Ireland exits the Bailout, but not Austerity

Today Ireland has exited the EU bail-out programme - the first country to do so - but it doesn't mean an end to austerity. Appearing on TV last night in a State of the Nation Address, Taoiseach Enda Kenny praised the sacrifices of the public and said that Ireland had regained its international standing. However, "prudent budgetary policies" will continue, meaning that there will be further austerity. The transport minister has also cautioned against any "giveaway budgets" on the basis that the public will be skeptical of them.

Ireland still needs to repay the bail-out loans and reduce its debt, and monitoring of the national finances will continue at the EU level (although now it will be based on the semester system in line with other Eurozone states, rather than the more controlling Troika process). The senior coalition partner, Fine Gael (EPP), is hoping that exiting the bail-out will generate enough satisfaction that things are slowly going in the right direction, even if people aren't feeling any benefit in their lives or in their communities.

For the junior partner, Labour (PES), this strategy is unlikely to work. Having campaigned in the election on a platform of "Labour's way or Frankfurt's way", there is little gain for Labour in a slow recovery (despite its attempts to capitalise on it). And not only is the economy bad for Labour, but when it comes to popular, more liberal, stances on social policy (abortion and same sex marriage, for example), it doesn't seem to boost Labour's position.

Whatever the position of the governing parties, there is really little to be excited about on the Irish economy. The stronger export sector has been an advantage, but with the general economic malaise in Europe and high levels of private debt in Ireland, it's hard to see where the growth is coming from. The bail-out and banking debts that the public have been saddled with results in continuing austerity with Kenny aiming for 2020 as the year recovery will be complete.

Ireland may be the star pupil of austerity, but it hardly demonstrates that austerity is a star policy.

Martin Schulz: Political, Left-wing and Federalist

Yesterday Martin Schulz, the President of the European Parliament, was announced to be the Party of European Socialists' candidate for the Commission Presidency.

So who is Martin Schulz? A former binder and book-shop owner, Schulz's only experience in political office outside of the European Parliament was at the local level as a councillor and then mayor of Wuerselen in Germany. He was elected to the European Parliament in 1994, was head of the PES/S&D group between 2004-2012 and has been president of the Parliament since 2012.

This experience is both a weakness and a strength. The current trend for Commission presidents is for them to be selected from the ranks of former prime ministers, and it's easy to see why. Name recognition, executive and diplomatic experience and (for members of the European Council) an understanding of national leaders. While Schulz doesn't have this, he clearly knows the EU institutions inside out and currently leads one. Speaking German, French and English and having lead a multi-national political group in the Parliament for 8 years, he should have a good grasp of EU political issues, how the institutions work (and how to work them) and how to build coalitions at the European level. Compared to a former prime minister who is offered the job, Schulz clearly sees the Commission presidency as the top job in his career and will probably be more politically ambitious in the role.

As a more openly political Commission president, a Commission lead by him would probably be more combative. Schulz sees wants the election to be a battle of ideas. As president of the European Parliament for almost 2 years, he hasn't actually voted on many of the most recent and controversial policies (as it's not the role of the president), but he has been a vocal president (no doubt with an eye on the upcoming campaign). In the last few months he's called for immigration reform (and wants Germany to take more refugees), supported pausing the trade talks with the US over the spying affair, supports a smaller Commission, sees the balance between large and small Member Sates shifting too much towards the larger ones, and is anti-austerity and wants Eurozone reforms (including a Currency Commissioner who chairs the Eurogroup). 

It's an open question how far he can take this combativeness from the Commission - the Commission still needs Council and Parliament approval to pass legislation. However, having an outspoken President could be a positive for small member states who want the Commission to do more to counterbalance the big countries, provided that they feel they can hang on to their Commissioners. Those who want an active Commission or to change the economic direction of Europe could see him as the man to pin their political hopes on, but Schulz will need to build broad support across Europe to get the votes he needs, and it might not be the biggest electorate in the world. Though with Eurosceptic parties established as the protest vote and rising in popularity, the PES probably can no longer simply rely on anti-incumbency sentiment to boost its vote. A more coherent anti-austerity vision may actually be the better than national parties simply going their own way. Politically and rhetorically, Schulz is to the left of several of the PES's member parties, though his main Eurozone and anti-austerity ideas are not too far outside the mainstream of the pro-integration centre-left.

How much Schulz's opinions will make it into the PES election manifesto remains to be seen, but Schulz has used the EP presidency to set out his leadership style: political, left-wing and federalist on the Eurozone and not afraid to annoy the bigger Member States. Whatever your political opinion, you can't accuse him of being another Barroso. Obviously this makes him an unlikely choice as the European Council's pick for the Commission, which makes electoral success all the more important for Schulz. He not only needs the PES/S&D to emerge as the winners of the election, but he has to be a visible and successful part of the campaign so that he can't be sidelined by the European Council. As I said yesterday, the lack of an open primary contest makes this more difficult.

