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.
Showing posts with label Hollande. Show all posts
Showing posts with label Hollande. Show all posts
Wednesday, 4 July 2012
Tuesday, 29 May 2012
A very reluctant Yes on the Fiscal Stability Referendum
This is the fourth time I've written out this post. Over the last 2 months I've painfully shifted from a pretty definite No to a reluctant Yes on the Irish Fiscal Stability Treaty referendum.
I really don't like this treaty. It's clear that it will neither have prevented the crisis (if preventing excessive borrowing was the problem, the pre-crisis surpluses in Ireland and Spain would have meant those countries wouldn't be in the mess they're in), nor will it do anything to solve it. As I've pointed out before, the Treaty is 90% existing EU law, since the European Parliament has passed the "six-pack" of legislation last year. It's already mostly in force - it has caused political complaints in Belgium, and was part of the reason for the collapse of the Dutch government this year.
For these reasons I originally wanted a No vote as a political message against austerity and to promote a more balanced approach at the European level. I don't oppose some level of collective budget discipline nationally if it leads to a positive reform of the Eurozone: Eurobonds, the ECB becoming the lender of last resort, a banking union so that banking problems will not be localised and made the problem of one or two Member States, etc. But it should come as part of a grand bargain where it's not simply about the core and the periphery, but about building a working Euro-system. Suggestions that ratifying the FST would give Germany enough confidence in the Eurozone to sign up to Eurobonds "sometime in the future" did not comfort me.
So why have I moved towards a Yes? Two main reasons: the European Stability Mechanism (Treaty here: PDF) and the direction of Hollande.
Only Member States who have ratified the FST will have access to the ESM for future bail-outs. Given the extent to which the IMF has lent to Ireland more than it would have already if we hadn't have been part of a European bail-out programme, I have not been convinced by the No side's arguments that we will find another bail-out somewhere. It's argued that we'll get something from the IMF (which I doubt since we've already been lent 15 times our normal share), or that we will still be given access to the ESM despite being excluded from it since Eurozone politicians will not want to risk the stability of the Euro. I'm not convinced by these arguments: they require a political leap of faith, and for such a leap to be worthwhile, there needs to be the plan and the tactics behind it, not to mention the opportunity for it to work.
Hollande's election earlier this month may have raised the prospect that such a strategy might pay off, but it's clear from the news and the outcome of the summit on the 23rd May, that any progress on the Eurozone will be in addition to the FST, rather than going back to the drawing board - and an Irish rejection won't change that. The best we can hope for by rejecting the FST is to be faced with the FST plus some sort of growth treaty (or plus a growth protocol to the original treaty). There's little payoff for risking the uncertainty over Ireland's access to the ESM in my opinion, and I do not want to take the risk of greater austerity by Ireland being unable to access any fund. And on the "No to Austerity" platform of the No side, it doesn't really fit in with the state of existing law and Eurozone rules. The Treaty itself won't add any more to austerity in law, but it will impact on the confidence needed for any further steps in economic union.
I also can't see any Eurozone vision or strategy on the No side that could form the basis of working toward an alternative. It's very much of the "reject, and then let the rest of the Eurozone come up with a better deal to sell us" variety, and it smacks too much of populism for my political taste. So despite the almost equal bankruptcy of political vision on the Yes side, I have to reluctantly support a Yes vote.
I really don't like this treaty. It's clear that it will neither have prevented the crisis (if preventing excessive borrowing was the problem, the pre-crisis surpluses in Ireland and Spain would have meant those countries wouldn't be in the mess they're in), nor will it do anything to solve it. As I've pointed out before, the Treaty is 90% existing EU law, since the European Parliament has passed the "six-pack" of legislation last year. It's already mostly in force - it has caused political complaints in Belgium, and was part of the reason for the collapse of the Dutch government this year.
For these reasons I originally wanted a No vote as a political message against austerity and to promote a more balanced approach at the European level. I don't oppose some level of collective budget discipline nationally if it leads to a positive reform of the Eurozone: Eurobonds, the ECB becoming the lender of last resort, a banking union so that banking problems will not be localised and made the problem of one or two Member States, etc. But it should come as part of a grand bargain where it's not simply about the core and the periphery, but about building a working Euro-system. Suggestions that ratifying the FST would give Germany enough confidence in the Eurozone to sign up to Eurobonds "sometime in the future" did not comfort me.
So why have I moved towards a Yes? Two main reasons: the European Stability Mechanism (Treaty here: PDF) and the direction of Hollande.
Only Member States who have ratified the FST will have access to the ESM for future bail-outs. Given the extent to which the IMF has lent to Ireland more than it would have already if we hadn't have been part of a European bail-out programme, I have not been convinced by the No side's arguments that we will find another bail-out somewhere. It's argued that we'll get something from the IMF (which I doubt since we've already been lent 15 times our normal share), or that we will still be given access to the ESM despite being excluded from it since Eurozone politicians will not want to risk the stability of the Euro. I'm not convinced by these arguments: they require a political leap of faith, and for such a leap to be worthwhile, there needs to be the plan and the tactics behind it, not to mention the opportunity for it to work.
