. Reassuring Germany over discipline without a trade-off on fiscal solidarity makes the deal harder to sell, and it could still fail. Some elements of solidarity might emerge over the course of negotiations between now and March (we all know that more happens in a week than in a year for the EU in this crisis).

Still, if the deal collapses, the Eurozone might need to reform the EU institutions (democratic legitimacy might re-emerge as an issue: after all, it's the aim of Merkel's CDU to mae the Commission President a directly elected office), and therefore an all-EU treaty change with the UK participating. It might even be the case that another treaty change is needed since the current deal doesn't do enough to help solve the crisis. This would still not be a good opportunity to renegotiate the UK-EU relationship to a great extent - if anything the Eurozone governments would be more panicked and willing to use any means necessary to save the Eurozone, and the international pressure on the UK not to block a deal would be huge - but it would provide a means of restoring influence and relationships within the EU for Britain. We'll see if it gets this second chance.

The new fiscal compact

Yesterday's neotiations have produced an agreement on a new "fiscal compact" (i.e. they hope the ECB will start playing the role of a normal central bank as much as it can now, even though it's too politically difficult for Germany to agree to it yet). You can find the agreement here (PDF).

Some of the main points are:

"General government budgets shall be balanced or in surplus; this principle shall be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5% of nominal GDP.

• Such a rule will also be introduced in Member States' national legal systems at constitutional or equivalent level. The rule will contain an automatic correction mechanism that shall be triggered in the event of deviation. It will be defined by each Member State on the basis of principles proposed by the Commission. We recognise the jurisdiction of the Court of Justice to verify the transposition of this rule at national level. [The ECJ will therefore only rule on whether thi rule has been correctly transposed into national law and will not rule on the imposition of sanctions].

• Member States shall converge towards their specific reference level, according to a calendar proposed by the Commission.

• Member States in Excessive Deficit Procedure shall submit to the Commission and the Council for endorsement, an economic partnership programme detailing the necessary structural reforms to ensure an effectively durable correction of excessive deficits. The implementation of the programme, and the yearly budgetary plans consistent with it, will be monitored by the Commission and the Council.

• A mechanism will be put in place for the ex ante reporting by Member States of their
national debt issuance plans."

There is also a promise to boost the IMF by €200 billion and the European Stability Mechanism (which is to take over from the EFSF in March as the crisis mechanism - though the EFSF will continue working on the current bail-outs until 2013) will take decision during times of crisis by a super qualified majority of 85% if Finland's parliament agrees.

It's easy to criticise the deal as not going anywhere to solving the current crisis - after all, the short term goal of the plan was to provide the ECB with the political cover to do what Germany lacked the political will to change legally in the Bank's charter. Since the ECB's president practically crushed these hopes yesterday, it's hard to see the ECB going a long way to meet this open secret demand. However, the level of integration proposed by the agreement is striking. The powers of budgetry oversight by the Commission and the ability to send in inspectors to non-bail-out countries are particularly remarkable.

While common budget discipline is necessary, there is only the promise to look at tools like Eurobonds in the future. This raises a big issue: if we accept that this agreement is a stepping stone on the way to Eurobonds (introduced in stages to reassure Germany), then it's still a difficult position for the other Euro states to take it on trust. Without the ability to voe on economic policy (opposed to simply vetoing sanctions), and without any promise of some form of transfer union or the possibility of Eurozone investment in deficit-reducing economies, the deal will be difficult to pass in places like Ireland. It will be justifiably argued that this deal sets an inflexible economic policy in stone, and it will be hard to convince people to accept it he understanding that Germany will eventually accede to Eurobonds and a transfer union if its confidence is built up by acceptance of the deal.

How do you sell only half a fiscal union that doesn't seem to deal with the short term crisis which demanded it in the first place?

The Veto

Cameron has played the UK's veto. Returning social policy powers to London wasn't on the table, but it seems that having a seat at the Eurozone meetings and opt-outs on financial services laws were. Ironically the former was to ensure that the Eurozone didn't start dividing up the internal market, while the latter would have, er, divided the internal market by providing one rule for the UK and another for the other 26...