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.

Economic Union and Cyprus

The crisis flared up in a shocking manner this week as Cyprus, long on the list of potential bail-out countries, found itself at the centre of the Eurocrisis after the controversial bail-out deal was rejected by the Cypriot parliament. The ECB has extended its emergency credit to the Central Bank of Cyprus until Monday, giving the country some more time to find a Plan B. Cyprus is increasingly looking to Russia for support (Russia has already loaned Cyprus some money), and there is a media battle over the rights and wrongs of the bail-out conditions. The decision to tax bank depositors as a one-off was always going to have a knock on confidence, and the confusion over who decided what is increasing with a PR war over the decision to extend the tax to depositors with accounts of under €100,000.




The head of the Euro Group, Jeroen Dijsselbloem, was in the European Parliament today to answer questions on the crisis, and European Council President Van Rompuy and Commissioner Maroš Šefčovič were grilled by the Parliament yesterday. The deposit tax was attacked from across the political spectrum:

"My question is: how come all of a sudden small savings and depositors are no longer protected? This is a dangerous precedent. It takes years to recover trust by depositors. Why hit the small savers? The crisis in Cyprus has sounded an alarm bell. We have to speed up the regulation of financial markets. Above all, we need a European solution to the Cyprus problem, not a Russian one." - Corien Wortmann-Kool, vice chairwoman of the centre-right European People's Party.



"The European law is very clear: all deposits below €100,000 must be guaranteed in case of bank failure. We urged the Cypriot government and the European authorities to come up with an alternative solution that protects the savings of ordinary citizens. The EU has made huge progress on strengthening the stability of the eurozone with the recent agreement to set up a single European supervisor to oversee the banks, and the new rules on capital requirements for banks (the so-called 'CRD IV' package). We need to do more by setting up a European resolution mechanism in case of bank failures." - Elisa Ferreira, S&D spokesperson for economic and monetary affairs.



"A banking union must protect the bank customers, especially the ordinary depositors rather than the bond holders and creditors. Nor does the decision do anything to break the link between banks and sovereigns. It is totally incomprehensible and undermines the credibility and legitimacy of the EU and its new financial structures to restore stability." – Guy Verhofstadt, leader of the Liberal ALDE group.



“While it is clear that a bailout is necessary to protect Cyprus from eventual bankruptcy, the tax on bank deposits will risk destabilising the complete structure of the Cypriot banking system, and is an aggressive gesture by the Eurogroup to the population of Cyprus.” - Monica Frassoni, European Green Party co-Chair.

The shambolic approach to bail-outs highlights again that the EU is operating in a piecemeal way to the crisis and has little coherence to its responses. The demand for a deposit tax doesn’t sit well with bank deposit guarantees, the aim of protecting depositors or breaking the link between sovereigns and the banking system as was agreed at the European Council summit in June.



Ironically yesterday the Commission unveiled further plans on economic and monetary union to increase co-ordination on important economic policies including the areas of “competitiveness, employment, market functioning, tax systems, financial stability and fiscal sustainability”, as well as further developing this contractual approach to financial assistance in the form of “Convergence and Competitiveness Instruments” (CCIs). These proposals aren’t yet legislative proposals, but they underline the technocratic approach:

“What would the ex-ante coordination process look like?

A Member State would provide information on a major economic reform plan in its National Reform Programme (on economic policies for the coming year) or at another time during the year. The Commission would assess the plan and deliver an opinion on it. The Commission's assessment would cover the extent to which the reform tackles the specific policy challenges and how it would improve competitiveness and adjustment capacity. The Commission's assessment would pay particular attention to the impact the reform would have on the functioning of the euro area and possible spillover effects on other Member States. These plans will then be discussed by the Council of Ministers and the Eurogroup. The Commission and the Council can suggest modifications to the national reform plan where they could be justified by the expected effects on other Member States and the functioning of the Economic and Monetary Union.”

Without oversight and accountable political decision-making at the European level to decide on what kind of Eurozone we want in the first place, the coordination and the negotiation of the CCIs will be based on a technocratic vision of the Eurozone. If the CCIs are to form a pillar of Eurozone economic and social policy, shouldn’t there be a Eurozone framework drawn up by the European Parliament that identifies economic and social priorities regularly to guide this, rather than technocratic priorities being enshrined? Currently bail-out deals seem to be ad hoc and unprincipled, with disastrous results for policy making.

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.

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.

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.

EMU fatally undermined by the Koenigstedt Declaration

Has all the progress over the last 6 months been undone? The painfully slow summitry of the European Council has proven to be an inadequate firefighter, but there had been some movement towards a banking union and a working economic union. The biggest criticism was that European leaders were putting in the safeguards against the next crisis rather than trying to deal with the crisis we're currently in, but in last June's Euro Area Statement, the European Council finally seemed to have got it (PDF):

"We affirm that it is imperative to break the vicious circle between banks and sovereigns.

