European Stability Mechanism before the ECJ

Irish independent TD (MP) Thomas Pringle’s case against the European Stability Mechanism has reached the Court of Justice in Luxembourg, referred there for interpretation on 3 questions by the national court. The 3 questions, are:



(1) Whether the European Council Decision 2011/199/EU of 25th March 2011 [PDF] breaches the EU Treaties or general principles of EU law (i.e. is it valid law?);

(2) Whether Eurozone Member States are entitled to enter into extra-EU Treaties on the Euro, and if this infringes on the EU’s exclusive competence over the Euro; and

(3) If, should the European Council decision be ruled valid, Member States are only allowed to enter into (ratify) the ESM Treaty following its entry into force (1st January 2013)?


The case will be very important for 3 reasons. First, it will help decide if the stability mechanism is compatible with EU law; second, if non-EU treaties can be used to change the governance of the Eurozone or if the EU’s exclusive competence over the Euro means that the EU treaties would have to be changed; and third, the extent to which the European Council can amend the EU Treaties. All obviously important not just for solving the economic crisis, but for how the EU and the Eurozone is governed generally.


RTÉ has reported that all 27 of the court’s judges will sit on the panel for this case – an unprecedented for a case referred to the court by a national court. On the proceedings before the court, RTÉ reported:

“Michael Cush SC for Ireland said the ESM amendments were "fully compatible with the treaties".

He countered that the ESM "will not affect the union's exclusive competence regarding monetary policy for the euro area nor will it increase the limited competence that it has in respect of the coordination of the member states' economic policy."

Thomas Henze, a lawyer for the German government, said there was no indication of any infringement of EU law.

He countered Mr Rogers' assertion that the ESM should not have been ratified when the relevant treaty, the Fiscal Treaty, did not come into force until January.

[...]

After three hours and 30 minutes of questioning, the ECJ Judges asked legal representatives to stand over their statements.

Most of the questioning of the bench was focused on the oral statements from the European Commission and the European Counsel, although Mr Rogers was called to clarify and justify his arguments on several occasions.”

The ruling is expected by the end of the year in what could be a landmark judgment.

Agreement to agree on maybe agreeing. Perhaps.

The European Council once again agreed to agree on a Banking Union. It says a lot about the state of EU politics that this is a positive sign. The Guardian commented:

"What we are left with is a political fix which remains vulnerable to the fiscal equivalent of the next extreme weather event to hit the eurozone. The ESM, if it ever opens, is a cash machine. It will not solve the underlying factors that caused the mounting debt in the first place. That extreme event could come from a halting Chinese economy or double-dip US recession. Or it could come from mounting social protest. Europe-wide protests will grow because it is now clear, even to those who proposed radical cost-cutting at the G20 summit two years ago, that austerity is not working. The amputated limbs of the euro economy are not growing back of their own accord."

It's right to point out the vagueness and vulnerability of the agreement, but I'd go further: it won't take an extreme economic weather event to throw the agreement into doubt. Where was the extreme weather when Germany, Finland and the Netherlands tried to bury the June Agreement in Koenigstedt.

Yesterday the Journal.ie reported that the Irish dimension to the June Agreement may be revived:

"TAOISEACH ENDA KENNY and the German chancellor Angela Merkel have issued a joint statement affirming that Europe remains committed to splitting Ireland’s banking and sovereign debts.

[...]

The two “reaffirmed” that deal, where heads of state told the 17 Eurozone finance ministers “to examine the situation of the Irish financial sector with a view to further improving the sustainability of the well performing adjustment programme”.

The statement said Ireland was recognised as “a special case”, given the circumstances under which Ireland was frozen out of the bond markets, and said the finance ministers would take this into account when examining how to improve the terms of Ireland’s bailout deal."

While this is welcome, it still represents a regression from the deal struck in June: what is the purpose of the banking union if it doesn't divorce sovereigns from the banking debt, and how can it help in the current crisis if it doesn't affect the banking debt of Spain and Ireland? That there was a need to negotiate to return to a partial form of an earlier agreement demonstrates the farcical depths to which European politics has fallen. How can Member States progress on solving the crisis if they now have to work hard to ensure that the deals made aren't unravelled by ad hoc groups of Member States?

The European Council was hardly a shining beacon of good decision-making before, but this naked and self-defeating display of national interest politics is simply something else.

