Britain has lost influence and friends in the EU due to the veto, but it doesn't mean that the UK won't get another chance to sit around the negotiating table because the new fiscal compact is far from a done deal.
Isolated Britain
First of all, how Britain has isolated itself needs to be recognised. When it comes to treaty renegotiation, Britain has a bad hand to play. Though the Tory right have talked up the crisis as an opportunity to renegotiate the UK's EU position and the possibility of leading a group of non-Eurozone countries. Both ideas are - and have proven themselves to be - ridiculous. The crisis makes it more likely that governments under pressure will try to circumvent an obstructive Britain in the rush to save the Euro than waste time opening up non-Euro areas of the Treaties. Most of the non-Eurozone countries either see themselves as future Eurozone members (most of them are legally obliged to eventually join), or see buying into the deal as a cheap way of ensuring influence (it has no affect on non-Eurozone members after all.
Second, though Britain wasn't arguing for major renegotiation of the treaties (e.g. on social policy powers), the UK's demands weren't as reasonable as they are now being presented. Under the present Treaties there is already a veto on introducing measures such as a financial transaction tax, so Cameron's veto doesn't add any extra protection in this area. On other financial regulations (decided by qualified majority voting, but in practice never previously passed without UK consent) we need to be clear that the UK was asking for special treatment of the financial services compared to other parts of the internal market. Why should financial services be treated differently and not any of the countless other economic interests of the other 26 Member States? Ironically France ending up standing up for the integrity of the internal market against Britain! In any case, Britain's demands could have probably been accomodated in practice during the normal legislative negotiations rather than tampering with the internal market as a concept.
It's not hard to see why the UK found itself without support for its position at the summit.
The New Fiscal Compact
Though Britain has damaged its own interests and alliances, it could try to repair them and it could find itself at the negotiating table again soon. The new fiscal compact only focuses on fiscal discipline, and doesn't touch on the role of the ECB or on the possibility of Eurobonds. Reassuring Germany over discipline without a trade-off on fiscal solidarity makes the deal harder to sell, and it could still fail. Some elements of solidarity might emerge over the course of negotiations between now and March (we all know that more happens in a week than in a year for the EU in this crisis).
Still, if the deal collapses, the Eurozone might need to reform the EU institutions (democratic legitimacy might re-emerge as an issue: after all, it's the aim of Merkel's CDU to mae the Commission President a directly elected office), and therefore an all-EU treaty change with the UK participating. It might even be the case that another treaty change is needed since the current deal doesn't do enough to help solve the crisis. This would still not be a good opportunity to renegotiate the UK-EU relationship to a great extent - if anything the Eurozone governments would be more panicked and willing to use any means necessary to save the Eurozone, and the international pressure on the UK not to block a deal would be huge - but it would provide a means of restoring influence and relationships within the EU for Britain. We'll see if it gets this second chance.
Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts
Monday, 12 December 2011
Friday, 29 January 2010
Will European bonds translate into Eurobonds?
There are, we are told, no plans to bail out Greece, which has come under a lot of pressure and scrutiny for its government debt. However there seems to be a general feeling that if it came to it, Greece would be bailed out: see the Irish Times and A Fistful of Euros. A few months ago, when the pressure was more focused on Ireland, I had the impression that, in the end, Merkel would relent and accept the need to bail out Ireland to prevent the Euro from being damaged. In terms of the Euro, any state is probably too big to fail, and so there probably needs to be some mechanism for supporting Eurozone states.
If Greece is bailed out by the EU, then there’ll be a strong precedent and expectation to do it again – and it could be called to do so again, as AFoE seems to suggest when you consider its articles on Spain. Of course, it may not come to a bail out, but already the EU is setting precedents through checking the Greek government’s figures and offering advice on the economy. Granted, the EU isn’t yet setting fiscal policy or writing Athens cheques, but it does show a growing need for greater formal economic co-ordination – and a certain willingness to do something about it.
There have been calls for more co-ordination in tax (which would be resisted by Ireland, among many member states).
Also, the Eurobond issue has been raised again, as it was when Ireland was the focus, and with the S&D group coming out in favour of its creation. It would make borrowing cheaper for countries like Ireland and Greece, but more expensive for countries in a better position, which in political terms looms large as Germany. Germany rejected the idea back when Ireland was the issue, and Berlin remains an obstacle to the idea. But if idea proves resilient and keeps coming back – as it probably will during what will likely be a long recession, and particularly if Greece does need to be bailed out – it could happen. Is it a necessary element of a stronger Eurozone?
The S&D group is also advocating the EU adoption of Obama-like plans for the banking sector. Given the UK’s unease with the prospect of financial regulation at a European level in the guise of a simple oversight system, and the dominance of the right generally, it isn’t really a serious prospect. Except... It is interesting that in the UK the Conservatives have, strangely, enthusiastically adopted Obama’s ideas and David Cameron has called on the Prime Minister to clearly come out publicly in favour as well. I doubt they adopt the same position in the EP.