[...]

When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly."

Finally! Banking union and economic union are based on this logic: that the financial markets are too big for the Eurozone Member States to deal with on their own, and that there needs to be a common regulatory policy, and the means to deal with problems posed by the banks. The statement even signalled support for breaking the link between sovereigns and existing banking debt as a way of  lessening the debt burden for crisis-hit states (especially Ireland and Spain, who stuck to the Stability and Growth Pact criteria):

"The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally."

However Germany, Finland and the Netherlands have not only set out to turn back the clock on this progress, but to fatally undermine the rationale behind banking union as a concept. In Koenigstedt the three countries declared not only that there will be no deal on existing banking debts that have been taken on by European sovereigns, but that national sovereigns will have to take on banking debt until they have reached their capacity before the ESM should step in to fund the banks directly:

"We agreed that the implementation of the European Semester, including budgetary discipline and targets, in all countries remains key to ensuring financial stability; the ESM and the other crisis mechanisms can only play a supplementary role to these policies that are decided at the national level.

[...]

 Regarding longer term issues, we discussed basic principles for enabling direct ESM bank recapitalisation, which can only take place once the single supervisory mechanism is established and its effectiveness has been determined. Principles that should be incorporated in design of the instrument for direct recapitalization include: 1) direct recapitalisation decisions need to be taken by a regular decision of the ESM to be accompanied with a MoU; 2) the ESM can take direct responsibility of problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities; 3) the recapitalisation should always occur using estimated real economic values; 4) direct bank recapitalisation by the ESM should take place based on an approach that adheres to the basic order of first using private capital, then national public capital and only as a last resort the ESM.

[Emphasis mine]"

 Far from breaking the link between banking debts and the sovereign, this reinforces it. It states that the order of debt responsibility in the Eurozone is: private, national sovereigns, then the ESM, creating an order for future crises that follows our current debt and banking crisis. Far from pointing towards a sustainable solution for the crisis and a workable Eurozone, this wilfully ignores the lessons of the past 4 years and tries to cement the current Eurozone order.

Why then should we have a banking union at all? The idea behind the banking union is that the financial sector is truly European (and global), and that it needs to be regulated and controlled in common - national authorities are too small and weak to deal with the sector own their own anymore. If it is to be a national responsibility for now and all time - the Konigstedt direction - then why bother with European regulation and oversight? Where is the added value or common purpose to this?

Why this step? Is it because of the ECB's open commitment to bond-buying, and the (current) creditor states want to seize back as much control and initiative as possible? Whatever the reason, it's hard to see this unilateral redirection of the Eurozone as any help for any sense of common purpose at European summits. What's the point of Ireland, Italy, Portugal and Spain waiting for summit time to try and shift the consensus constructively if other Member States start undermining the process of common negotiation? At this rate, they should start holding summits and economic seminars of their own to promote their alternative vision of economic union and crisis resolution - after all, Germany et al have shown their contempt for common decision-making.

It's truly mind-boggling to think how self-absorbed the ministers at this Koenigstedt meeting must be. Not content with vague signals and behind-the-scenes work, they've simply decided to wreck all agreement up 'til now. Diplomacy is not the word.

Barroso's State of the European Union Speech 2012

Today was the third State of the Union speech by Barroso this parliament, and it fits the description better than the previous speeches, which focused more on the legislative programme for the upcoming year. This makes it harder to mark in comparison to past years because what works for a good legislative programme speech (good rhetoric + great substance) is different to what is needed for a good state of the union speech (great rhetoric + a few key aspirations/details to meet).

First I'd like to quote the President of the European Parliament, Martin Schulz, who made a short defence of European parliamentary democracy before Barroso took the floor:

"Today the world is looking at Europe not least the Karlsruhe Constitutional Court, we have reached a decisive moment. Recent developments in the European Union have been of great concern. We have seen a deparliamentarisation of Europe. Those who think that parliamentary democracy is too slow or raises too many obstacles are arguing in the wrong direction. No decisions in Europe can be reached without the involvement of the European Parliament. The European Parliament is the Parliament for the whole of the European Union. More Europe with less parliamentary democracy is impossible."

 I agree. So I'll also look at the responses of the leaders of the political groups.


Barroso's Speech

(Picture from the Commission's Facebook page).

The speech turned out to be a strange hybrid: while the focus was on the future of the EU economically and politically, the structure and style of the traditional legislative programme speech was painfully evident in places. The economic leg of the speech had more policy and was quite legislative, while the political leg was more rhetorical.