Merkel and Barroso's Speeches to the EPP Congress

I haven't had the time to look at much of the European People's Party's Congress this week, but I saw the speeches of Merkel and Barroso.

Angela Merkel's speech echoed some of the "strivers" rhetoric of David Cameron's speech, though EPP parties in general seem to be able to carry off compassionate conservativism a bit better by integrating the "social market economy" into their rhetoric.




I have to take issue with Merkel's approach on democracy, however. It's not just about demonstrations or press freedom (not that all EPP parties have had a spotless record on the press), but about influencing policy. The calls by Merkel and Schaeuble for rigid budgetary rules and therefore dilution of national democracy is not the way to handle the crisis: Eurozone solutions should focus on preserving national democracy, and deepening European democracy where there needs to be common policy.

Barroso, who could throw his hat into the ring to be the EPP's candidate for a third Commission Presidential term, also spoke at the Congress:




Barroso stressed that the crisis was caused by a lack of regulation in the financial sector and public debt (only partially right when it comes to Ireland and Spain), and pushed for more integration. He pitched for the EU institutions to retain their current structure and not be divided because integration should be seen as a way to deepen solidarity, "...and not as a way of creating new walls because in Europe we definitely need no more walls".

Barroso used the opportunity to drum up support for the current Commission programme on EMU reform. He also called for support for the EU budget as a way for investing in growth, and tried to portray EU spending not as welfare, but as money for common objectives. He'll have a hard time building his "coalition for growth"...

Nobel Prize Collection

As postscript to the award of the Nobel Prize to the EU, it's been decided that the presidents of the 3 EU institutions - Commission, European Council and Parliament - will go to collect the award in Oslo. It's not been decided who will give an acceptance speech.

I'll not spill any more digital ink over this, but clearly there needs to be a ceremonial "head of the EU" status given to one of these posts since for such situations because the current arrangements aren't working (the Lisbon Treaty hasn't proven a solution to the representation problem here). It would make sense to give it to the Commission President, I think, with a protocol for when it is the whole EU that needs to be represented, and not just the European Council.

Schaeuble's Currency Commissioner

German Finance Minister, Wolfgang Schaeuble, floated the idea of a currency commissioner in the run-up to this week's European Council summit. The currency commissioner would be able to veto national budgets, and would be independent of the rest of the College of Commissioners (the Commission takes decisions by majority vote) to "depoliticise" the role.

This idea is clearly bonkers. You cannot "depoliticise" the fundamental matter of national budgets, because you cannot pretend that budgets and economic issues are simply matters of technical wizardry, with expert options being implemented for desired outcomes - desired outcomes are political matters, and deserve a meaningful airing in a publically accountable body: the national parliament. While there is an argument for certain budgetary contraints on Eurozone Member States to ensure the functioning of the common currency - in exchange for solidarity between Member States, it should be stressed - at the end of the day Member States should be able to set their own budgets.

Rather than trying to come up with tighter and more rigid and better enforced rules for the Eurozone, we should be working to divorce banks from the sovereigns to make banking a European matter within the Eurozone, and creating a system where Member States can go bankrupt, without endangering the system and with some support for recovery after bankruptcy. A flexible and politically accountable system would work much better than Schaeuble's approach - there needs to be political accountability for national budgets at the national level, and at the European level for those elements of European solidarity.

Even on the European level of accountability, Schaeuble's plan fails: an independent currency commissioner would be free of the restraint of the rest of the college of commissioners (and here the issue of the nationality of said commissioner would come into political focus), and the ability of the European Parliament to hold him or her to account is also muddied. Could the EP sack this independent commissioner or only as a part of the Commission as a whole? Where's the balance between independence and accountability here?

Schaeuble's approach here reveals an underlying philosophy that's plan wrong. Money and budgets are political, and there needs to be democratic accountability and participation both nationally, and Eurozone-wide for the Euro to work. Once Schaeuble and others take account of this basic fact we might get to see more realistic and workable plans being suggested.