Hollande's election earlier this month may have raised the prospect that such a strategy might pay off, but it's clear from the news and the outcome of the summit on the 23rd May, that any progress on the Eurozone will be in addition to the FST, rather than going back to the drawing board - and an Irish rejection won't change that. The best we can hope for by rejecting the FST is to be faced with the FST plus some sort of growth treaty (or plus a growth protocol to the original treaty). There's little payoff for risking the uncertainty over Ireland's access to the ESM in my opinion, and I do not want to take the risk of greater austerity by Ireland being unable to access any fund. And on the "No to Austerity" platform of the No side, it doesn't really fit in with the state of existing law and Eurozone rules. The Treaty itself won't add any more to austerity in law, but it will impact on the confidence needed for any further steps in economic union.
I also can't see any Eurozone vision or strategy on the No side that could form the basis of working toward an alternative. It's very much of the "reject, and then let the rest of the Eurozone come up with a better deal to sell us" variety, and it smacks too much of populism for my political taste. So despite the almost equal bankruptcy of political vision on the Yes side, I have to reluctantly support a Yes vote.
Tuesday, 8 May 2012
A referendum on political tactics
When the Fiscal Stability Treaty was agreed back in January (PDF), despite being short and to the point, it was hard to assess. First of all, the treaty is already 90% EU law, the European Parliament having passed the “six-pack” Barroso mentioned in his State of the Union speech – you can find the legislation here. The budgetary requirements have also caused a political storm in Belgium and been one of the causes (or the excuse for, on the part of the PVV) the collapse of the Dutch government.
However, though the treaty changes little in legal terms, it’s not something that could simply be voted against to force another renegotiation, as only 12 states need to ratify it before it comes into force. In addition, in the treaty for the European Stability Mechanism (PDF), it stipulates that only countries that have ratified the FST will have access to its funds for a bail-out. Despite the six-pack legislation not being subject to much debate in Ireland, the debate has so far centred around the big question of how Ireland secures its funding. The current bail-out arrangement lasts until 2013 when Ireland is supposed to return to the markets. Though there is widespread acceptance that the current austerity policy (essentially, the last 5 years) is not enough and that there should ideally be an investment and growth policy, the bail out loans cover the budget deficit for the Irish state, and without it Ireland would have to default, leading to harsher, more sudden cuts.
So far the No side has failed to come up with an alternative to the question: where would the money come from if we need a second bail out? It seems perverse, since the government line is that we won’t need one since Ireland is “on track”, but since the No side is based on the fact that the current bail-out programme won’t solve anything, it is not a question that can be ignored. One solution put forward by the No side is that Ireland could veto the ESM treaty – though this would be difficult since it can only be vetoed by states amounting to 10% of the subscriptions, of which Ireland makes up under 2%. All the political parties involved have trouble articulating a vision on Europe, and on making alliances to achieve their vision. This may partially be a result of the referendum process in Ireland and treaty structure of the EU as past referendums could block a treaty and force a renegotiation. This is not the case here, and though the quality of the debate is much higher than before (there have been no strange claims along the lines of abortion or conscription), the lack of an alternative vision is palpable. It means that the Irish government has an unimaginative and poor European policy, but in this case it helps the Yes side since the No campaign cannot rely on the “back to the drawing board” vote in the same way anymore.
But now there’s a Socialist in the Élysée talking about growth and leading the charge against austerity in Europe. The promise of Hollande to renegotiate the FST has already played a part in the campaign so far. For the No side this is the sign that a No vote would really count in the European debate on austerity. So far the messages from Hollande have been quite mixed, and there might not be a renegotiation of the FST per se:
Would a No vote help bury the austerity policy, or would it leave Ireland unnecessarily politically exposed while an extra treaty is put together – or new proposals are made within the EU legislative system? With only a month left before the vote there will be no alternative treaty before the vote, so it will be down to what tactics seem most credible. Ireland will listening closely to what the Élysée says in the next few weeks.
UPDATE: Van Rompuy has called a summit for the 23rd of May, so the outcome could impact on an Irish referendum - especially if any growth pact is tied to the Fiscal Stability Treaty.
However, though the treaty changes little in legal terms, it’s not something that could simply be voted against to force another renegotiation, as only 12 states need to ratify it before it comes into force. In addition, in the treaty for the European Stability Mechanism (PDF), it stipulates that only countries that have ratified the FST will have access to its funds for a bail-out. Despite the six-pack legislation not being subject to much debate in Ireland, the debate has so far centred around the big question of how Ireland secures its funding. The current bail-out arrangement lasts until 2013 when Ireland is supposed to return to the markets. Though there is widespread acceptance that the current austerity policy (essentially, the last 5 years) is not enough and that there should ideally be an investment and growth policy, the bail out loans cover the budget deficit for the Irish state, and without it Ireland would have to default, leading to harsher, more sudden cuts.
