Breaking the link between Governments and the Banks: Tales from Statusquoland

The Irish Taoiseach, Enda Kenny, is in Brussels at the European Council with 2 aims: (1) ensure that Ireland has access to an emergency line of credit (the "Enhanced Conditions Credit Line") with as few conditions as possible to smooth Ireland's exit from the bailout programme, and (2) to have the European Council re-agree what they agreed back in June 2012.

That's right: a major win for Kenny would be the re-agreement of something that the European Council already agreed over a year ago! I'm not joking.

Back in June 2012, the European Council agreed that a Banking Union was the way forward (PDF). The banking debts had to be severed from sovereign debts because Member State governments cannot bear the cost of this most Europeanised of market sectors. The Banking Union should also create a way for banks to be re-capitalised or wound up on a Eurozone basis, so that the debt crisis would not happen again. The European Council even decided to review the case for breaking the link between sovereign debt and existing bank debt - something that would do wonders for the balance sheets of the Irish and Spanish governments and ease the burden on their people considerably

This outbreak of good sense didn't last very long. In September 2012, Germany, along with The Netherlands and Finland, declared that not only will past banking debt not be severed from sovereign debt, but the European Stability Mechanism would not recapitalise banks instead of governments. Instead the order for recapitalising banks in the future would be: private funds, then Member State governments, and only then would the ESM step in. So three Member States had decided to completely void European policy agreed between 27 countries just 3 months ago, and they completely ruined the idea of a Banking Union. Why should countries bankrupt themselves saving banks, for the Eurozone to help out the banks directly more than the countries? It would be pure madness.

So now Kenny wants to return to the June Agreement:

"Speaking at an event in the National Gallery in Dublin celebrating the 50th anniversary of charity group Chesire Ireland, Mr Kenny said he would again urge European leaders to fulfil their pledge to break the link between sovereign and bank debt.

“One of the failings or inadequacies of the European Council over the years has been an inability to actually complete programmes where decisions are made,” he said

“In this regard, I refer to the decisions that were made last year in respect of banking union. For Ireland and for other countries, it is absolutely critical that we follow those things through to completion before moving on to any other agendas.”"

It's a farcical position to be in and it shows how little progress is being made, and it shows that Merkel is perhaps the most conservative Chancellor ever: she literally does not want to change anything, and will only sanction limited change if its aim is to make sure things stay the same. Once, Merkel described the internet as Neuland - "New Land" - but even as  the digital agenda is being discussed in Brussels, it feels like Europe is stuck in the twilight of Statusquoland. Even the German powerhouse economy can only expect 0.5% of growth this year.

So as Ireland, the Eurozone's star pupil, is preparing to leave the bailout programme, it's hard to be optimistic. Austerity has hardly worked wonders on the Irish economy, with government debt higher than at the start of the progamme, and employment soaring after 5 years of cuts. Without even the rewards of agreed Eurozone reform, many question how worthwhile the status of "star pupil" really is.

Statusquoland: If at first you don't succeed, apply the same rules more strictly.

Mmm... Banking Flavoured Union

With Barroso calling for a banking union - and saying parts of it could be put in place in 2013 - there's wall-to-wall coverage of Banking Union in the media. There's not much I can add, except that it seems pretty clear to me that separating banking debt and the Eurozone banking system from sovereign debt is a key issue we need to gets to grips with and a Banking Union is urgently needed as part of the solution to the crisis. I've been thinking of covering Irish MEPs a bit more too, so I'll just leave you with a video I found of Marian Harkin's One Minute Speech on the subject:

Conclusive proof that Van Rompuy is now too powerful

I've just read conclusive proof that Van Rompuy has become so powerful that he has eclipsed the rotating presidency of the Council via Open Europe: apparently, neither he or Barroso thanked the Spanish presidency for its work during the last European Council meeting.

"Those who worried that the Lisbon Treaty and the creation of a permanent EU president would sideline the rotating presidency held by national governments have been proved right. Spanish Daily El Mundo notes that during a speech in the European Parliament yesterday, neither President Herman Van Rompuy, nor President Barroso mentioned or thanked Spain’s EU Presidency for its role in last week’s European Council summit. It seems that even the fact that Van Rompuy sat next to Spaniard Diego Lopez Garrido..., the secretary of state for the EU, failed to remind the officials of Spain’s role. Barroso managed to find the time, however, to thank Catherine Ashton, the Parliament, the Commission, and the Council."

Oh noes!

Obviously, this is an attempt to avoid embarrassing discussion about Spain, or something similarly nefarious or insulting to the pride of member states:

"The incident could be part of a larger EU effort to avoid any discussion of Spain, hoping people will forget it may be the next eurozone domino to fall. Or perhaps it demonstrates that the Brussels elite have little time for national governments..."

Or it could be a mistake or omission.

The short article seems to be very lazy and over-sensitive and it's a wonder that anyone took the time to write anything on it at all without anything more substantial. What substantive evidence is there that Van Rompuy is becoming over-powerful versus the rotating presidency? It's hard to measure this because the argument is neither defined nor backed up. Those who feared that the permanent presidency would sideline the rotating one? The aim of the permanent post was to give greater continuity and voice to the European Council, so how should we examine the "fear" that Open Europe had and the reality? If the rotating presidency went on as before, then Open Europe and others would (justifiably) be shouting that the permanent post was unnecessary and costly. If it does fulfil its role, then it would necessarily be more prominent than the rotating presidency, so where do you draw the line and say that the permanent post has infringed on the role of the rotating one?