Eurozone Exit of the crisis countries could cost world €17 Trillion

As the European Council meets for its summit to decide on the way forward for the Eurozone based on Van Rompuy's recommendations, Die Sueddeutsche Zeitung has reported on a study by the Bertelsmann Stiftung, which found that if the crisis-hit countries of the Eurozone left, it would cost the major world economies €17 Trillion up to 2020:

"Bei einem Austritt Griechenlands aus dem Euro hätten die wichtigsten Volkswirtschaften bis 2020 einen Verlust von 674 Milliarden zu tragen. Ein Ausstieg der Euro-Länder Spanien, Italien, Griechenland und Portugal könnte sogar bis zu 17,2 Billionen Euro an Wachstumsverlusten führen, schreibt die Stiftung.

Das höchste Minus beliefe sich in Frankreich auf 2,9 Billionen Euro, in den USA auf 2,8 Billionen Euro, der Verlust in China auf 1,9 und in Deutschland auf 1,7 Billionen Euro. Die wirtschaftlichen Einbußen in Deutschland wären dann mit 21.000 Euro pro Kopf teilweise noch höher als etwa in Griechenland mit mehr als 15.000 Euro.

[Own Translation: A Greek Exit from the Euro would cost the major economies €674 Billion by 2020. An exit by Spain, Italy, Greece and Portugal could cost up to €17.2 Trillion in loss of economic growth, the foundation writes.

The biggest lost would be in France at €2.9 Trillion, in the USA at €2.8 Trillion, the lost in China would be €1.9 Trillion, and in Germany €1.7 Trillion. The economic loss in Germany would be €21,000 per capita, which is higher even than the pro capita loss in Greece at over €15,000.]"

The isolated withdrawal of Greece would be manageable, but would also trigger a recession that would spread to the US and China. The Bertelsmann Stiftung also says:

"Für Griechenland wäre das Szenario mit einem Staatsbankrott, einer massiven Abwertung der neuen griechischen Währung, Arbeitslosigkeit, Nachfrageverlusten u.v.a. verbunden, was sich bereits schnell auf seine direkten Handelspartner auswirkt. In dem südeuropäischen Land selbst würden sich die anschließenden Wachstumsverluste bis zum Jahre 2020 auf 164 Milliarden Euro oder 14.300 Euro pro Einwohner belaufen. Die 42 wichtigsten Volkswirtschaften der Welt müssten in der Summe aber bereits einen Verlust von insgesamt 674 Milliarden Euro verkraften.

Da aber nicht auszuschließen ist, dass ein Euro-Austritt Griechenlands massive Folgen für weitere südeuropäische Krisenländer hätte, wurden die Berechnungen auch auf diese Szenarien ausgeweitet.

[...]

In ihrer Gesamtbewertung kommen die Autoren zu dem Fazit: Ein zunächst isolierter Austritt Griechenlands und sein Staatsbankrott wären zwar ökonomisch verkraftbar, könnten aber mit ihren schwer kalkulierbaren Folgen die Weltwirtschaft in eine tiefe Rezession stürzen, die auch vor außereuropäischen Volkswirtschaften keinen Halt machen würde. Neben den rein ökonomischen Konsequenzen ist auch mit erheblichen sozialen Spannungen und politischen Instabilitäten zu rechnen – vor allem in den Ländern, die aus dem Euro ausscheiden, aber auch in anderen Volkswirtschaften.

[Own Translation: For Greece a bankruptcy scenario along with the devaluation of a new Greek currency would mean unemployment, loss of demand, etc, which would have a rapid impact on Greece's direct trading partners. In Southern Europe the economic loss up to the year 2020 would be €164 Billion, or €14,300 pro capita. The 42 biggest world economies would have to reckon with a total loss of €674 Billion.

However it must not be rulled out that a Greek Exit would have massive consequences for the southern crisis-hit countries, so the calculations were applied to these further scenarios.

[...]

Overall, the authors came to the conclusion that an isolated Greek Exit and its bankruptcy would be economically manageable, but the unpredictable consequences could lead to a deep global recession that would not stop at Europe's borders. Apart from the purely economic consequences, there are also the high social tensions and political instability to consider - especially in the exiting countries, but also for other economies.]"

Not a time to be rowing back on the progress that's already been made.


Update: The EUObserver has an article on this in Englisgh here. And the calculations were done by Prognos for the Bertelsmann Stiftung, rather than by the Stiftung itself.

Why not have a referendum on justice co-operation?

