ESM to be examined by the European Court of Justice

The Irish Supreme Court, following a challenge by independent TD Thomas Pringle, has referred 3 questions on the European Stability Mechanism to the ECJ in Luxembourg to test its compatibility with the EU Treaties. Given that securing access to the permanent bail-out fund was the main reason most Irish people voted Yes to the Fiscal Compact, it has the potential to cause severe economic and political fallout.

The questions are:

"1.Is the EU Council decision of March 25th 2011 to amend article 136 of the TFEU valid and does it violate treaty or EU law principles?


2.If the decision of March 25th 2011 is valid, is a member state entitled to join the ESM before the decision comes into force?

3.Is the terms and operation of the ESM Treaty compatible with the principles and provisions of the EU Treaties?"

As far as I know, this is the first time that either the Fiscal Compact (not included in this challenge because the referendum changed the constitution to permit ratification) or the ESM Treaty will be examined by the ECJ for compliance with the EU Treaties. The Supreme Court has asked for a quick answer from the ECJ given the seriousness of the matter (The Journal.ie reports that a full panel of seven Supreme Court judges heard the case).

Even should the Treaty prove to be in compliance with the EU Treaties, it still needs to be decided by the Supreme Court whether or not it violates the Irish Constitution.

Waning German solidarity?

Yesterday Angela Merkel made it clear that the next German federal election will be fought on Europe, and that she would continue to fight for the current approach to the crisis (in more detail in German here). Not something to enthuse her many detractors and those who want to see more solidarity in Germany's approach to the Eurozone. But it's not only Europe - the Transfer Union is taking a bit of a knock in Germany too, as the state of Bavaria has taken a case to the German Constitutional Court to complain at the fiscal transfers it has to pay to the other German states.

"Bavaria is not really German", is something you might hear in Germany. The Freistaat Bayern certainly has a very distinct identity within the German federation - Merkel's party doesn't organise there, but allies with the separate sister party of the Christian Social Union, which is part of her governing coalition in Berlin. For now the Bavarian government remains unique in bringing its challenge before the constitutional court, with the other contributing states preferring to continue with negotiations with the recipients. The Bavarian Prime Minister Horst Seehofer (CSU) has been issuing complaints and threats over the Länderfinanzausgleich (clumsy translation: "Financial equalisation of the states") for a while, and has been a firm opponent of Eurobonds and further Eurozone integration. While the idea of banking union - and the move towards the separation of banks from the states - has been generally well received around Europe, Seehofer insists that the state ultimately remains liable for European support: something that contradicts Spain's preferred narrative and direction.

It will be interesting to see how the debate over fiscal transfers in Germany develops, and if it will impact on the wider European debate on the Eurocrisis. Tagesschau has already pointed out that though Bavaria is by far the largest contributor, it has also benefited a lot in the past from fiscal transfers. In any case, it serves as a reminder that German state politics have the potential to impact on the European debate, and that talk of any kind of European transfer union will be compared to the state of the German one domestically.

“I feel that we’ve been had!” – Report on the SWIFT Agreement

 BY CC greenefa.

In 2010 the EU ratified an agreement with the US called the SWIFT Agreement (or more technically: the “Terrorist Financial Tracking Programme” – PDF), after the first agreement was vetoed by the Parliament, and despite privacy concerns remaining for the second agreement. The SWIFT Agreement permits the transfer of financial transaction information to the US government for the purpose of counter-terrorism. The problem is that you can’t ask for someone’s transaction information, but data is transferred in bulk to the US, where they search through the information to see if they can find out anything relevant to counter-terrorism. As a check, the second agreement stipulates that Europol must check that requests for transfers are in compliance with the agreement. Given that Europol could gain from any leads from the information, it’s not exactly the impartial check of a judicial body.

The LIBE Committee debated the Second Report on the role of Europol by the Joint Supervisory Body on 21/6/2012 (you can watch it here). The first report (PDF) found some serious failings, including:

- Due to the abstract nature of transfer requests, proper verification of whether the requests are in line with the conditions of the Agreement is impossible.
 - Information provided orally to Europol affects their decision making, but cannot be reviewed by the JSB. Whether the deficiency in information in the requests is remedied by oral information is impossible to verify.
- Significant involvement of oral information renders proper internal and external audit impossible.