In any case the UK has been left out of the negotiating room: the deal will be signed by 23 Member States, with others considering whether or not to sign up. Backing out of a deal was always going to upset the Eurozone countries, but it will be interesting to see how the UK's relations will develop with the other non-Eurozone countries. Sweden's foreign minister mocked the UK's position in a tweet:

"Worried that Britain is starting to drift away from Europe in a serious way. To where? In a strong alliance with Hungary."

The inclusion of these other non-Eurozone countries should be enough to ensure that the Eurozone doesn't go ahead on internal market matters without the rest of the EU (the Danish presidency will be particularly helpful in protecting the position of non-Eurozone members), though it probably does damage the short term influence of the UK in the EU.

Britain's Bad Negotiating Position

Eurosceptic Conservative backbenchers in the UK want to use the summit tomorrow to negotiate the return of powers from the EU to the UK. It's not clear what powers they want to return to Westminster, but it's likely that the area they're interested in is social policy. This area covers things like the 35 hour week, maternity leave, and holidays. The problem is that Britain isn't in a good negotiating position.

First of all, the official position of the British government is that they want the Eurozone to have some level of fiscal union so that the Euro survives and the British economy is protected by meltdown. It would be a bit strange if the UK government suddenly switched from cheer leading greater integration to threatening to block it so other treaty areas could be opened up. Even if there weren't any other problems with the renegotiation position, this would leave the renegotiation position without credibility. After all, which does Britain need more at the moment: a stable Eurozone or a full treaty renegotiation?

Second, any treaty change will be designed to only affect the Eurozone so the UK's referendum law won't be triggered. So no powers will move from the UK to the EU. But at the same time Britain, as stated by Cameron, wants safeguards that ensure that the Eurozone "Outs" are protected from the growing integration (and potential power) of the "Ins". So Britain (and the other non-Eurozone countries) want something from these negotiations, but they will not be offering anything on the integration side. Whie Germany and other Eurozone countries (like Ireland) support a treaty change for the 27, it has already been signalled that the Eurozone 17 could go on ahead with a treaty outside the EU if necessary. When you're in a position of asking for safeguards but not exchanging anything in return, with the possibility that your negotiating partners can ignore you altogether, it's not a very strong negotiating position.

Third, the UK underestimates how controversial returning social policy will be for the other EU Member States. Social policy seems to be portrayed like it is a small add-on to the internal market, but for other Member States this protects their social policies and welfare states from the opening up of their markets. Why should the special access the internal market provides be given to the UK if they are going to engage in race-to-the-bottom social practices that would harm their welfare states? To put it in terms of the UK's human rights debate: there are rights and responsibilities, and the UK is increasingly seen as wanting all of the rights, but none of the responsibilities.

So for Britain to successfully negotiate a return of social policy powers to London, they need allies (which they would loose from obstructing a treaty change that both Germany and other Outs like Poland want), be in a position to offer something in return (to reassure other Member States that they won't start a race to the bottom), and a credible negotiating position (i.e. not being dependent on the treaty being passed and the goodwill of other Member States to be a part of the negotiations). I can't imagine that the Conservative backbenches aren't already aware of this (I mean, if they aren't I'd like to see their negotiations!), so it could be a way of trying to force David Cameron into backing an In-or-Out referendum.

Cameron might have more luck with negotiating safeguards on financial services, though the 17 can still threaten to go on ahead without Britain. He'll have to hope that whatever safeguards he gets will satisfy the Tories back home.

Ireland's State of the Nation Address

Ireland's Taoiseach, Enda Kenny, made what is only the 6th state of the nation address on Sunday evening before the new government's first austerity budget (to be announced over Monday and Tuesday). Brian Cowen, the last Taoiseach, was criticised for not making an address, and was probably held back by the memory of another past Fianna Fáil Taoiseach, Charlie Haughey, who famously told the country to tighten its belt while he was far from doing the same in his own life. Ireland's also had some experience of austerity speeches that have been mocked:



Here's Enda's State of the Nation address:



Enda will probably get some credit for making the address, but the devil will be in the detail of the budget, and the debate that follows will be inevitably overshadowed by the actual changes and choices made by the budget. Ireland has been living under austerity budgets for so long that the further cuts and tax increases by the government will be increasingly painful: we've long run out of low-lying fruit.