In the UK the Conservatives have been blundering about with EU policy again. Home Secretary Theresa May, who talked about rolling back the free movement of people not so long ago, is now talking up the possibility of the UK opting out of the area of freedom, justice and security altogether. The coalition LibDems have not exactly killed the idea, but pulled the rug from under May when he said that no decision had been made, leaving May to provide the House of Commons with an empty statement about the government's "current thinking".

There's a lot of comment about how short-sighted it is to pull out of justice co-operation, and on how the Conservative approach to the EU has been a shambolic case of issuing announcements with little thought and then scrambling to deal with the aftermath. While I agree that opting out of the JHA area en bloc is a terrible idea that would weaken the UK's security, I'm confused over why the Tories have been so inept over this issue: why not have a referendum on justice co-operation?

Seriously. If Nick Clegg will only go as far as saying that nothing has been agreed yet (suggesting that the LibDems might be reconciled to the opt-out if the UK opts back into several JHA measures), and ministers are going to engage in such policy kite-flying, then why not put the issue to the people or make noises about doing so? It would give the people a referendum on the EU, let people express an opinion on at least one aspect of the EU relationship that the Conservatives want re-balancing (and why not gauge opinion on what aspects of the EU the public want to buy into?), and would allow the Conservatives to partly deliver on their promise of a referendum on the Lisbon Treaty (in this case opting in or out of the post-Lisbon justice area).

The Home Secretary would not have been able to make a statement straight away, but the Conservatives could have started agitating for a referendum, and there is general agreement that some EU referendum has to happen sometime soon. It would have given the Conservatives space to test waters and refine their position and avoided statement grandstanding while winning a political point on the issue. Sounds like a better strategy than the current farcical posturing.

So why not have a referendum? Perhaps it's because it would be awkward for the party of law and order to campaign for opting out of law and order co-operation - maybe it's just simply politically uncomfortable as a gamble, with little likelihood of success. It's hard to sell the idea that the justice system won't suffer from the opt-out because we'll go back to the EU and negotiate specific opt-ins: not exactly a great rallying cry. And even a total opt-out with no subsequent opt-ins would be a hard sell.

In other words, if you hold a referendum on justice co-operation, the Europhiles would probably be the winners. Now that would be a Tory nightmare worse than their own bungling.

OLAF investigation brings down Health Commissioner Dalli

An OLAF investigation into attempts by the tobacco industry to influence EU legislation has led to the resignation of Maltese Commissioner John Dalli, who had health as his portfolio.

The investigation was into whether a Maltese entrepreneur had used contacts with Dalli to influence future proposals on tobacco legislation. The complaint to OLAF was launched by the company Swedish Match (a tobacco producer) in May 2012, and the report was delivered to the Commission yesterday. The report found:

"...that the Maltese entrepreneur had approached the company using his contacts with Mr Dalli and sought to gain financial advantages in exchange for influence over a possible future legislative proposal on snus. No transaction was concluded between the company and the entrepreneur and no payment was made. The OLAF report did not find any conclusive evidence of the direct participation of Mr Dalli but did consider that he was aware of these events."

So while Dalli did not accept any bribes, OLAF considers that he was aware of these dodgy dealings. It is now for the Attorney General of Malta and the Maltese judiciary to decide on further action.

Dalli rejects the allegations.

Employment and Social Affairs Committee on Economic and Monetary Union

The European Parliament's Employment and Social Affairs Committee adopted an opinion last week on its position on economic and monetary union, pushing, naturally enough, for employment and social matters to be given more weight when it comes to European economic policy. You can read it here: PDF. The non-binding opinion was adopted on a vote of 27 for, 16 against and 1 abstention.

The Committee's basic attitude is reflected in this paragraph (p.6):

"...any upgrade of the role of the Commissioner for economic and monetary affairs will need to be echoed by an upgrade of the role of the Commissioner for employment and social affairs so as to ensure a balanced approach of the social market economy, in the same spirit the EPSCO Council [Employment, Social Policy, Health and Consumer Affairs Council in the Council of Ministers] should be upgraded and organized in a euro zone formation."

The opinion calls for minimum social benchmarks and for the Commission to look into the feasibility of introducing a minimum unemployment allowance for the Eurozone. The Committee also calls for an "integrated employment and social policy framework", and that increased worker mobility should be complimented with access to social protection and the portability of pension rights.