Recommendations:

- Inform the JSB on the results of the review in policies and procedures for Europol’s role. - Ensure the ability of the Europol Data Protection Officer to carry out his role.
- Ensure hard-deletion of Article 4 data (data to the US where Europol has to verify their requests), which where inputted into some of Europol’s information processing systems before the upgrading of the security level.
- Contact the US Treasury Department and ensure that adequate information is provided with requests.
- Ensure verifications by Europol are made based on written requests, along with any supplemental documents, in order to allow for proper internal and external audit.

The Second Report notes that all US data requests to date have been approved and that some of the reasons are too generic. Many of the request applications included “copy and paste” texts and the information provided was out-of-date and already in the public domain, and oral information is still being provided to Europol in order for it to make decisions. Also, there is no geographic limitation to these requests (data concerning the whole world is requested), and the requests submitted on a monthly basis for a month in duration (so effectively data transfer is ongoing all year round with little limitation).

The JSB concluded that 2 of its recommendations from its previous report have been implemented, while progress is ongoing for the other 3. The EU and US have signed an agreement for a second person to be posted from the EU to the US Treasury Department to oversee the operation of the agreement. The Overseer currently in place has been involved in intensive on-the-job training, and has been in US Treasury briefings. Clearly continuous information is being provided on generic and incomplete information with little restriction, so it’s hard to see how the current system provides adequate safeguards.

The full report however is not publically available or even available to the MEPs on the LIBE Committee – when the Committee requested access to the report, the JSB said it had no objections, and that there was nothing sensitive in the report that would prevent it from being disclosed. However, Europol stated that disclosure would threaten operational interests, so the report has not been disclosed. You can find the JSB’s public statement here: PDF.

Sophie in’t Veld and Jan Albrecht weren’t impressed (Veld: “I feel that we’ve been had!”). Veld highlighted that the EP was assured that there would be no data mining, but that the current procedure – of continuous and almost unlimited access – is much worse and goes further than what Parliament had expected. Veld objected to the secrecy of the report, saying that the Committee cannot fulfil its role of scrutinising Europol and the Agreement properly on the basis of a “3 page summary”. Albrecht said that the demands of MEPs have not been met after 2 years of the agreement, adding that if we have a functional fundamental rights jurisdiction, we could get this taken down in court.

While the role of the Europol Data Protection Officer seems to have been strengthened, it hardly seems like there are any safeguards on the flow of financial transaction data to the US. Without a sunset clause on the agreement, the European Parliament is in a fairly weak position to act against the treaty or to demand amendments. We seen the trend of PNR treaties on passenger information lead to a bad proposal for EU PNR, and soon the Commission will propose a TFTS for the EU. We need to make sure that we don’t throw away our civil liberties for little or no security gain simply because law enforcement authorities want our information and data.

Council Transparency and VoteWatch

BY CC DrabikPany.

Last week I was at the (re)launch of the VoteWatch website, which now covers Council votes as well as European Parliament votes. The Council votes on display are put together using information already publically available, though it’s currently not machine readable so the information needs to be collected manually.

A lot of the comment so far has focused on the rates of voting no in the Council (and that the UK and Germany seem to vote no the most, while France and Lithuania always voted with the majority). There are some debates over what this means (including that it’s more indicative of being able to play the political game beforehand if you can agree to the text when it comes to the vote), but I agree with Ronny that the rates of voting no are very small. In fact, only in 35% of cases where there is qualified majority voting and not unanimity, were there any dissenting votes (90% of votes are run on the QMV procedure - you can read the VoteWatch report here). So while I might be surprised that Ireland is in agreement with Italy a lot of the time, and in 100% agreement with Germany in the area of the environment, it’s only to a slight degree, since (near) unanimous agreement is the rule rather than the exception.

The panel discussion covered some interesting questions, such as the transparency of the political negotiations in the lead up to the vote and the transparency of amendments. It turns out that there are several shadow or practice votes in the Council groups working on the legislation, which generally see closer results than the final vote, and that amendments are proposed in many ways – formally submitted in writing, submitted in an informal style, and introduced orally, which may make it difficult to record in the same way the European Parliament records its amendments. (It was also noted that amendments are whittled down in number and merged in negotiation before being put to the vote. However, the Council is nowhere near this level of transparency yet). It could also be argued that with an array of groups working on legislation and several shadow votes, it would be difficult to keep track of everything and to judge its influence. After all, it seems to be a question of how negotiations should be led, and if these shadow votes are aids to negotiation, perhaps they should continue to be held in secret, especially since their significance individually is hard to measure.

