Veto of Diminishing Returns

Back in 2010 I wrote about the then Dutch government's approach to the EU, and noted that it wasn't particularly fond of vetoes, despite the perception that they're better for smaller Member States to protect their interests. This is because when there must be unanimity, the bigger states can rely on their greater power to get a greater say since they don't have to be afraid of being outvoted. However the UK's veto policy is showing that the value of waving the veto around - the nuclear option in EU politics - doesn't really work for the big states either, and that use devalues the veto heavily.

But it's not just the use of the veto, it's how it's being used. It's ridiculous to announce the circumstances of when you'll use the veto before  negotiations, because if you declare yourself to be uncompromising, then it will be harder to find allies to hammer out a winning position - that process inherently means compromising. Aggressive use of the veto means that the UK becomes less attractive as a negotiating partner, and the focus will switch to building a majority with the rest. Which potential ally could be sure that a British PM could get their minor compromise through the British Parliament - would it not be better to spend time on building a majority that would be more useful in the annual budgets after the UK wields its veto? The majority position after the veto will probably be the basis for any final deal when it comes to finally hammering out the multiannual financial framework, so why waste time on an unreliable partner like the UK?

With officials considering just using the back-up annual budget procedures, which are decided by qualified majority voting, there's talk of EU officials trying to "find a way" around the British veto. It's not trying to find a way around it - the annual procedure is what happens when there isn't agreement and the vetoes are used. If a Member State walks in with hardline conditions and little room for compromise no wonder everyone else in the club turns to what the follow-up will be.

And this brings us back to pre-vetoing (or should that be premature veto-casting?): vetoes are their most effective when at the end of a negotiating process, at the early hours of the night, when everyone else is invested in getting things done that particular way. By pre-announcing the veto and giving the other negotiators time to get used to the back up procedures and situation - maybe even turning to negotiate on that basis - you effectively devalue the veto before you even get to use it.

The veto will also be devalued back at home. The hardliners who cheer every time the veto is used won't be long in complaining that it has no discernible effect whatsoever. This veto policy is not only ineffective for the British government on the European stage, but is poisonous to its European policy generally - it will lead to more paranoia that the UK is not listened to within the EU institutions, and grow more disillusioned by its lack of allies, all while missing the fact that negotiations are not simply about other people listening to you.

In any case, this blogger supports the rise in the EU budget, since there wasn't enough money for the last one, and the policy commitments made by the Member States need to be paid for.

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.

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.

Once again the day is saved...

...At least for now. It's hard to escape the feeling that each time an agreement is made at a European Council summit, it's only a matter of time (usually 3-6 months) before we're back in superhero mode again. Still, there seems to be something more to this deal than the simple bail-outs (or loans as they're normally called). The agreement's outline can be found here (PDF).

Greece.

First of all, Greece will get more loans - and more cheaply - to help fight its economic crisis: €109 billion. Structural funds and European Investment Bank funds will be directed towards helping Greece stimulate growth, and there will be some voluntary private sector involvement which will be for Greece only (a bizzare situation where creditors are seemly asked to take a partial default on the basis of what they can afford out of the goodness of their hearts).


And the rest...

All three countries will benefit from a interest rate reduction on the loans to 3.5% (for Ireland this is a 2% reduction), and the loans will have to be paid off in 15 years (at a minimum) rather than the previous 7.5 years. This should make it easier for the countries to implement their austerity programmes as it eases the economic and political pressure on the governments.

In Ireland the interest rate reduction is a great victory for the government. During the election campaign the (now) coalition parties had been campaigning for a negotiation of the EU/IMF deal for lower interest rates and for the burning of some bondholders. The restriction of voluntary private involvement in the scheme to Greece means that partial defaults on the private debts in Ireland are unlikely for now. I say for now because there's resentment in Ireland at having to pay back all the private debt and that the private sector is not taking any hit, and now it will be harder to argue morally, and politically, why there should be movement on this in Greece but not elsewhere. It gives the impression that being the golden pupil of the bail-out class doesn't win you any rewards. I wonder if the market will really see private investor involvement in the Greek deal as a one-off.

Also important is what Ireland might have conceded for this interest rate reduction, and hat it means for the Eurozone's economic policy. The Eurozone heads note:

"[W]e note Ireland's willingness to participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft directive (CCCTB) and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework."

Since Ireland's corporate tax rate has become iconic and synomous with Irish economic success, the scale of this concession will be heavily debated: is it just a commitment to negotiate? Does it commit us to common tax policies?

I actually think that this is a victory of sorts for Irish diplomacy (well, good use of circumstances at least). It seemed like a raise of Irish corporate tax might have been a condition for a drop in interest rates - in other words, Ireland would unilaterally raise its tax rates without European harmonisation. Since this would have been Ireland and not the EU deciding this, no referendum would need to be held. However, if it comes to a EU Directive, then the Irish government could hold a referendum on the subject, citing it as a constitutional requirement (although I doubt the extent to which it might be one). It's hard to know if that's exactly the case yet, but by having the discussion at a pan-European (or pan-Eurozone) level, Ireland's diplomatic position is improved, not least because it can try to build coalitions around its positions.