The recommendations reflect some of the amendments in the parliamentary reports on the 2-Pack of legislation: a Social Pact, employment and social benchmarks to make up part of any troika programme, for there to be a representative of the International Labour Organisation added to the Troika, and making the European Semester more accountable to the European Parliament. Cooperation on tax is also cited as necessary to prevent the free movement of capital from undermining tax systems - probably the most controversial idea if it gained any ground in public debate: tax competition versus certain common bands to prevent an undermining of tax systems within the internal market.

The European Conservatives and Reformists hit out against the opinion:

"The document also called for a minimum unemployment allowance and integration of civic initiatives, trade unions and other social groups at all levels of political decision-making. Such a populist proposal would, however, cut back on powers of democratically elected representatives in favour of lobbying organizations."

While I don't agree with everything in the opinion (there's a crazy paragraph on linking access to capital to the potential for employment in the investment) , I would support support some minimum social standards. The problem we face at the moment is that the policies at the EU level are far too focused on sovereign debt and the banking system, to the determent of employment and social policies (and the internal market has by definition a social dimension) - and while introducing minimum social standards is necessary to make the internal market work for all and to help preserve the Member States' own powers in this area, there needs to be political debate and support for these programmes.

I hope the parties that voted for this opinion will put these ideas and policies into their manifestos come election time so we have a chance to vote on them.

European Congress Season

We've just had the Party of European Socialist's Congress at the end of September, but the congresses of the other Europarties are still coming up. The European People's Party will hold their Congress this week in Bucharest on the 17th and 18th, which you can follow here.

The other Europarty Congress dates are:

European Liberal Democrats: 8th-10th November, Dublin.

European Greens: 9th-11th November, Athens.


I wasn't able to find Congresses for any of the other political parties, but I did find that the European Alliance for Freedom (part of the anti-EU Europe of Freedom and Democracy Group in the European Parliament) held a Congress on the 24th-27th June in Malta. You can find it here, but there doesn't seem to be much in terms of policy or tactics that came out of it.

So though there are 12 recognised Europarties as of 2012, there only seems to be Congresses for a minority of them (though they are the big mainstream Europarties). Their activity needs to ramp up next year in the run up to the 2014 election if they're to prove their worth.

The Nobel Peace Prize Debate

The news that the EU will be awarded the 2012 Nobel Peace Prize was quite a surprise, and it caught a continent off guard. Praise for the EU? The constant drip-drip of bad news and mini-crises bubbling up as the Great Recession rumbles on has made any major show of support for the idea of European unity, beyond crisis-fighting necessity - almost unthinkable. It was a controversial decision, and I've mixed feelings about it.

Ironically, I wrote a post two months ago arguing that pro-Europeans should move away from arguing for the EU based on its peace mission, and now it's the focus of continental debate. While I agree that the EU deserves the prize, I do have a few reservations about the timing and the manner of the award.


The EU deserves the Peace Prize

The EU has been amazingly successful as a peace project in Europe, ensuring the reconciliation between France and Germany, it has helped anchor European states in democracy and it has provided a structure of rules and constant negotiation that promotes and secures a culture of problem-solving that rests on diplomacy and even transnational democracy (if a flawed transnational democracy). As I argued in my post on retiring the pro-European peace argument, purely military alliances do not build such a culture and allies, such as Greece and Turkey, could even have their relations collapse and move towards serious conflict.

It's important to stress that peace - and particularly a sustainable, lasting peace - isn't simply the absence of war, but the presence of a working system and culture that brings countries together in a way that solving problems peacefully and cooperatively becomes not just more workable, but the norm. The EU provides a system of cooperation and negotiation that is constant, building a community of values and interests that helps bind Europe together and sustains that culture of peace between the Member States. Of course peace wouldn't collapse tomorrow if the EU disappeared, but without a sustainable system the norms underwriting peace would be eroded. Like the burning of financial regulation and the gradual disappearance of a culture of restraint within the financial sector that could lead to abuse and a hollowing out of the system, the peace in Europe requires constant maintenance.

The arguments against the EU deserving the prize seem weak to me. That the EU did not bring peace to the Western Balkans in the '90s is a low point in its history, but the EU didn't (and doesn't) have that kind of foreign policy and defence power if the Member States don't act. That's not to say that the EU would have done a fantastic job if it did have those powers (who can guess what might have happened?), but the EU's capabilities for promoting peace outside its borders are restricted to the carrot of enlargement, peacekeeping, and foreign aid - not dealing with hot conflicts. The soft power brought by the EU to the former Yugoslav states through the promise of enlargement - integration into the peace and economic system of the continent - has helped boost the movement toward the democratic and peaceful European mainstream in those countries.