Could Gordon Brown turn around and say, “Why, yes, of course we support such a plan – and we’re part of an EU-spanning political party that advocates it too. Given the international value of banking, and the single market, it would make sense to have common rules on the matter – and we’re the only party in the UK that has the political clout in Europe to make it happen.”? Well... no. Besides Britain’s euroscepticism and the government’s continued awe of the City, it would be too risky to support it at a European level because the S&D are in opposition, so there’s no guarantee that it would pass in the EP, never mind in the Council and Commission; the Commission, which would need to introduce any draft legislation on the matter, may not back the idea; it could end up playing as a victory for the French and a result of their “winning” an economic portfolio, even if it was originally Obama’s idea, etc.
Pity: the thought of Labour turning its European-dimension to its advantage on an issue (to show coherence and effectiveness on several levels compared with the Tories) is a nice thought, but still a fantasy.
Will European bonds translate into more co-ordinated action and a more structured way of working together in the future? Necessity might demand it, but there may not be the supply of political will.
If Greece is bailed out by the EU, then there’ll be a strong precedent and expectation to do it again – and it could be called to do so again, as AFoE seems to suggest when you consider its articles on Spain. Of course, it may not come to a bail out, but already the EU is setting precedents through checking the Greek government’s figures and offering advice on the economy. Granted, the EU isn’t yet setting fiscal policy or writing Athens cheques, but it does show a growing need for greater formal economic co-ordination – and a certain willingness to do something about it.
There have been calls for more co-ordination in tax (which would be resisted by Ireland, among many member states).
Also, the Eurobond issue has been raised again, as it was when Ireland was the focus, and with the S&D group coming out in favour of its creation. It would make borrowing cheaper for countries like Ireland and Greece, but more expensive for countries in a better position, which in political terms looms large as Germany. Germany rejected the idea back when Ireland was the issue, and Berlin remains an obstacle to the idea. But if idea proves resilient and keeps coming back – as it probably will during what will likely be a long recession, and particularly if Greece does need to be bailed out – it could happen. Is it a necessary element of a stronger Eurozone?
The S&D group is also advocating the EU adoption of Obama-like plans for the banking sector. Given the UK’s unease with the prospect of financial regulation at a European level in the guise of a simple oversight system, and the dominance of the right generally, it isn’t really a serious prospect. Except... It is interesting that in the UK the Conservatives have, strangely, enthusiastically adopted Obama’s ideas and David Cameron has called on the Prime Minister to clearly come out publicly in favour as well. I doubt they adopt the same position in the EP.
Could Gordon Brown turn around and say, “Why, yes, of course we support such a plan – and we’re part of an EU-spanning political party that advocates it too. Given the international value of banking, and the single market, it would make sense to have common rules on the matter – and we’re the only party in the UK that has the political clout in Europe to make it happen.”? Well... no. Besides Britain’s euroscepticism and the government’s continued awe of the City, it would be too risky to support it at a European level because the S&D are in opposition, so there’s no guarantee that it would pass in the EP, never mind in the Council and Commission; the Commission, which would need to introduce any draft legislation on the matter, may not back the idea; it could end up playing as a victory for the French and a result of their “winning” an economic portfolio, even if it was originally Obama’s idea, etc.
Pity: the thought of Labour turning its European-dimension to its advantage on an issue (to show coherence and effectiveness on several levels compared with the Tories) is a nice thought, but still a fantasy.
Will European bonds translate into more co-ordinated action and a more structured way of working together in the future? Necessity might demand it, but there may not be the supply of political will.
Tuesday, 14 July 2009
The G8... and other minor issues
This may be the first blog post I've written about a G8 meeting (and a late one at that), but it is probably a waste of time, judging from the media coverage of the summit and the well-deserved cynicism that summitry in general tends to meet with these days. One of the few blog posts I've read on the G8 L'Aquila summit had the blunt title "G8 - Waste of Space?". The G8 focused on 3 main areas last week; the financial crisis, climate change and food and aid for the developing countries, though they also discussed issues like the Iranian elections, intellectual property, etc. You can find the summit documents here.
Overall it was quite underwhelming: the major achievement as far as climate change goes was getting an agreement to reduce emissions by 80% by 2050 and so prevent the rise in temperatures beyond 2 degrees Celsius. Before the summit, this had been Barroso's stated aim, but, though achieved, a political and non-binding agreement with no detail to have something done in 41 years time is hardly an impressive or ground-breaking achievement. The talks will have been useful in preparing the ground for Copenhagen in December; it's a weak diplomatic weapon, but the agreement could be used to urge greater action this winter. There will also be an institute to look at carbon capture: the "Global Carbon Capture and Storage Institute", which will be based in Australia. I don't know any of the details behind it: budget, remit, etc. and it's likely that all of that is still to be finalised; still, it doesn't take too much imagination what sort of stuff it will be doing.