On the Eurozone crisis, Barroso complained that the disunity of the Member States after European Council summits, with leaders calling for further measures afterwards, fed doubt into the markets and public and is undermining the efforts made so far to overcome the crisis (as if people aren't capable of making that judgment for themselves). He called for the strong Member States to commit to helping the weaker ones and for the weaker ones to make the necessary reforms.

On the economy, Barroso announced that the Commission would introduce a Single Market Act II to help open up the single market and improve competitiveness (in fact I think "competitiveness" was mentioned much more than democracy in this speech). The first Single Market Act hasn't been fully passed or implemented yet, so I don't know what the second one will do (or if it's simply a repackaging of the first one). There was also talk of a new industrial policy, with Barroso calling for coordination on an attractive tax environment for industry. That there was no mention of common taxes or tax bases indicates that Barroso's thinking of softer cooperation between Member States. Barroso also said that the Commission would pursue a more active trade policy and that the Commission wanted a mandate to negotiate saving tax agreements with third countries to reduce the impact of tax havens.

Banking and fiscal union was a big issue. Barroso made the case for European and coordinated supervision (with national regulators) for all banks, and committed the Commission to pursuing a financial transaction tax through enhanced cooperation (so that it will only apply to willing Member States). Fiscal union will mean greater coordination of national fiscal policies, but Barroso did not spell out any vision for how this might work or how far it would need to go for the Eurozone to work. He also strongly rejected the creation of new institutions alongside the Commission, Council and Parliament or separating out parts of these institutions for Eurozone purposes.

The Commission will present a blueprint for deepening economic union - including treaty changes - this autumn. Barroso also urged MEPs and Member States to back the next EU budget, which he called a growth budget.

On political union and reform, Barroso said that Europe cannot "use the political tools of the past to tackle the problems of the future". The European Parliament should have a strong role, and the Commission will introduce a new statute for the Europarties to strengthen them so they can better offer alternatives in the elections. Barroso also called for Europarties to present candidates for the President of the European Commission at the European elections in 2014. Greater cooperation between the European and national parliaments was also called for, but what this would mean wasn't elaborated on. Barroso defended the independence of the ECB and urged others to respect and defend it.

Barroso called for an intergovernmental conference to decide on treaty change, and a "federation of nation states". This choice of words was picked up on by some MEPs as a way of saying "federation" but meaning continuing on with more of the same.

Foreign policy got some time as well - mostly that Europe needs to act more together in order for the Member States to be heard in a world with the US and China at the helm.

It was a much better state of the union speech than last year for vision, but it had a lot of problems as a speech. Barroso's stronger points where when he could reference legislation because he could tie ideas closer to a sense of direction. That's not to say that vision speeches have to be dotted with legislative proposals, but the speech needed to do a better job of making the case for a certain type of union rather than the more generalised pro-European rhetoric that we got. The debate over what a "federation of nation states" and what that means will probably dominate any comment on the speech because it's so qualified and vague in practice, and in fact that there is little else to grasp on to. Barroso was far more passionate and convincing in his reply to the MEPs' questions and debate - he should have brought that Barroso to the speech.


Political Group Leaders

Daul (European People's Party):

Daul gave a rambling speech, which he admitted wasn't prepared but it would have been better if he had. It was generally supportive of Barroso (who was the EPP candidate for the Commission presidency in 2009), but was the worst speech from a group leader. One thing I got from this was that the EPP supports the ECB buying of bonds (this may contrast with the ECR if you're on the right and distrust central banks taking that kind of action).

In the end I did much better with my Buzzword Bingo for Daul's speech than Barroso's - not a good sign!

Swoboda (Socialists and Democrats Group):

Swoboda said that his group would only support the next EU budget if it was serious about delivering growth, and heavily criticised the EU Troika for their policies in the bailed-out countries for contributing to the recession. He signalled that the S&D Group would be willing to support the saving tax agreements, but there needed to be much more focus on investment. Swoboda pointed out that the US, China and Japan are all putting more into investment at a time when Europe is following austerity.

Swoboda called for a social compact to combat the erosion of solidarity in Europe. Hopefully we'll get to hear more on what this means - Swoboda said his group was agreed on it, so we should get to see the S&D (or the Europarty PES that sits as part of the group) proposing some detail. Maybe something for the PES Congress at the end of the month?

Verhofstadt (Alliance of Liberals and Democrats for Europe):

Verhofstadt focused on Barroso's "federation of nation states" remark, and said it represents the same approach rather than something new. He criticised Barroso for not taking more initiative without Council approval, particularly since the Commission tends to act more on Council ideas than those from the Parliament. Verhofstadt called for a federation of the citizens, and said that federal solutions are necessary - and that the ECB's bond-buying policy will only buy 5-6 months. He said that there needs to be resolution for the banks, a debt redemption fund and a European treasury.

Interestingly, Verhofstadt said that the independence of the ECB meant less democracy and seemed to argue for greater parliamentary control (if I understood his argument correctly).