And while I feel that there are issues with the timing, I don't think the EU deserves the award any less now for what it has already achieved. The current economic policies may be wrong, but the mission of creating a Europe where war is unthinkable has been largely achieved thanks in large part to the EU.


Problems with timing and intent

Though there's peace between the Member States and no suggestion of armed conflict, the social problems that have scared the lives of millions within the EU as a result of the economic crisis and misguided economic policy led by the European Council makes the award ring hollow. Though the EU deserves the prize for its work, the motive behind the award seems to lend the EU some political capital to help it solve the crisis. A Nobel prize awarded to boost peace efforts is by definition controversial and is vital and necessary work for the Nobel Committee. But here the questions for resolving the crisis are essentially questions of domestic policy, and I think it's a bit too far removed from the classical peace building work. It would have been preferable if the award was given in circumstances that better recalled the good work of the EU, rather than being delivered as a pointed reminder that we risk messing up our continent and the global economy.


Highlighting the EU's Shame

Increasingly, the intended message behind the prize seems to me to shame the EU: it has achieved a lot, and it could achieve more by way of solving its own crisis, but so far it is failing. Pro-Europeans should not see this simply as a boost to the credibility of the EU (as if credibility could be so easily boosted), but take seriously the challenge of conflict resolution. The current EU system is failing at resolving the conflict and tensions within it, and the solution applied to the crisis should not just be about finding the right technical remedy, but in fashioning a system that all Member States and citizens can buy into. This means a greater European democracy, baked up with substance - a project not to be left to elites, but dependant on citizens too.

Using the Nobel prize to help boost a political position that is largely domestic (as in the case of awarding Obama with the prize), devalues the Nobel Prize. Even though the peace aspect is less indirect in this case, it's still a bit of a stretch in the current climate. The EU deserves the Peace Prize and it needs a shot in the arm, but it's unfortunate that it was the Nobel Committee that felt it had to take it upon themselves to make an argument for the EU. We should be doing better than this.

Activity Report of the Socialists and Democrats

At the PES Congress the Socialists and Democrats Group in the European Parliament submitted its activity report (PDF). It gives an interesting snapshot of how the parliamentary party views itself, as a party of opposition within the EU institutions.

The poor election results of 2009, the dominance of the EPP and Liberals in the Council and Commission, and the failure to select a candidate for the Commission within the PES have cut deeply, and seems to be the motivation behind a lot of the changes within the PES recently. The need to increase coordination between PES ministers before ministerial meetings (like the EPP and Liberals do), and to promote dialogue between national parties and national parliamentary parties to help build a workable alternative comes across very strongly in the report.

It's good to see that there is an awareness there of the challenges the PES and S&D face in order to increase their representation across the EU, and, more importantly, it's good to see that the direction is towards a more coherent party that can deliver a political alternative at elections. Easier said than done, but it's an important debate for the party and political group to have.

Cameron, Eurozone budgets and the Single Market

David Cameron signaled his support for the competence review to look at whether the free movement of people should be changed on The Andrew Marr Show on Sunday. You can watch the interview on BBC iPlayer if you're in the UK (the interview starts at 28.45, the European section starts at around 43.30).

The Home Secretary, Theresa May, first issued a call for the free movement of people to be looked at in order to control migration within the EU more. At the last election, the Conservatives promised to cap immigration and they've been criticised for ignoring the free movement of workers within the EU as the major source of immigration. Given the difficulties of the Tories in government, perhaps Cameron wants to repatriate Conservative voters from southern France and Spain!

Changing the free movement of people is a big ask. It's one of the fundamental freedoms of the single market (remember, the single market the Conservatives are supposed to be in favour of?), and the rights of free movement of EU citizens are already pretty much subject to a worker test (i.e. you have to be working or have worked in a Member State before you can claim benefits there). So it's not really a question of EU nationals "pulling their weight", but whether they should be allowed on the job market at all.