The lack of action an real targets has led to a rubbishing of the G8's conclusions - even Ban Ki-Moon, the low-key Secretary-General of the UN had some strong words:
When it comes to the financial crisis, it doesn't look as if there's much new here: just a commitment to getting credit flowing again and to try to make the Doha round of trade talks a success - since I haven't heard of any country taking the opposite line, this doesn't especially strike me as an impressive diplomatic victory. The G8 also considered the issue of food security and aid, and Obama has spoken about Africa being self-sufficient. This has resulted in a promise for $20 billion (around €10 billion) to be invested in rural aid over the next 3 years in developing countries, though, again, there will be the small matter of following up on the promise now that the leaders have left L'Aquila.
As for the significance of the G8, I'm torn. On on hand, it has become obvious that power in the world has shifted so that the G8 can no longer be expected to come up with the solutions to the problems of the day anymore. This can be seen from the simple fact that the G5 were invited along to attend. On the other hand, there is a value in a group of (mostly) like-minded countries coming together to discuss various issues at the highest level. It helps grease the wheels of diplomacy (though I suppose, depending on the leader, the foreign affairs officials may see that differently), and could help co-ordination and lead to better achievements at more specific summits. It may be the end of the G8's significance, but that doesn't mean that it's the end of the G8's usefulness.
Overall it was quite underwhelming: the major achievement as far as climate change goes was getting an agreement to reduce emissions by 80% by 2050 and so prevent the rise in temperatures beyond 2 degrees Celsius. Before the summit, this had been Barroso's stated aim, but, though achieved, a political and non-binding agreement with no detail to have something done in 41 years time is hardly an impressive or ground-breaking achievement. The talks will have been useful in preparing the ground for Copenhagen in December; it's a weak diplomatic weapon, but the agreement could be used to urge greater action this winter. There will also be an institute to look at carbon capture: the "Global Carbon Capture and Storage Institute", which will be based in Australia. I don't know any of the details behind it: budget, remit, etc. and it's likely that all of that is still to be finalised; still, it doesn't take too much imagination what sort of stuff it will be doing.
The lack of action an real targets has led to a rubbishing of the G8's conclusions - even Ban Ki-Moon, the low-key Secretary-General of the UN had some strong words:
"“The policies that they have stated so far are not enough, not sufficient enough,” Mr Ban told reporters. Referring to the UN Intergovernmental Panel on Climate Change (IPCC), he said: “This is the science. We must work according to the science. This is politically and morally imperative . . . for the future of humanity.”"
When it comes to the financial crisis, it doesn't look as if there's much new here: just a commitment to getting credit flowing again and to try to make the Doha round of trade talks a success - since I haven't heard of any country taking the opposite line, this doesn't especially strike me as an impressive diplomatic victory. The G8 also considered the issue of food security and aid, and Obama has spoken about Africa being self-sufficient. This has resulted in a promise for $20 billion (around €10 billion) to be invested in rural aid over the next 3 years in developing countries, though, again, there will be the small matter of following up on the promise now that the leaders have left L'Aquila.
As for the significance of the G8, I'm torn. On on hand, it has become obvious that power in the world has shifted so that the G8 can no longer be expected to come up with the solutions to the problems of the day anymore. This can be seen from the simple fact that the G5 were invited along to attend. On the other hand, there is a value in a group of (mostly) like-minded countries coming together to discuss various issues at the highest level. It helps grease the wheels of diplomacy (though I suppose, depending on the leader, the foreign affairs officials may see that differently), and could help co-ordination and lead to better achievements at more specific summits. It may be the end of the G8's significance, but that doesn't mean that it's the end of the G8's usefulness.
Wednesday, 4 March 2009
Don't worry, the Commission has a cunning plan
The Commission apparently has a plan to aid Eurozone countries that default, though it will not reveal them to the public. Though since there can be no buying up of national bonds or bailing out of defaulting governments, the balance of payments scheme seems to be the only mechanism available (that I know of - not being an economist, I can't say for definite). If that's true, it seems the amount of money that is involved is minuscule (unless the ceiling is raised significantly: at the moment the ceiling is €25 billion).
I'm not too impressed by the claim that they're "equipped intellectually, politically, and economically to face this crisis scenario", either. First of all, I would question the fact that the aid (under "The Plan") seems to be on offer only after the country has defaulted, or at least it is only spoken about in these terms. Second, the Commission's performance over the last few months hasn't been inspiring. If its defence of the single market, the heart of the EU, is so weak, then I don't expect much ambition in this area either. That the Commission has proved so inept in demonstrating the usefulness of the EU to the public by taking a pro-active stance is, in my opinion, the most damning aspect of Barroso's Commission.