Cohn-Bendit (European Greens/European Free Alliance):

Cohn-Bendit pointed out that the environment wasn't mentioned in Barroso's speech, but focused on social welfare. Cohn-Bendit said that the US federal budget had expanded to protect social welfare, and that the EU budget would need to expand to at least 5% of GDP in order for it to have the fiscal firepower to do anything to support social welfare across Europe. He argued that there should be more own resources rather than Member State contributions to the budget in order to achieve this, and that there would be financial support for Greece and its social system in the form of a social fund, with more time given to it to reform and pay back the debt.

Callanan (European Conservatives and Reformists):

Callanan opened by borrowing a line from Mitt Romney, saying that he wished that Barroso succeeded (as the ECR supported his election as Commission President), but that he had gone too far down the road of knee-jerk calls for more Europe, instead of focusing on reducing regulation (which he said Barroso had had some success in, but not enough). (He seems to be a big fan of Romney). For the Eurozone, Callanan said that the only way for it to work was for there to be transfers from the stronger countries, which was impossible, or for some countries to leave the Euro, and he advocated Greece leaving the Euro. (I wonder if Cameron supports this line).

He criticised the ECB's bond-buying policy, and said that there needed to be an economic solution to the crisis through less regulation. In response to a question he said that he didn't support quotas to bring about more gender equality in the boardroom.

Callanan also referred to our Buzzword Bingo and the chat on Twitter in his second speech, making him the first MEP to reference it in the chamber!

Farage (Europe of Freedom and Democracy):

Farage started by remarking it is the 20th anniversary of Britain leaving the European Exchange Rate Mechanism. He said that he was wrong in his speech last year that Greece would leave the Euro within a year, but that was because he underestimated how fanatical Barroso and European leaders would be to save it.

Zimmer (United Left Alliance/Nordic Green-Left):

Zimmer attacked the crisis policies for not solving the problem and for weakening European democracy.


Verhofstadt, Cohn-Bendit and Callanan were the strongest performers, taking the opportunity to get their visions and ideological points across. Swoboda was good too, and it's interesting that he kept referring to things that his group had agreed on, but without any detail it lost impact - hopefully there are a few interesting ideas being saved for the PES Congress at the end of the month. Daul, Farage and Zimmer were the dullest. Farage normally manages to inject some personality into his speeches, but it just fell a bit flat, whereas Daul was unfocused and rambling and Zimmer was, well, just dull and didn't make any impact.

Will Barroso set out his vision for the Eurozone?

Tomorrow Barroso will give his third State of the Union speech of the parliament. The last two have been focused on the legislative programme for the upcoming year, so they have been more of the traditional speech from the throne that are held in constitutional monarchies rather than the more fundamental state of the union speeches that the title implies. This year the expectation seems to be that Barroso will focus on the integration needed for economic union - what will be the balance between legislation for the upcoming year and integration rhetoric?

Commissarial Speech 2011

But what about the progress since his last speech? Barroso focused mainly on the economy and foreign affairs. He declared his support for the Financial Transaction Tax, where the Commission has published an impact assessment but there's little prospect of it being implemented. The Single Market Act is slowly being put into action and legislation in this area (e.g. on public procurement and professional qualifications) has been introduced and/or passed. Project bonds are now in a pilot stage. On foreign affairs, the EU is clearly not any more important globally than it was before.

So there's been some progress on the main goals set out and plenty of ongoing work to do.

The six-pack of legislation on rules for the Eurozone were also passed and the draft two-pack was introduced and is currently under debate in the Parliament.


Commissarial Speech 2012

The Commission is entering the last 2 years of its mandate, so the focus will start to shift to finishing its legislative priorities and plans (such as the two-pack, market regulation and the new general data protection laws) rather than introducing new draft legislation that the Commission might not have time to bring through the legislative process. That treaty change is on the political agenda (with Van Rompuy putting together some proposals), this is Barroso's (and the Commission's) chance to make a big political pitch for the type of EU he wants to see. It's also hard to see any legislative rabbits being pulled out of the hat at this point or many new investment or growth policies, particularly given Barroso's agreement with the general line on austerity and the crystallisation of Member State positions on the EU budget. So we should see a speech on the direction of the EU and European integration.That said, vision and ambition aren't the words that spring to mind when it comes to Barroso.

Apart from the economic crisis and discussion on European integration, the Union's justice and home affairs policy really needs attention. The area got scant attention last year and problems have built up, with the bust-up between the Council and the Parliament over Schengen (leading to the Parliament suspending talks on several important pieces of legislation) being the key event in the last 6 months. Will Barroso try to woo the Parliament back into working in this area, and can he present a coherent vision for the EU's security strategy? It's a delicate issue since he won't want to risk offending his audience by pushing Parliament too hard to give in to the Council and there is little Barroso can offer the Parliament here, but the lack of a political narrative and political leadership for justice and home affairs apart from a shopping list from the Member States is a major weakness.