A lot of the debate centred on whether the greater transparency of the Council votes via VoteWatch – and it is a great blow for transparency of the EU that the painstaking work of bringing these votes together in a readable way will be carried out finally – will affect how the Council operates. Will it withdraw more into the background? Will Member States change their voting habits (more likely to vote against in some cases, less likely to vote against where popular measures, such as lower roaming charges, are at stake?)?

The tension at the heart of the Council when it comes to transparency is diplomacy versus democracy. While it’s true that negotiations and diplomacy are a part of parliamentary life, when it comes to the Council it’s of a different class altogether. The justification against transparency is that there are key negotiations at stake and that the Member States should be free to pursue them. There should be some space for confidential negotiations, like in any legislative body, but there’s the rub: the Council is operating as a legislative body. Where the Council acts like an upper house of a parliament, we should expect those levels of transparency and clarity of procedure.

There won’t be a groundswell of public concern for this, and we should focus on pushing the boundaries of transparency under the current structure, but where the structure of the Council presents arguments that something should be kept secret for negotiation’s sake, we should be willing to ask: why should it be structured this way? Does it need to be secret at so many stages? Aren’t you legislating for us?

Romania and the rule of law in the EU

The EU is a strange creature: in order to join a country must respect democracy, fundamental rights and the rule of law - a concept that is becoming ever more detailed and developed on the European stage - but the EU finds it incredibly difficult to ensure these standards are respected one a country is inside the club. There have been a few battles over the last few years: France's treatment of the Roma, Hungary's constitutional changes in the media and the courts, and now Romania.

In Romania there is a power struggle over the constitution and the presidency. The social democrat Prime Minister, Victor Ponta, wants to impeach the unpopular conservative president Traian Basescu and has tried to change the threshold necessary in the process to get it done. The Economist also lists a number of seriously worrying changes that the Romanian government wants to bring about:

"His government has replaced the ombudsman (the only brake on emergency government ordinances), grabbed control of the Monitorul Oficial, the official promulgator of laws and decrees, taken over the national cultural institute and threatened to fire the judges of the constitutional court."

These changes has provoked concern in Brussels (and Berlin) over the threat to the rule of law. There is a way of sanctioning Member States that break the values of the EU: under Article 7 TEU a country in breach of these values can be stripped of its voting rights. However it's a nuclear option, and one that is difficult to threaten, never mind enforce or enact. There are two linked reasons for this: one technical and one political.

Politically it is hard for Member States to condemn a fellow Member State, and if the government of the offending Member State is aligned to either the EPP or PES (sitting in the S&D group in the Parliament), then it could have a strong lobby in its favour. Both the S&D and EPP have acted in the Hungarian and Romanian cases in support of governments that they are aligned with, as the Financial Times Blog rightly points out. The tactic used is generally to call for time while the Commission launches an investigation. This brings us to the second problem: the Commission only can investigate on narrow technical grounds, which allows for governments to make some concessions on these matters to lessen political pressure, while the measure is largely passed intact.

The Commission is equipped as a guardian of the treaties, but not as a protector of fundamental rights. To change this and to create a better culture for fundamental rights protection, it would be better for the Fundamental Rights Agency* to be empowered to assess the state of fundamental rights and compliance with the rule of law and EU values. Then it could recommend in a report what needs to be changed to bring a government back into line.

It would still be up to the Commission, Council and Parliament how they should act and if they invoke Article 7 TEU. Still, it is important that we move away from the culture of hiding behind technical requirements and changes and to a culture of debating the substance of protecting rights and the rule of law in the EU and the Member States. Even now European approval - or lack of sanction - carries a certain moral authority and legitimacy. We should make sure this is put to good use and not twisted and hollowed out to provide cover for subverting the rule of law. *The FRA's remit would probably need to be expanded for this.