Never mind the lack of political promotion and initiative during the referendum campaigns, etc. as highlighted by the Anyone But Barroso campaign, though these reasons are by themselves important - this failure to act effectively cannot be rationalised away with the idea that the Commission shouldn't be assertive in the national political arena; the crisis is huge, and the need for effective common plans and co-ordination has never been greater. If the Commission cannot summon up the courage and ambition to act in an area where it is so desperately needed, then I can only assume that this one has a death wish.
I'm not too impressed by the claim that they're "equipped intellectually, politically, and economically to face this crisis scenario", either. First of all, I would question the fact that the aid (under "The Plan") seems to be on offer only after the country has defaulted, or at least it is only spoken about in these terms. Second, the Commission's performance over the last few months hasn't been inspiring. If its defence of the single market, the heart of the EU, is so weak, then I don't expect much ambition in this area either. That the Commission has proved so inept in demonstrating the usefulness of the EU to the public by taking a pro-active stance is, in my opinion, the most damning aspect of Barroso's Commission.
Never mind the lack of political promotion and initiative during the referendum campaigns, etc. as highlighted by the Anyone But Barroso campaign, though these reasons are by themselves important - this failure to act effectively cannot be rationalised away with the idea that the Commission shouldn't be assertive in the national political arena; the crisis is huge, and the need for effective common plans and co-ordination has never been greater. If the Commission cannot summon up the courage and ambition to act in an area where it is so desperately needed, then I can only assume that this one has a death wish.
Saturday, 28 February 2009
Fianna Fáil go Liberal
The Fianna Fáil party in Ireland (the senior party in the governing coalition) is going to join the Liberal group in the European Parliament, after delegates voted in the party's Ardfheis (party conference) to accept the move. Provided that the Liberals accept them of course. It is unlikely to be much of a boost to the Liberals in the coming election, though as support for the party has collapsed in Ireland recently. Though since the party did so badly at the last European elections, there may not be a massive drop in the size of its delegation to the EP.
There are also plans to tighten rules about campaign funding for groups engaged in referendum campaigns. The move is clearly targeted at Libertas, whose funding has been a source of controversy and speculation ever since Lisbon I.
There are also plans to tighten rules about campaign funding for groups engaged in referendum campaigns. The move is clearly targeted at Libertas, whose funding has been a source of controversy and speculation ever since Lisbon I.
Tuesday, 24 February 2009
King of the Summit
Summits are a vital part of the European system, a simple fact that underlines the powerlessness of the Commission and European Parliament in times of crisis (and since the EU is always in crisis...). However there is an art to summitry: the main goal is to agree on a direction and move everyone together along it towards a goal (which need not be clearly defined). A bit like the EU as a whole.
But to move everyone along, everyone needs to be a part of it - and feel like a part of it. After Sunday's mini-summit in Berlin, which is ahead of the EU summit on March 1st, several countries are reportedly irked that they weren't invited to the party to decide that something must be done. What exactly? Well, it was decided at Berlin that the global financial and economic system should be fixed.
I know, I'm disappointed too; when will Berlusconi reveal his Marxist plans?
So what was the summit about really? There were more than the EU G20 countries there, so it wasn't just to decide on a common position for the summit in London in April; could it also be aimed at deciding a common position at the EU summit in March? Perhaps to ensure that the "west" (though not all of it) have a common position as well as the "east" which will have a summit of its own?
And where does this leave the countries left over?
All this summitry is turning poisonous.
In other news, a group of experts will probably announce that there should be a new EU bank watchdog. Common sense, right? Especially after the revelations that banking business in the past has lead to the situation where an eastern European collapse could bring down a lot of the west's banking system with it - illustrating the enormous flows of money between member states. But... member states might not be able to agree on it? Maybe a summit is needed...
But to move everyone along, everyone needs to be a part of it - and feel like a part of it. After Sunday's mini-summit in Berlin, which is ahead of the EU summit on March 1st, several countries are reportedly irked that they weren't invited to the party to decide that something must be done. What exactly? Well, it was decided at Berlin that the global financial and economic system should be fixed.
I know, I'm disappointed too; when will Berlusconi reveal his Marxist plans?
So what was the summit about really? There were more than the EU G20 countries there, so it wasn't just to decide on a common position for the summit in London in April; could it also be aimed at deciding a common position at the EU summit in March? Perhaps to ensure that the "west" (though not all of it) have a common position as well as the "east" which will have a summit of its own?
And where does this leave the countries left over?
All this summitry is turning poisonous.
In other news, a group of experts will probably announce that there should be a new EU bank watchdog. Common sense, right? Especially after the revelations that banking business in the past has lead to the situation where an eastern European collapse could bring down a lot of the west's banking system with it - illustrating the enormous flows of money between member states. But... member states might not be able to agree on it? Maybe a summit is needed...
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