The speech will be on at 9:00 CET on September 12th in the European Parliament.

Trichet's Political Union

Former ECB President Jean Claude Trichet has written a bit about the kind of political and economic union he'd like to see:

"[After considering the Fiscal Stability Treaty and moves towards banking union:]

But none of this is enough. Instead of imposing fines on countries that transgress rules and ignore recommendations, as the SGP was supposed to do, the European Commission, the European Council, and – this is essential – the European Parliament should decide directly on measures to be immediately implemented in the country concerned. Fiscal and certain other economic policies should be subject to activation of a eurozone “federation by exception.”

The idea that sharing a single currency also means accepting limitations on fiscal sovereignty is not new. A “federation by exception” merely draws the logical consequences from the ineffectiveness of the fines envisaged by the SGP, and is fully consistent with the concept of subsidiarity that has been applied since the SGP’s introduction: as long as national economic policy complies with the framework, there are no sanctions.

Perhaps the most important element of the “federation by exception” would be its strong democratic anchor. Its activation would be subject to a fully democratic decision-making process, with clear political accountability. More precisely, decisions to implement measures proposed by the Commission and already approved by the Council would require a majority vote by the European Parliament – that is, those representatives elected from the EU’s eurozone members.

In such exceptional circumstances, the parliament of the country concerned should have the opportunity to explain to the European Parliament why it could not implement the recommendations proposed, while the European Parliament could explain why the eurozone’s stability and prosperity are at stake. But the final word would belong to the European Parliament.

In the past, I have suggested establishing a eurozone finance ministry, which would be responsible for activating economic and fiscal federation when and where necessary, and for managing new crisis-management tools like the European Stability Mechanism. It would also be responsible for overseeing the banking union, and it would represent the eurozone in all international financial institutions and informal groupings.

But, most important, “federation by exception” would ultimately cease to be an exception. The finance minister would be a member of the EU’s future executive branch, together with the other ministers responsible for other federal departments."

This turns the idea of the democratic deficit on its head. The problem of the EU has been that it needs to be made more democratic and accountable to citizens, and that national electoral mandates have not provided that democratic legitimacy. There may be a need for a proper economic union to create a sustainable Eurozone, but if there needs to be some common policies, they should be, well, common policies rather than a selective intrusion into Member States. The kind of political union proposed by Trichet would bring a democratic deficit into Member States: those elected on a European mandate should make decisions on common European policy and not on national policy.

While economic union means that common policies are set, it is up to the Member States to decide for themselves on their economic policies. The aim of a common European economic policy is for the Eurozone to work as a currency area, not for the European institutions to set national policies in detail. So while by being part of the Eurozone Member States have to act in the common interest of the Euro so it isn't threatened or destabilised, it's up to the Member States to decide on their economic policies and how they will invest and pay down debt. Not only is Trichet's plan politically unacceptable, but it wouldn't work - if the national parliament is unable to meet the conditions of loans or of Eurozone membership, then it's because there isn't the political will within the Member State to take the necessary actions and drafting in another elected body to take those decisions won't be effective either, since it would lack democratic legitimacy and since the national administration is of course under the control of the national parliament and other state institions.

It takes a pretty strange concept of subsidiarity to propose the European Parliament standing in for the national parliament...

We need to start paying more attention to the European Parliament

I don't think I can say it any more clearly than the title: we really do need to start paying more attention to the European Parliament. Every so often there's a blog article about how the European Parliament is no longer a talking shop, but a strong co-legislator with the Council, usually citing as an example the Parliament's rejection of the first SWIFT Treaty as evidence. It's true, but though the idea that the European Parliament is more powerful now seems to have caught on a bit more, there's no real debate on what Parliament does, and it's a real failing of our media and a lost opportunity.

What do I mean? Well, the Fiscal Stability Treaty that everyone's discussing now makes hardly any changes to the current state of EU law, given that the European Parliament passed around 90% of it last year. These are big issues on how we run our Eurozone economy that we have been debating for the last two years, not a sudden report of this or that treaty* - legislation supposed to help deal with the economic crisis! They are already having an effect nationally and in national politics. And yet there has been little public debate on this until the treaty, and little attempt by the public to use the Parliament as a means to influence EU policy and law.

That's the most damaging part of this: we're not using the European Parliament to its half potential, never mind it's full potential. It's supposed to be there to represent us. There are issues with the distance between the EU institutions and the public, but I'm not satisfied with the attitude that the institutions should bring themselves closer to us - we should be demanding and dragging them closer to us, and calling them on what they get wrong. Our media has improved its coverage of the EU for the economic crisis - a lot of it has been extremely good - but it's missing out on how decisions are being made by focusing on the European Council and all the summits. These are important, but European politics should not be a spectator sport: we need to let the Parliament know that we're demanding participants.