Some notes on the UK's EU debate

After yesterday's post on the UK and the European Social Contract, which was written from the general point of view of the Member States and the compromises between their national social contracts, I thought I'd just note a few aspects of the current public debate in the UK on the EU. I'll not cover any specific groups, but just the general state of the public discussion.

1. Renegotiation for...? Despite all the talk of bringing back powers from Brussels, there isn't exactly a clear idea of what powers should be brought back. Social policy seems to be the only area that's highlighted, but the tone of the debate suggests that it matters more that a big victory is achieved by the UK for bringing a policy area home (and that the papers can run with this), rather than there being a specific goal. While it's understandable that the government wants to keep its cards close to its chest so it's easier to claim a victory, if there's such a public groundswell against the EU relationship, it's remarkable that it hasn't crystallised into a key demand yet.

2. The Internal Market as an Ideal. The internal market is viewed as an ideal in isolation to the rest of the EU and simply as a free trade zone, whereas it's deeper than that and requires an extension of the national social contracts (into a form of European Social Contract like I argued yesterday) to maintain its legitimacy.

3. There is no set of plans or reforms that have been demanded for which repatriation of powers is necessary. This links into the previous points, since it's very vague what areas the government will seek to bring home, and the social contract aspect of the EU isn't fully understood (not that it is elsewhere, but there does tend to be a greater understanding of the connection between economy and society in these terms). How does the UK want to change its own social contract? There have been arguments in the UK over financial regulation and whether it should be made easier for businesses to fire people. The lack of ideas and debate about what the UK will be following this repatriation of powers is amazing. What is the UK prevented from doing - or what kind of country is it prevented from being?


4. A referendum on a negotiated settlement could easily fall prey to a Eurosceptic (right) - (ambivalent/more pro-EU) left-wing alliance too. Without a clear sense of direction or purpose over what the UK will do or become with repatriated powers, there is a danger that a referendum would fail due to an alliance between Eurosceptics who reject it as too weak, and those who fear that the national social contract will be redrawn in a way they don't want. I would guess that as the debate becomes more specific over policy areas (e.g. social policy), there will be more questions raised over what will be done with these powers (e.g. maternity leave). It will become easier to paint the renegotiation as an attempt to achieve deregulation and a shrinking of the state, and this may feed in to the referendum campaign.

5. Assumption of alliances. I mentioned this yesterday that for renegotiation there is an assumption that the Northern Europeans want the UK in the club to balance out the others and will help the UK with its deal. However, if the UK withdraws from more legislative areas or sets that as its goal, then it signals that it will be a less useful and influential ally in the future for these countries, making it less attractive for these Member States to spend their political capital in Britain's favour.

It seems to me that there needs to be a debate on how the UK wants to change itself and how it sees itself as a country before it decides how it wants to change its relationship with the EU.

UK renegotiation and the European Social Contract: Free-rider Status?

Today Open Europe argues, on their blog and in The Telegraph, that the Norwegian model is a bad model for the UK to pursue, and that the British government should try to negotiate better terms within the EU rather than leaving to join the looser EEA. In arguing this, Open Europe take the argument of those who support either the status quo or further integration - that EEA membership or a Swiss model relationship with the EU would lead to a loss of political influence but require high levels of acceptance of rules decided in Brussels - and uses it to support the argument that the UK can get a special relationship within the EU. The UK, the argument goes, is such an important market, and Germany and other northern countries want the UK to remain inside the EU as part of a market-liberal alliance, that the UK can win a place as a member of the internal market, but opt-out of pretty much everything else.

This misses the point of what the internal market - and the EU - actually means to the rest of the Member States.

Back in the winter, when David Cameron wielded the British veto on treaty change, there was a political storm over whether Cameron negotiated well or not, but also a wide acceptance that what the UK asked for was reasonable. I argued that it wasn't, given that it was reversing integration in the internal market and that it would run counter to even the interests of the more traditionally UK-aligned Member States. In the UK the EU is portrayed as a free trading agreement that has run out of control, but the internal market itself is more than that, and the fact is that the rest of the EU needs to exist to politically support the internal market.

The internal market goes beyond a free trade agreement and a customs union because it's not just about getting rid of tariffs at the borders, but about creating an economic and legal space where businesses and people can move and work and provide goods and services without obstacles being thrown up by different regulatory systems. This means that there needs to be some harmonisation and some mutual recognition of rules and standards.