This really points to a shallowness in political thinking. The only form of regulation the Conservatives seem to believe in is regulating the movement of people! But the point of the single market is to have a more open and dynamic market where people can enjoy more goods, services, business and working opportunities. Tightening the screws on the movement of people within the EU is of little use if the aim is to protect British workers, because they will still be in a competitive European market, and businesses and capital can still move within the EU. It would be much better to improve the social side of the European Union to help drive social and economic standards up across the Member States to prevent a race to the bottom while allowing us to enjoy the benefits of the single market, including the free movement of people.

This just highlights the fact that the single market is a political project.

On the EU budget, Cameron said that the UK would veto any big increase. But he also indicated that a separate Eurozone budget may be required for fiscal transfers within the Eurozone, and that such a development would be welcome. It's a very interesting point, because a separate budget would mean that there would need to be a division in the European Parliament for it, and divisions within the EU institutions would raise further questions of diluting the UK's influence in the EU generally. And the official reason for the veto last year was that there weren't enough safeguards in the (not yet negotiated) Fiscal Compact to protect the UK's political influence in the single market! Cameron seems to be aiming for a kind of EEA membership within the EU: the perks of the single market plus the political influence without the obligations and financial responsibilities. He'll have a hard time walking that line.

PES Congress 2012

Last week the Party of European Socialists (which sits in the Socialists and Democrats Group in the European Parliament) held its 2012 Congress in Brussels. There they adopted a resolution "Together for the Europe we need" (PDF). The resolution set out what the PES has to do:

"We need to convince people that a progressive European Union can be the answer to their problems. To do this we need to be a confident, relevant and visible political force. We need to create the conditions for our own success. Revitalised active democracy is needed to move the European Union forwards. Since the beginning of the crisis we have seen that despite feeling alienated from the establishment people do want to engage with what is happening in their societies. They want their voices to be heard. We must listen to what women and men across Europe are saying."

What is the PES alternative?

Economy:

A Financial Transaction Tax is still the centrepiece of the PES economic programme as far as defined policy goes. The general economic strategy focuses on longer periods for budgetary consolidation and greater investment at the European level. The PES mention a European redemption fund as a possible measure to help solve the crisis, but it's merely referenced as a possibility so it looks like there's not a consensus on this point within the party yet.

Along with advocating stronger regulation of financial markets, the PES supports measures against tax evasion and avoidance (no defined policies are name-checked here). When it comes to the EU budget, the PES says:

"A long run solution to the crisis would entail tackling the strong divergences of the economies in the euro area through common economic policies and common investments in innovation, growth and decent jobs. We need to implement effective policies in order to halt the fiscal race to the bottom."

It's a good aspiration - I hope to see some policies on this coming out for the 2014 elections.

Employment:

Here the PES is more radical, calling for a €10 billion EU programme to aid employment and a Youth Pact to ensure that young people have access to further education or training:

"A European youth guarantee must be gradually implemented in all Member States, giving a state guaranteed right to every young woman and man to a new job, training or further education at the latest four months after leaving the education system or becoming unemployed. A European Employment Programme of at least 10 billion Euros must be introduced immediately, financing the creation of new jobs and supporting better education and training. A strong gender perspective must be included in this programme in order to prevent bigger gaps between women and men in the labour market and across society at a later stage. Improving the competitiveness of European companies is essential for Europe’s economic success. Instead of the Conservative recipe of weakening social protection and lowering wages, the following structural reforms must be pursued:

- Investment in education, training and active labour market policies should be increased.

- Europe´s industries must play a central and dynamic role in transforming our economies and developing our regions by fostering world-class innovation and green growth. Therefore, a reindustrialisation process must be launched. The manufacturing sector, especially Small and Medium Enterprises, as well as microenterprises - which represent a motor of the European economy, need to receive more support and a high-quality infrastructure must be built, for example on access to clean, reliable and affordable energy, broadband networks and transport. To this end, a growth-oriented review at EU level of the relevant state aid schemes is necessary.

- Energy and resource use must be reduced with an emphasis on reducing carbon emissions.

- More efforts are needed to support all dimensions of innovation and more resources need to be invested in research and development.

- The representation of male and female workers in companies must be strengthened, giving them an active role in the economy. We need to remove barriers to women's entry to the labour market. Furthermore, we have to provide women with equal opportunities to access decision-making positions within companies."