*The European Parliament does deal with lots of security issues - like surveilliance of air travel through the PNR system, which is still going through Parliament.

Ireland's State of the Nation Address

Ireland's Taoiseach, Enda Kenny, made what is only the 6th state of the nation address on Sunday evening before the new government's first austerity budget (to be announced over Monday and Tuesday). Brian Cowen, the last Taoiseach, was criticised for not making an address, and was probably held back by the memory of another past Fianna Fáil Taoiseach, Charlie Haughey, who famously told the country to tighten its belt while he was far from doing the same in his own life. Ireland's also had some experience of austerity speeches that have been mocked:



Here's Enda's State of the Nation address:



Enda will probably get some credit for making the address, but the devil will be in the detail of the budget, and the debate that follows will be inevitably overshadowed by the actual changes and choices made by the budget. Ireland has been living under austerity budgets for so long that the further cuts and tax increases by the government will be increasingly painful: we've long run out of low-lying fruit.

From a Eurozone perspective, this is the first major signal that the Irish government will accept treaty changes, which it had been opposing as recently as Kenny's visit to Berlin two weeks ago. In many ways the Irish government has been so absorbed by the austerity plan and worried about running a referendum in this climate that it put a bit too much hope in a solution being found without treaty change (and it has raised some valid points about the lack of implementation of all the summit agreements so far). However, there needs to be a better Eurozone system for the currency to work, and treaty change is inevitable if the Euro is to survive. It's a pity that the Irish government's sights are set so low (its main red line is preventing (corporate) tax harmonisation), rather than focusing on putting forward what it wants fiscal union to look like for the whole Eurozone. How we run the Eurozone will effect how we work in the future, and how much solidarity we will want to show with other Eurozone countries (for example, would Ireland be happy with lending money as part of a bail-out to another country [post-current-crisis], under the strict deficit rules being discussed?).

Do we want Eurobonds - and not just for Christmas? How much fiscal policy should be set by the Commission/European Parliament/Council? Lately there has been more discussion about the role the ECB should play, but it does seem as if our politicians will only discuss what "Merkozy" proposes instead of insisting on common ownership. It's not all Merkozy, of course. All Eurozone members will need to agree on the way forward, and the Franco-German proposals are the starting point. But we need to have a better sense of public ownership in the other Eurozone states. The rise of more extreme parties has been most marked in the smaller Member States: if the next treaty change is to solve the crisis it will have to go far enough to create a credible Eurozone and appear just and inclusive enough to be accepted across the Eurozone. It's too much of a gamble for Merkozy to appear to push too far ahead with their own project and then risk rejection in the smaller states which could derail the Euro entirely...

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.

The Gloom of having no Good Options

The Greek government has survived the vote of confidence, and now its next test is passing more austerity measures. Austerity has little - if any - support among the Greek electorate simply because it hasn't delivered the goods yet. It seems obvious that Greece will default at some point, but would it be better to do it sooner rather than later?

There doesn't seem to be any good solution here.

Greece cannot pay its debts, but the default and decouple option, as advocated by Daniel Hannan, among others, would be disasterous for Greece and for the EU. Defaulting would unleash a tidalwave of debt back into the European banking system and European taxpayers in the Eurozone would take a big hit at the same time that their governments (particularly in Germany, France and the UK) would be forced to decide whether or not to bail out their bad-Greek-debt-holding banks. For Greece, it would be locked out of the international financal markets (as it is now), and without an alternate line of credit. Since it takes in less in taxes than it needs to finance its expenditure, the resulting austerity could be much, much worse. Leaving the Euro at such a time could lead to extremely high inflation.

Just leaving the Eurozone (and not defaulting) is unlikely to help either, as the devalued New Drachma would make it harder for Greece to pay off its debts, most of which are in Euros.

Continuing austerity doesn't seem to be working either. Greece needs time to restructure and reform its economy, but the time-frame is extremely short for the task that faces the country, and the refrain of "tough love" from Northern Europe is not endearing for the Greek public, to say the least.

Further integration is the call of others, and interestingly also of the IMF, urging the Eurozone to integrate economically and politically. However, these calls still seem vague to me on detail, and I'm not sure how much they are aimed at solving the current crisis rather than on preventing it from happening again (or both). The blue-and-red bonds (where there are some Eurobonds and some national bonds) or the Eurobonds idea is attractive, and could ease some of Greece's problems, but it could also raise some others. Regardless, there is little political will for more integration, and as no attempt by any Eurozone government to really make the case for further integration, it doesn't look like that will change soon.