From a Eurozone perspective, this is the first major signal that the Irish government will accept treaty changes, which it had been opposing as recently as Kenny's visit to Berlin two weeks ago. In many ways the Irish government has been so absorbed by the austerity plan and worried about running a referendum in this climate that it put a bit too much hope in a solution being found without treaty change (and it has raised some valid points about the lack of implementation of all the summit agreements so far). However, there needs to be a better Eurozone system for the currency to work, and treaty change is inevitable if the Euro is to survive. It's a pity that the Irish government's sights are set so low (its main red line is preventing (corporate) tax harmonisation), rather than focusing on putting forward what it wants fiscal union to look like for the whole Eurozone. How we run the Eurozone will effect how we work in the future, and how much solidarity we will want to show with other Eurozone countries (for example, would Ireland be happy with lending money as part of a bail-out to another country [post-current-crisis], under the strict deficit rules being discussed?).

Do we want Eurobonds - and not just for Christmas? How much fiscal policy should be set by the Commission/European Parliament/Council? Lately there has been more discussion about the role the ECB should play, but it does seem as if our politicians will only discuss what "Merkozy" proposes instead of insisting on common ownership. It's not all Merkozy, of course. All Eurozone members will need to agree on the way forward, and the Franco-German proposals are the starting point. But we need to have a better sense of public ownership in the other Eurozone states. The rise of more extreme parties has been most marked in the smaller Member States: if the next treaty change is to solve the crisis it will have to go far enough to create a credible Eurozone and appear just and inclusive enough to be accepted across the Eurozone. It's too much of a gamble for Merkozy to appear to push too far ahead with their own project and then risk rejection in the smaller states which could derail the Euro entirely...

Eurocrisis, Democratic Deficit and the Re:New Conference

Throughout the Re:New Conference references were made to that most European of monsters: Merkozy. Yesterday Sarkozy spoke, and today Merkel has spoken in the Bundestag about Europe and the Eurozone. While European integration - and a new treaty - was held up to be necessary, Merkel rejected Eurobonds as expensive and unconstitutional. At the same time, the European Parliament has passed a resolution, declaring that it should have equal powers with the Council over any new features of economic union (such as an EU Finance Minister) so that there is sufficient democratic oversight.

The same day Sarkozy, in Gaullist mode, firmly signalled that any further changes would be purely intergovernmental:

""The reform of Europe is not a march towards supra-nationality," Sarkozy said. "Europe will reform itself by pragmatically drawing the lessons of the crisis. The crisis has pushed the heads of state and government to assume greater responsibilities because ultimately they have the democratic legitimacy to take decisions."

"The integration of Europe will go the inter-governmental way because Europe needs to make strategic political choices.""

At first sight the battle between Merkozy and the EP might seem to be a foregone conclusion: the duo have sidelined the EU institutions so far in the Eurocrisis and Treaty change is itself intergovernmental, so how much power can influence can the Parliament, with falling turnout numbers, and the Commission, which has hardly been bursting with energy, bring to bear. However, intergovernmentalism favours secretive processes and large countries over transparency and smaller countries. I've written before about the faultlines dividing the European debate, and these will spur some Member States to fight for more supranationalism.

In the long run intergovernmentalism will be a mistake as is disempowers citizens and promotes a cynical them-and-us culture between the rest of us and the Paris-Berlin duopoly that is unhealthly for European politics and damaging to democracy. But it's also damaging in the short term - by going for intergovernmentalist solutions, the suspicion and anger with the Franco-German concentration of power will crystalise: should this summitry with France and Germany at the top - which has hardly worked wonders during this crisis - be not just for crises, but for life? Without QMV, Commission oversight and Parliamentary input, the majority of the Eurozone and Non-Eurozone states and citizens are threatened with the prospect of being marginalised within the EU structure. So far we've been working ad hoc, pretty much outside of the treaties. Now we're talking about committing ourselves to these governing structures by treaty.

That's not to say that the European Parliament is a great cure for this democratic deficit: though over last weekend I saw a PES that spoke like an opposition and proposed a different vision for the EU, as an opposition the PES, and other Europarties, remain too detached from citizens and even their national parties. It seems to me that supporters of a more democratic EU need to focus more energy on reforming the Europarties so that they can seriously propose new policies and debate them in public. This requires not just some autonomy on the part of the Europarties - you could argue they have autonomy at the moment since the national parties don't pay much attention to them for policy matters - but commitment from the national parties to help shape, debate and campaign on these policies.