Biggest loser: ECB?

The Europeans Financial Stability Fund willbe given several new powers. It can:

"- act on the basis of a precautionary programme;

- finance recapitalisation of financial institutions through loans to governments including in non programme countries;

- intervene in the secondary markets on the basis of an ECB analysis recognizing the
existence of exceptional financial market circumstances and risks to financial stability and on the basis of a decision by mutual agreement of the EFSF/ESM Member States, to avoid contagion."

If the EFSF is able to intervene in non-programme countries to be a lender of last resort to the banks,* then this would dilute the power of the European Central Bank. It's been widely noted that the ECB's loans of €120 billion to Irish banks gave it a lot of power, and that it was a big player in the events leading to the Irish EU/IMF deal. With another institution, created without treaty change, able to provide alternative credit in a crisis, it could be a way of Member States preventing the ECB gaining a strong hand in their economies during times of crisis. It will be interesting to see if this will change the institutional balance in the Eurozone.


*Technically it can't lend directly to the banks, but it lends to the Member State who then lends to the banks. This would also be done at a higher interest. It also means that there are aspects of EFSF loans to banks which make them less attractive than ECB loans, but it does show how wary the Member States are becoming of the ECB's power if they've created a way of circumventing its role as a lender of last resort, even in non-programme countries.

Van Rompuy, European Council President

A few days ago, Van Rompuy was a little known, everyday, average Belgian Prime Minister... but now he's the President of the European Council! Ok, so it's not all that dramatic, and thank god it isn't.

Despite my first impression, really, I can't complain too much with this appointment: though I'd have preferred Freiberga or Juncker, I have argued for a low-key Presidency, and that the Council itself is the legitimate electoral college for the choice (though of course that in itself wouldn't stop me from disagreeing with the choice). Van Rompuy has a good record as a consensus builder, and has proven able to hold the linguistically divided country together; surely good experience for the role of a chairman steering the Council agenda to some sort of workable conclusion. He's very unlikely to claim much of the media's attention, which is both good, in that it will defuse the chance of a conflict between the Council Presidency and the Commission Presidency (and probably even with that of the High Representative); but perhaps also bad in that the clear constitutional separation will mean that the media will have little inclination to highlight the different positions between the Council and Commission. Hopefully it will still lead to a bit more of a clearer representation of the differences between the Commission, Council and Parliament in the media, though I'm not sure I'd be willing to put money on it.

Still, the first few days have revealed a certain potential for controversy - particularly over Van Rompuy's opposition to Turkish EU-membership and his support for the idea of an EU tax. Controversies probably won't arise too often, since Van Rompuy is likely to stick to his brief and just represent the decisions reached by the Council publicly, though he could prove to be influential on issues such as Turkey (could France and Germany try to use his opposition as a front to deflect criticism for any anti-Turkish moves on their part?). In any case, Van Rompuy needs to be careful, since his statements will colour the impression of the EU both within and without: it is, at its heart, the most diplomatic post in the EU.

In any case, with the European Council Presidency in safe enough - and dull - hands, the High Representative, Baroness Ashton, will be even more interesting.

You shouldn't get to vote for the President of the European Council

The Foundation Robert Schuman is running an online poll on the 5 candidates for the post of President of the European Council (via Grahnlaw and Joe). It's important that there's a debate over the candidates - whoever's elected to the office will represent the institution of the European Council in the EU (like the EP President represents the European Parliament), and on the global scale the President will represent the EU (though probably in a largely ceremonial fashion, since the High Representative will have the most influence over foreign policy - in fact, the E.C. President's claim to represent the EU as a whole will largely rest on being able to speak for the consensus between the states).

But we need to distinguish the right to transparency from the right to vote.

There have been calls for the post to be directly elected - some Eurosceptic condemnation of the Lisbon Treaty was based on the fear that it created an unelected executive President of the EU, rather than the occasional chairman/woman role that it will actually be. If the office had really been an executive post, then the outrage at the lack of direct elections would have been understandable - after all, the electoral college that elects the President is made up of the governments of the member states, and though they have legitimacy as directly or indirectly elected bodies themselves, having an executive post elected by a twice-removed indirect method would have been too much. But then that's the point - it's not an executive President.

So, no, you shouldn't have a vote on who gets the job. Just as the President of the European Parliament shouldn't be directly elected (MEPs elect the post), so it is justified that the European Council elects its chairman. Direct elections for such an office would be pointless - why focus on making what is essentially the "Speaker of the Upper House", who doesn't even have a vote, directly electable, when increasing the accountability of the Commission and participation through the European Parliament are the real, substantive challenges?

That's not to say there are problems with the selection process; ideally the candidates would apply for the post, and be subject to an open and transparent debate in the European Council and/or an open interview before the European Council. Though there may be some diplomatic hang-ups about this level of openness in what is an intergovernmental institution (note that this means you can't always apply the same rationales to it as you can to the supranational institutions!), I don't think the argument that the selection process should be secretive and elitist can be justified:

"The bottom line is surely this: if the EU sees any merit in having big, serving figures given these big new jobs, then opacity is the price to pay."