At the moment the best option seems to be to accept the bad austerity and bail-out deal and forge ahead with reforms in Greece with at least the thin cushion of EU/IMF loans rather than no loans at all and hope that either (a) the EU gets its act together; or (b) the painful austerity will help Greece just enough so that it can partially default in a more managed way in a year or two when the prospects are better for it and the EU. Neither option is an inspiring or very sellable one.

The protests in Greece will continue, but I wonder what the historical legacy would be if they won and Greece defaulted unilaterally - both for internally and in Europe?

Arguing with the "Facts".

I've already written why I think opinion polls are unhelpful due to the difficulty in interpreting them for policy formulation. But I want to write down a few ideas on the Eurobarometer poll. (If you're interested in Eurobarometer analysis, Grahnlaw is writing a series on it).

When it comes to the interpretation of the results, I find myself caught between the pro-integrationists and Eurosceptics. My lasting impression is that there is a wide "middle ground" to be fought over EU action on the economic crisis. The 75% support for EU action has been critised (rightly) by Open Europe as giving a misleading impression of overwhelming support. Not only is it a combination of the replies of "very effective" or "fairly effective", but it doesn't show support for specific policies, and we cannot guess exactly what kind of co-operation people want.

However, Grahnlaw is right to point out that Open Europe has missed a trick here. For, while Open Europe repeat their outraged "do they take us for fools?!" line, the fact is that 75% think that EU action on the crisis would be fairly effective, and the 26% that replied "very effective", puts the EU in the position of being the organisation with the highest percentage of "very effective" replies (versus IMF, national governments, the US, the IMF, etc.). Though it should be noted that when 26% is the highest number, it indicates a fairly wide spread. That it does not indictate overwhelming support for a particular form of cooperation is correct, but it shows that people are very much open to arguments for economic governance. It's a pity that Open Europe focused only on the spin and did not feel it necessary to engage in a battle of ideas over what economic governance should mean, or why it is the wrong choice. We are treated, instead, to a declaration of what the general opinion is (or an interpretation of it), and expected to evaluate the legitimacy of our ideas - or what is politically possible - in light of them.

It seems to me odd to adopt this attitude.



What support means.

The second big battle is over the loss of trust in the EU means. The two are linked. Eurosceptics argue that the loss of trust should mean that the EU slows down and should not try and "act big" on the economic crisis. Supporters of closer EU co-operation point to the above argument that the high level of openness shows that we should press ahead. My position as an integrationist is well known to readers of this blog, so my interpretation comes with a health warning - however, I want to offer a few counter-arguments and ideas to show that the "battlefield of ideas" is still open.

First of all the argument that the drop means that the EU should not act further (or, more extreme, be abolished) based on the trust ratings is a strange argument. First of all, the trust rates for national governments are over 10% lower, and nobody is suggesting that national governments should stop mooting ideas or bringing forward policies (or, in the other extreme, being abolished to allow for more government from the "more trusted" EU level of governance). In terms of drops in support, national governments also faced a similar 6% fall in support between Eurobarometer 71.1 (Jan-Feb 2009) and 71 (September 2009), though this may be seen as a blip, given that it rose between Autumn 2008 and Jan-Feb 2009 (trust rose from 34% to 38% before falling to 32%) [see Eurobarometer 71, page 74 (PDF)]. The point is that further Eurobarometers can give more contezt, and that drops in support are not alien to national governments.

Second, the argument that the drop shows that people are "waking up to the Eurosceptic view as the reality" is also dubious to me. Between Eurobarometers 70, 71.1, and 71 (covering Spring 2008-9) shows the level of trust in the EU remaining steady at 47% (see EB 71, page 124). This was during a period where it was clear that the Lisbon Treaty was going to face a second referendum in Ireland, a fact frequently used in Eurosceptic argument of the untrustworthiness of the EU, yet at a time when the governance of the EU was so clearly highlighted, it appears the trust levels held. Looking further back, the level was at 48% in Autumn 2007, and briefly jumped up to 50% before falling to 47% (see page 31, PDF). Context is needed, and we can't link such results for non-specific questions to particular arguments easily.

So my feeling is that the Greek Eurocrisis was the main reason for the fall (but, again, it's hard to say - maybe unemployment and other economic reasons are a cause or additional causes). There are 2 arguments here. The failure of the Eurozone made people loose trust in the way the economy of the EU was being handled at an EU level, so there should be less co-operation. The lack of solidarity and the bad feeling generated by "bail-outers" and "bailees" shows that further co-ordination shouldn't be pursued. Or, that the lack of solidarity and decisiveness lead people to loose trust in the EU to help their country if the crisis hit them, or to prevent the crisis spreading to countries entailing their country to bail others out, and therefore closer and clearer co-operation and governing structures are needed.

I think both have a valid basis - though I am on the side of the latter argument, the former argument cannot just be ignored. Personally, I would say that the openness of people to EU action, as shown by the recent Eurobarometer results, indicates that it's still all to play for, and that nothing is settled.