So far the No side has failed to come up with an alternative to the question: where would the money come from if we need a second bail out? It seems perverse, since the government line is that we won’t need one since Ireland is “on track”, but since the No side is based on the fact that the current bail-out programme won’t solve anything, it is not a question that can be ignored. One solution put forward by the No side is that Ireland could veto the ESM treaty – though this would be difficult since it can only be vetoed by states amounting to 10% of the subscriptions, of which Ireland makes up under 2%. All the political parties involved have trouble articulating a vision on Europe, and on making alliances to achieve their vision. This may partially be a result of the referendum process in Ireland and treaty structure of the EU as past referendums could block a treaty and force a renegotiation. This is not the case here, and though the quality of the debate is much higher than before (there have been no strange claims along the lines of abortion or conscription), the lack of an alternative vision is palpable. It means that the Irish government has an unimaginative and poor European policy, but in this case it helps the Yes side since the No campaign cannot rely on the “back to the drawing board” vote in the same way anymore.
But now there’s a Socialist in the Élysée talking about growth and leading the charge against austerity in Europe. The promise of Hollande to renegotiate the FST has already played a part in the campaign so far. For the No side this is the sign that a No vote would really count in the European debate on austerity. So far the messages from Hollande have been quite mixed, and there might not be a renegotiation of the FST per se:
“Hollande says he agrees with all existing provisions in the fiscal treaty, including tight limits on budget deficits and public debts.
[...]
Informal contacts have been taking place between Hollande’s camp and the authorities in Berlin, Frankfurt and Dublin, and despite Hollande’s public insistence on renegotiation, all signs suggest the ground is being prepared for a compromise.
Two of Hollande’s senior aides – policy director Michel Sapin and Europe adviser Catherine Trautmann – have indicated to The Irish Times that they may be open to a “growth pact” in the form of a protocol or a separate legal text, a fix that would leave the fiscal treaty as it stands.”
Would a No vote help bury the austerity policy, or would it leave Ireland unnecessarily politically exposed while an extra treaty is put together – or new proposals are made within the EU legislative system? With only a month left before the vote there will be no alternative treaty before the vote, so it will be down to what tactics seem most credible. Ireland will listening closely to what the Élysée says in the next few weeks.
UPDATE: Van Rompuy has called a summit for the 23rd of May, so the outcome could impact on an Irish referendum - especially if any growth pact is tied to the Fiscal Stability Treaty.
Monday, 7 May 2012
Hup Hollande Hup!
Sunday was a big election day for Europe. France elected its
first Socialist President in 17 years with Francois Hollande, and the Greek electorate looks like it has given the two main parties a huge kicking.
Hollande will add to the pressure for a change in direction
in the EU when it comes to austerity, and Hollande has already set himself up
to be the leader of counter-austerity Europe. Though he will undoubtedly clash
with Merkel, in the end they’re likely to muddle through unless Merkel sticks
to an absolutist vision of austerity Europe. With austerity failing in practical
terms – S&P used its report on Spain to critique the front-loaded austerity
programme and the EU’s general policy – and countries like Italy voicing the
need for a better approach to growth (while endorsing austerity in general),
the political winds look like they will shift the continent leftwards to a
degree (Europe is still dominated by the centre-right EPP political family).
Within Germany there is more debate on Eurobonds, etc, than
I think outside commentators give credit for, though there is still a lack of
debate. The opposition Social Democrats and Greens are more enthusiastic on
Eurobonds and deeper fiscal integration, but the rise of the Pirate Party makes
the German political scene more unpredictable. Germany has been caught up in a
lot of comment on the rise of Die Piraten: what exactly are they about? Do they
have the kind of leadership structure or policy programme that makes them a
credible force? If they remain so unstructured – and wedded to “fluid democracy”
(crudely put, where policy is crafted online by activists and then represented
in parliament by Pirate representatives) – could they ever be capable of
coalition with the other parties?
Sunday brought an election in the Northern German Land of
Schleswig-Holstein, where the Pirate Party gained 8.3%, and there was little
between the Christian Democrats (CDU) and the Social Democrats (SPD), even if the centre-left coalition is ahead - the rival Christian Democrats-Liberal bloc trial the Social Democratic-Green
bloc 39% to 43.4%. It now looks like the Social Democrats will lead a
coalition with the Greens and the Danish minority party SSW (which is not subject
to the same 5% threshold as the other parties), that may have a majority of
just 1. The Liberal FDP is unlikely to do as well at the federal level as in
Schleswig-Holstein (honestly, after the bad year they’ve had, being kicked out
of one state parliament after another, their 8.2% vote in S-H is a huge
victory), but it just demonstrates how the sudden rise of the Pirates could
splinter the political field further.