The Social Pact is another key policy, aiming to fix Member State and EU spending on education and training at 6% of GDP for Member States, and 6% of the EU budget, and preventing a race to the bottom on social standards within the EU. There are quite a few ambitious aims under the Social Pact heading.

Environment:

The PES wants to strengthen the European Emissions Tradings Scheme and the introduction of an EU Carbon Tax. They also note the need to ensure that the EU's biofuels policy does not harm food security.

Institutional Reform and Democracy:

The PES wants the European Parliament to be strengthened along with Economic and Political Union, and wants an effective European monitoring of democratic standards not only for candidate countries, but also for Member States. The PES has promised to produce concrete proposals for strengthening the European Parliament.

Foreign Policy:

The PES supports enlargement of the EU in the Western Balkans, and wants to extend its domestic policies (FTT, climate change, etc.) to the EU's multilateral relations, dubbing it a "Global New Deal".



As a political programme, it's surprisingly ambitious for a European political party in some areas. It's a good statement of principles, and it gives us a statement to track PES policy development with. Personally, I think that there needs to be a more social alternative presented at the next election - too often, the EU is seen just as a mix of the internal market and CAP payments, as if there should be not social dimension to the EU (and as if the internal market is not a social and political project in itself). The challenge for the PES is to produce a more detailed manifesto for the 2014 elections along with choosing a candidate for the Commission Presidency, and to present it through a credible European campaign - after all, the programme is only credible if the national parties are selling it on the doorsteps as a programme that they stand for on a European level.

The PES confirmed that it would select a candidate for the European Commission Presidency for the 2014 European Elections through party primaries.

An Emergency EU Budget

The Commission will table an emergency EU budget - a "supplementary amending budget" - to plug an estimated €10 billion funding gap across several EU projects, including Erasmus and the European Social Fund. Erasmus is probably one of the EU's most famous projects, funding the exchange of European students across the continent, but the European Social Fund is meant to deal with employment, and is linked with the Lisbon Strategy:

"In order to support the Lisbon Strategy the ESF adopted the following priorities in the 2000-2006 period:

• active labour market policies to combat and prevent unemployment
• equal opportunities for all in accessing the labour market
• improved training and education, as part of a lifelong learning policy to improve access to the labour market, maintain employability, and promote job mobility;
• a skilled, trained and adaptable workforce and new forms of work organisation
• entrepreneurship and conditions facilitating job creation"

The ESF takes up around 10% of the EU's budget, so to have such a key area "insolvent since the beginning of the month" is clearly a big problem.

The European Parliament has also backed the Commission's budget proposals for a 6.8% increase for the next 5 year budget, compared to the Council's position of an increase of 2.8%. It's been argued that the Lisbon Treaty and the projects voted for by the Council has added to the expense, while the Member States are unwilling to pay for the policies they bring in on a European level. The Member States have argued that the EU shouldn't increase its budget at a time of austerity.

It should be noted that the 6.8% increase in the budget would be an extra €9 billion - and if the EU's struggling to cover a gap of €10 billion in the budget, it's hard to see how programmes on employment and regional development won't be affected. The regional funds and funds aimed at aiding employment - like the European Globalisation Adjustment Fund - help the poorer and more crisis-hit countries in the EU. EU budget austerity will end up hurting those countries and regions that need it most, as modest as the help can be when the budget is only 1% of the EU's GDP.

Whether or not you agree with EU austerity, I think there is a good argument for adapting the timing of the EU's 5 year budget plan ("Multi-annual Financial Framework") to bring it closer to the European Parliament election cycle. Passing the budget is a main task of the Parliament, and if cuts or increases are to be made, then making it a more prominent part of the election campaign would bring more legitimacy to the process.

Quote of the Week: The Other Moral Hazard

From The Economist:

"There is a cost to delay and prevarication. It is harder for countries to reform without hope that their agony will end. Germany’s unwillingness to act except in the most dire moments condemns the euro zone to one acute crisis after another. In the short term Mrs Merkel may thus find herself fighting for re-election next year with the euro zone back in flames. In the longer term a chronic crisis is already creating permanent damage: prolonged economic stagnation and depression in deficit countries, loss of confidence in the credibility of governments and the future of the euro, and increasingly poisonous politics. Germany may fear the “legacy” costs of past mistakes. But it should also worry about the legacy of its hesitation and inaction."