With the PES in opposition almost everywhere in the EU, this should be easier for them to achieve. Could a basic common platform not provide a voice for the centre-left during the crisis both in Member States and at the EU level? The divisions between national parties and the protection of national party autonomy from European commitments are great and understandable, but it's hard to see how the centre-left - the opposition - can effectively put forward their own narrative and solutions if they cannot build a European coalition, even on a basic level, that can make their visions at a national level sound realistic. Given that pan-european crises of this scale are - thankfully - rare, I wouldn't expect much progress to happen in this area, which is why I hope a contest between Europarties for the Commission Presidency would push politics further along this path. But that's too long-term, and this crisis is progressing too rapidly.

I'm not a member of a political party, but if I believe in promoting democracy at a European level, then perhaps I should become one and add my voice, in whatever small way, to the need for a better European politics. Because we can't just hope that it will simply emerge to inspire a demand for it; rather those of us who want it should demand it, and demand it loudly. Despite my criticisms of the lack of policy at the PES Conference, I did see some vision there. If we want to have an inclusive EU rather than a concentrated summitry, then we'll have to strengthen our Europarties so they can represent us better.

Vote for the Irish Council Presidency's logo

You can now vote for the logo of the Irish presidency of the Council of the European Union (to be held in the first have of 2013; currently held by Poland, but Denmark will take over in the new year). You can find the designs and vote here.

I liked the spirals and connections designs best, but as I can only vote for one, I went for the connections one.

Re:New: Europarties and Primaries

When I wrote about the Re:New conference and the lack of policy at the PES level on Friday, I wanted to find out more about the Europarty and how things are done. Luckly there was a workshop on Transnational parties on Saturday, which I attended (annoyingly most of the workshops I would be interested in were on on Saturday afternoon: I would have liked to have asked a few questions at the citizenship workshop on Zambrano and McCarthy).

Understandably the structure of Europarties mitigated against more unified political platforms being put forward at European elections (and in between). Europarties have evolved over the last 20 years, with political foundations (such as FEPS for PES), and firmer legal regulation for their legal status and funding. While there was some interesting presentations on the history and structure of the Europarties (notably from Erol Kuelachi and Steven van Henke). However, of the three aspects raised by Sebastian von Thuena (1. institutional aspects of Europarties; 2. the legal structure; and 3. the role of the grassroots), the question of the grassroots was picked up on by the audience (which counted a few PES activists among its members). How grassroots activists should work alongside national parties - via exchanges and uring election campaigns - was debated. Apparently there have been PES activist exchange programmes trialed that haven't been very successful, and national parties are unsure of how to react to PES activists (in some cases perhaps fearing that the PES is a competitor for institutional control within the party).

I was disappointed that the PES primaries weren't being discussed, so I asked:

"What could be the effect of the PES presidential candidate (and does the PES see it as more parliamentary or presidential)? It could have a chain effect (if there’s enough momentum) – 1. Would it take away from activist influence on the manifesto? 2. Would it bring the Commission closer to the EP? 3. Would it mean coalition Commissions and provoke reorganisation in the Greens, etc.?"

There wasn't enough time to address all of these points, but Steven van Henke pointed out that the PES would confirm both the candidate and the programme, raising the prospect of the candidate not being able to stand on their own platform. Originally I had thought that it could push activists out of the role of manifesto-shaping that they had gained at the last election - it will be interesting to see how the PES balances the national parties, the activists and the candidate's view in the joint manifesto.

Another aspect of the PES primaries is their timing. I hadn't noticed anything about the timing of the primaries during my first glance through the procedure, but I've heard complaints about the process being held over the December/January before the election, since it is extremely difficult to organise events for national parties at that time (at least, I have heard these complaints from the Irish Labour activists; and Irish Labour has been one of the most enthusiastic parties for PES primaries). Together with the uncertainty of the number of parties which will hold direct votes and whether the candidate will have much control over his/her policy platform, the PES's seeming political coup could be strangled at birth. Since it has the potential to boost not only the PES but also push the other Europarties to be more coherent, it would be a big loss to EP democracy.