So far, there have been no reports of Van Rompuy chairing Council formation meetings - despite all the European Council meetings to address the economic crisis and the eurozone crisis, I haven't heard anything about Van Rompuy chairing the Ecofin Council formation, which is the meeting of EU finance ministers. Van Rompuy has proposed chairing an economic task force, and other reforms to deal with the crisis, though this seems to me to be over-shadowing Barroso and the Commission. After all, the member states have not shied away from giving their own two eurocents on what reforms are needed (France and Germany unsurprisingly being the most vocal). Perhaps what holds Spain back in being vocal here is its own domestic crisis - in which case the question is, "if a permanent presidency can keep things going politically, and not just administratively, is that not a good thing to have?"

Again, it should be pointed out that neither Van Rompuy nor the Spanish rotating presidency could get these things done without the consent of the European Council/Council. Which consists of the member states. The member states are not co-opted or bullied by presidents into doing things; negotiation between them is the key aspect here.

Given that Madrid has ensured that there have been EU meetings held in Spain and not all in Brussels, and the willingness to promote its leadership role domestically and abroad (mostly to the detriment of the High Representative Aston), I don't think that the rotating presidency is dead or meaningless yet.

But it's good to know that Think Tanks like Open Europe are spending their time coming up with constructive policy proposals and not just wading through pages of information to pick up on irrelevant details to push a political message.


UPDATE: here's a link to an article on Ideas for Europe "President Paradox" which argues the opposite. As you can see from the comments, there are powerful counter-arguments to the article's reasoning (I largely agree with the counter-arguments), but at least the arguments and reasoning here is clear: clear arguments with a target, not just a lazy assertion.

Two Presidencies, Two Presidential Websites

The dawning of 2010 brings with it the beginning of two parallel Council presidencies: a rotating, currently Spanish, one in the normal Council (apart from foreign affairs), and one in the European Council, in the shape of Van Rompuy. Though Van Rompuy has been in office for a month now, the last European Council summit was run by the Swedes who held the last rotating European Council presidency.

So with two presidencies (well, two Council presidencies), there's two presidential websites:

The Spanish presidency.
Van Rompuy's presidency.

As uninspiring as the Spanish one is, it's clear that there's more money behind it than Van Rompuy's... remember when the President was supposed to be an ueber-powerful figure who could shoot directives from his eyes? Can't even find a good website designer, apparently.

Though not much has happened yet with the Spanish presidency, there are two interesting signals: the intention to set up a council with Van Rompuy to smooth out how to operate the two presidencies harmoniously, and the ambition to see a Palestinian state in 2010.

While the first seems to show that Spain doesn't wish to undermine the new permanent presidency and will willingly accept the Lisbon reforms in practice, the second could weaken Baroness Ashton's position as the High Representative politically. The HR organises the Foreign Affairs council (as it's called, but it might be easier to think of is as a committee) of the Council and sets the agenda there, so I doubt that the HR's position could be irreparably weakened by the rotating presidency, but it could be politically weakened. After all, the HR depends on the member states to agree with her to get anything done, so any loss of political initiative could be hard to win back, even if the position is one of consensus-builder.

How will Van Rompuy and Spain hammer out their respective political roles, and how will Ashton take on the political challenges raised by the Spanish Presidency? Ashton has stressed the consensus-builder role of the HR; can she skillfully present such ambitious goals as a Palestinian state in 2010, or take on the task of solidifying a common approach in the EU? And how far could she take control or ownership of foreign policy projects, or will she be buffeted about by the changing winds of the rotating presidency?

Could an unilateral Palestinian declaration of independence be Ashton's first test? The foreign policy field seems almost crowded at the moment with possible "first tests".

European Elections 2009: Update (2)

Some more news and updates on the elections and stories that could affect the elections:

In Italy, which will start its 2 day long poll today, Berlusconi has been caught up in yet another scandal in the media, with pictures of naked women in his villa (and a naked man who may or may not be Topolanek, the leader of the Czech ODS party). The pictures were published by El Pais and are banned from appearing in the press in Italy due to being a breach of privacy. I doubt the pictures, or rumours of pictures, will have much effect on Berlusconi's EPP-aligned right-wing party in the elections - none of the other scandals have (including divorce proceedings).

In France, there's been a big clash between Danny the Red and the leader of ELDR aligned MoDem, Francois Bayrou, on French television. Daniel Cohen-Bendit viciously slammed Bayrou as a leader and presidential candidate, while Bayrou countered by raising old allegations of pedophilia against the former '68 student leader. I wonder how much of an impact this will have on the Greens and MoDem in France - Sarkozy's UMP are expected to comfortably win a good number of votes, with the Socialists behind due to their disarray. A new communist group is doing well in the polls, perhaps to the socialists' expense, but it means that MoDem and the Greens could be fighting for third to fifth place. Perhaps this outburst will damage the chances of either reaching third.

MoDem has also declared themselves against Barroso's bid for a second term.

The Commission is once again annoyed with the Netherlands for producing preliminary results before the rest of the member states have voted. There have been some indications that the Commission could actually do something about it and perhaps even refer it to the ECJ. However, the lack of a truely pan-European campaign means that the Dutch results are unlikely to have much of an impact on the rest of the voting.

Analysis over the preliminary result is already taking place - especially on what the surge in support for the right wing PVV actually means.

RTÉ predicts that there will be a healthy turnout in Ireland - around 60%, and perhaps higher than the last local and European elections due to the economic crisis (then also 60%). On Northern Ireland, RTÉ reports that there was a 42.8% turnout (a drop of around 9% from the last European election), and speculates that de Brún will top the poll with a big lead, making Sinn Féin the "biggest party in any election" - not that it matters in this election. The DUP could have been hit hard (they've not exactly run a good campaign, with a candidate who was frankly embarrassing at times). I suspect that the extent of the vote-splitting with have a lot to do with how Diane Dodds has gone down with DUP voters.