Muddling along will likely continue in Europe, except now
the hope is that we’ll start to see a direction with more solidarity develop.
The biggest shock to the system will be the Greek elections, where it could be
very difficult indeed to form the next government. With the far-right getting
into parliament and the collapse in the vote for the two main parties,
political instability is going to dog Greece and the rest of Europe for a long
time to come. France and Germany can’t afford to squabble for too long: Greece
will be bursting back on to the agenda before we know it.
And the referendum in Ireland? I don’t know how much
Hollande’s election will make a difference until – or if – he makes it clear if
he is seeking another treaty to supplement the Fiscal Stability Treaty or a
renegotiation. From what he’s said it looks like he wants an extra treaty – it’ll
be easier to get this, as it will be easier for Merkel to agree to this without
losing face – and Ireland might be in a difficult position if it rejects the
treaty to push a joint cause with Hollande... and then have to re-run the
referendum in order to get the second treaty too (though it should then be
clear that enough’s changed to have a re-run at least). The vote’s not until
the end of May, so there’s still some time to read the signals from the Élysée.
Friday, 27 April 2012
Merkel's Intervention
Merkel's intervention in the French elections yesterday - effectively attacking Hollande by stating that there will be no renegotiation of the Fiscal Stability Treaty - strikes me as bizarre. If she's hoping that this will discredit Hollande and lead to voters voting Sarkozy, I can't see how it will work (will those who voted for the far-right be more willing to vote for the candidate closest to German policy, or the candidate who is almost setting himself up as the leader of an anti-German leadership alliance?).
It's also starting to seem a bit desperate. Hollande's position isn't really so radical: no renegotiation of the treaty itself, but some new measures before it will be adopted. Since 90% the treaty is already EU law, Merkel's discipline provisions are in reality safe from Hollande. Even the Eurobonds Hollande is proposing aren't connected to mutualising debt, but for investment in infrastructure, etc. Calls for the remit of the ECB to also have encouraging growth and employment as part of its task will find a lot of sympathy in other states too. Is Merkel really going to set her face against all of this?
The Eurozone crisis is worsening day by day and the same austerity approach isn't working for anyone (even in Ireland there is talk that a second bailout might be needed - indeed, the Yes side in favour of the Fiscal Stability Treaty relies on this need for access to bailout funds to gain support for the treaty). While economic reforms are necessary, this extreme austerity is an insane way of going about it. The German government wants its fellow Eurozone states in a strange limbo of danger, where there is enough stability that the reforms can be implemented, but sufficient economic danger to ensure governments will enact these reforms.
While the German government may think it's the only way bailout states won't flush money down the drain, the political logic doesn't - and cannot - add up. The lack of a solution simply worsens the situation and spreads the crisis to yet more Eurozone states, while draining away the political support for the Euro in general, leaving people cynical that any of this mystic summitry the European Council engages in is a waste of time. All pain, no gain.
For Merkel to refuse even Hollande's modest proposals would be disastrous. The political winds are starting to blow against austerity, and Germany's great adapter will have a very tumultuous EU on her hands if she decides she won't give an inch.
It's also starting to seem a bit desperate. Hollande's position isn't really so radical: no renegotiation of the treaty itself, but some new measures before it will be adopted. Since 90% the treaty is already EU law, Merkel's discipline provisions are in reality safe from Hollande. Even the Eurobonds Hollande is proposing aren't connected to mutualising debt, but for investment in infrastructure, etc. Calls for the remit of the ECB to also have encouraging growth and employment as part of its task will find a lot of sympathy in other states too. Is Merkel really going to set her face against all of this?
The Eurozone crisis is worsening day by day and the same austerity approach isn't working for anyone (even in Ireland there is talk that a second bailout might be needed - indeed, the Yes side in favour of the Fiscal Stability Treaty relies on this need for access to bailout funds to gain support for the treaty). While economic reforms are necessary, this extreme austerity is an insane way of going about it. The German government wants its fellow Eurozone states in a strange limbo of danger, where there is enough stability that the reforms can be implemented, but sufficient economic danger to ensure governments will enact these reforms.
While the German government may think it's the only way bailout states won't flush money down the drain, the political logic doesn't - and cannot - add up. The lack of a solution simply worsens the situation and spreads the crisis to yet more Eurozone states, while draining away the political support for the Euro in general, leaving people cynical that any of this mystic summitry the European Council engages in is a waste of time. All pain, no gain.
For Merkel to refuse even Hollande's modest proposals would be disastrous. The political winds are starting to blow against austerity, and Germany's great adapter will have a very tumultuous EU on her hands if she decides she won't give an inch.
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