Which brings us to the "European Social Contract". Yes, despite all the fallout and arguments of the Eurozone crisis, I would argue that there is a basic social contract at the heart of the EU, which is also important to ensuring that the internal market has the political legitimacy to exist. The internal market covers a massive economic space and its regulation has social, economic and environmental consequences. Given the post-war social contract in Europe - essentially that the state has a place in ensuring the social welfare of the people both as a moral duty (it's seen as part of "what the government does", and in order to provide a bulwark against extremism and social instability - and a crude deregulation of markets within a European space would threaten national societies and their identities. The social and environmental legislation and the elements of redistribution that exist in the EU are an attempt to preserve this social settlement while unlocking the economic potential of such a large continental market (we'll ignore the history of integration being seen as a way of ensuring peace).

While the internal/single/common market has been elevated to an article of faith in the UK, really it relies on the social, regional developmental, redistribution-orientated and environmental faces for its political legitimacy. Would the other Member States not only be willing to give the UK full access to the internal market and let it leave the areas that sustain its political legitimacy, but also let it retain its political influence in votes in Brussels? It's a hard bargain to drive to say that you will have full benefits in the areas you like, but opt out of all other obligations. I don't think other Member States would be willing to open up their markets fully to a country that will not accept its part of the European Social Contract. It's up to Britain if it wants to reduce workers rights and social and environmental protection, but why should the other Member States provide the UK with unfettered access to the internal market if it does?

This is not asking for second or third tier membership, this is asking for Free-Rider Status.

The argument that the UK is too important to the more market liberal Member States to let Britain leave - as has been argued elsewhere too - also forgets to touch on the UK's political weight and influence as a Free-Rider Nation. The UK - and probably its MEPs - would not have a say in the areas that the UK opts out of. What use is the UK as an ally here if it doesn't have a vote? This is another aspect of the UK's negotiating position that is just not recognised in the British debate: the more the UK opts out or talks about opting out, the less valuable and reliable it is as an ally for the other Member States. After all, why should you put your political capital on the line for a country that's half out the door and in little position to help you in return?

There's no such thing as a free lunch, and in the EU there can be no such thing as a Free-Rider Nation.


UPDATE: The Centre for European Reform explores the Norwegian and Swiss options in more detail.

ACTA rejected in the European Parliament

A victory yesterday for the Parliament and the demonstrators across the continent who have been keeping up the pressure against the Anti-Counterfeit Trade Agreement: the treaty was rejected by 478 votes to 39, with 165 abstentions. A conservative amendment to send the treaty back to committee and wait for the ECJ judgment on the treaty's compatibility with EU law was also rejected leading up to the vote, resulting in right-wing MEPs abstaining from the vote - supporting the treaty, but afraid to nail their colours to the mast in the face of public controversy. Though 22 Member States have ratified the treaty, the approval of the EP was needed before it would come into force anywhere in the EU.

The public controversy and campaign against the treaty is now the model for using the Parliament to make the EU more democratically accountable. It was not just an online campaign, but included demonstrations all over Europe, and political pressure building through the national parliaments. It helps that the issue was one of online politics, with a constituency that would probably find it the easiest to mobilise across borders. Will we see other such European civil society campaigns? Digital and civil rights related issues will probably remain the most natural campaign issues. When it comes to the digital marketplace and the internal market, as well as crime and child protection on the internet, the EU is a main actor given that these technological developments have appeared and grown as parts of the economy during the internal market's existence, and since purely national regulations don't make quite as much sense as an approach here.

Direct campaigns on this scale are quite difficult to create and sustain, and generally seem to be best directed towards the rejection of a draft law or treaty, and don't often happen in many states. So will this help stimulate the opening up of the European Parliament? So far many of the Parliament's stands have centred mainly on its place in the institutional triangle with the Commission and Council. While there was some institutional self-interest in this case (the EP wants to be more involved in treaty negotiations), the political groups took their positions to garner public support. It was perhaps also an ideological battle since the right in the Parliament was broadly in favour of ACTA or an ACTA-like agreement, while the liberal and left wing groups were more ready to oppose it. Environmental and economic issues are also important and high on the public's agenda, but it is harder to build a campaign for such complicated policy areas for a positive change rather than rejecting proposals. Hopefully the ACTA case will spur political and electoral innovation by the Europarties and parliamentary groups by demonstrating that there is a politically aware public to tap into.