This assumes that former and current government leaders form the only qualified group that you can draw on to fill the post, so you mustn't scare them off by opening the process so much that candidates risk losing face by not getting picked. While it's true that openness and transparency isn't likely to excite Europeans into caring about European politics (I don't see the performance of Barroso during Commission President's Question Hour being poured over each month on the news, do you?), and direct elections aren't likely to do better (after the novelty value wears off, and people realise that the post isn't executive, do you think that its election will even manage the turnout of the EP elections?), arguing that opagueness is "good" is just ridiculous. There may not be a cause to directly elect the President, but open discussion and debate of the roles and politics of the candidates and the institution itself has its own value.

We should be concerned about holding the European Council to the principle of transparency, not arguing for the vote when there's no firm ground for doing so.

On last week's EU Summit

I haven't exactly been quick to blog about this summit, mainly because I wasn't sure what to add to what I previously wrote about the politics of Barroso's agenda and re-appointment. Julien Frisch has a good Barroso overview here, and Tony Barber has written about the possible effects of the Slovenia-Croatia border dispute, which is still trundling on.

EUX.TV has a good video overview of the state of play:




Again, Barroso's comments on excluding politics from the selection of the Commission is a blow to anyone who wants to see the EU to be made more democratic, the Commission more accountable, and for the EU as a whole to be more open to proper debate on the policy issues they so often tell us effect us in our everyday lives. This attitude alone, and the implications for the role of the European Parliament, is enough reason to oppose his re-appointment in my opinion.

There's been anger at the decision from the PES (as I think they're still called that for now) and the Greens - but the EP may face an uphill struggle in asserting itself, with no real alternative candidate and a fractured Parliament.

Sarkozy, meanwhile, will make a speech on EU reform on Monday (later today), and has called for a strong Commission President and for institutional balance. I doubt he envisages a relative reduction in Council power (as the Council's the most powerful EU institution), but it will be interesting to see how many people he can annoy at once. The Commission does need reform; I might post about that later.

You can read the European Council's conclusions here.

In other news, a Bill on Ireland's membership of the European Defense Agency is being formulated. It's likely that it will pass (and ensure Ireland's continued membership) - as far as I know, only Sinn Féin and the Greens are against membership, and Fianna Fáil (senior governing party) is for membership, as well as the main opposition party, Fine Gael.

The Barroso Agenda

After calls from both the EP and from France and Germany for Barroso to give details on his "ambitious agenda" for a second term, Barroso has finally attempted to outline his vision for the next 5 years in a letter to the heads of state and government (PDF). (Via EurActiv).

The letter doesn't detail any policy (his policy preferences were probably in the letters he sent to each government individually, if at all), but it stresses his believe in a responsible and effective internal market, environmental protection and the importance of a low carbon economy, and in the European ideal of a strong Europe and respect for national competences. The focus on generalities is to limit the objections that could be raised in the European Council summit today against nominating him for a second term - Barroso is anxious to prevent Sarkozy from ensuring that Barroso only get the political support of the Council. If Sarkozy gets his way, and the Lisbon Treaty passes, the Commission Presidency could become part of a package deal of EU posts, and Barroso's political backing could dry up pretty quickly.

It's also noticeable that the letter is addressed to the European Council - I'm not aware of any similar letter to the group leaders in the European Parliament. This is a sensible tactic from Barroso's point of view, because if he wins the Council's support, it will be much harder for the EP to oppose him, especially without an alternative candidate. Any doubts the EPP might have about his candidature will be suppressed by his letter and Council support. At the same time, the EP - and certainly his critics - would demand more detailed proposals, which could damage his standing with some governments and slow down his endorsement by the Council. Still, it's a shame that the European Parliament has been neglected by Barroso.

In other news, ELDR now backs Barroso. (Link. Via Julien Frisch). The Anti-Barroso coalition didn't have enough votes to make Guy Verhofstadt a viable candidate, but this announcement makes Barroso's second term a near certainty, unless he falls out of favour with the Council in the next few months. The EP needs to make the most of its opportunity to grill Barroso before it votes on a second term.

So, given that Barroso's re-election/appointment is so likely, should the EP just bow to the inevitable? Tony Barbar at the FT seems to think so, on the basis that the left lost, so they can't complain. However, Julien Frisch has written a great counter argument on his blog. There needs to be more political competition and debate over the post, and an opposition-government divide in the EP would force more scrutiny of the Commission and help open the Brussels political world up a (small) bit more to the public.

There is also the question of the EP standing up for itself in the EU system. The Greens are suggesting that an early Barroso appointment could be invalidated by the EP's own procedural rules. The European Parliament needs to make its voice heard and to ensure that it is respected as an institution within the EU system. If it can't stand up for itself, and force the Council and Commission to listen to its views, then why should it expect people to vote for it?