ACTA itself may be dead, but governments are likely to continue to try to push further and further on enforcement mechanisms for copyright without a reappraisal of copyright in a digital world. It's a very important debate, and it would truly be impressive if the European Parliament tried to take a lead in the debate on how to adapt copyright so creativity in the economy and the arts is encouraged and promoted, yet prevent the misuse of copyright in the courts and in society in a way that actually dampens creativity and could in some cases endangers free speech if badly enforced. It's not enough to halt the mindless and crude enforcement of a flawed system; we need to be proactive in adapting.

If the European Parliament is smart, it can capitalise on this and serve as a platform for an important 21st Century debate. And if they don't, we should force them: we've proven we can have an impact on the European stage.

Eurozone politics should not be a game of football

It was a tense summit last week, but it had a clear result: 1-0 to Hollande. Or was that Merkel? Maybe Monti?

After last week's summit the German papers have turned to rage - how could Merkel give in to Hollande on banking union?! - to pride - aha! of course Merkel tricked Hollande into a banking union with supervision from the ECB! This is the most depressing part of European summitry: the debates are so childish and miss the point entirely.

The deal made last week (PDF) is the same as the deal that stands this week. The same deals are known, there have been no further explanations. But the point-scoring narrative rumbles on for days afterwards, instead of actually asking if the proposed system will work, or if something else needs to be done.

The Eurozone leaders are slowly, ever so slowly, inching their way towards closer economic and political union in order to deal with the crisis. Clearly the weight of the financial sector of the Eurozone cannot be contained in the periphery, which does not have the fiscal firepower to essentially deal with the European banking crisis. Loans provided on the basis of austerity conditions funnelled through state coffers to the banking system - and funded for by taxpayers through national austerity programmes - will not work, never mind the horrific social costs. A banking union is one necessary part of economic union, in order to divorce the European banking system from a patchwork of sovereigns too individually small to prevent its collapse. This will be the easy part; the second part is much, much harder.

Closer economic and political union in the Eurozone is needed to ensure that there is enough solidarity and support between Member States so that states can recover from economic and state finance crises without threatening the Eurozone system, and also ensuring both the responsibility of the Member States and securing the social cohesion of national societies (and therefore the Eurozone as whole politically). This requires a delicate balance between the democratic rights of the Member States to determine their own economic and social policies, and on the democratic rights of the Member States not to be punished for the democratic decisions of other Member States and their fall out.

Merkel and the German government are coming from the point of view that discipline and austerity are necessary, otherwise solidarity will be taken advantage of, with the problem being that the sort of austerity and discipline being demanded is asking the impossible. As brilliantly explored over on the Social Europe Journal, Greece has undertaken more "adjustments" in a year than Germany did during its entire programme of reforms in economically good times. The focus on the Fiscal Stability Treaty is also a narrow-minded approach which overlooks the actual course of the crisis in many countries: countries like Ireland and Spain had surpluses, while Germany and France broke the rules, and this has not translated into a deeper crisis in France and Germany than in Spain in Ireland. Holding ever more rigidly to the rules will not solve anything.

On the other hand, there cannot be a blank cheque of solidarity, it needs to be built through a system where there is true give-and-take. Everyone will make concessions, and Member States will have to undertake to keep government debt in general low as well as federalising certain policy areas, in return for fiscal support and stimulus in times of trouble.

France, and other countries, have trouble with the European F-word, but there needs to be more democratic accountability at the European level, and the system needs to be reliable, transparent and agreed upon for it to gain public trust. Hollande seems to be moving towards thinking of the political side of the union, though it could also force an answer to the West Lothian question in the European Parliament.

The step-by-step approach of Merkel is a failure. We cannot continue with a drip-drip trickle of treaties, summits and agreements that edge us towards a solution without ever getting us there - a method corrosive to public trust. It's time to be clear about the options and to discuss how far we are willing to go in the Eurozone. In the end the public needs to be brought along in all Member States, so we all need to confront the concessions we need to make.