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.

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...

ECB lending to buy time for... what?

The European Central Bank's announcement that it would buy Eurozone government bonds is a massive boost to the Eurozone, but a lot remains to be done before we can say that the Eurozone is starting on its path out of the crisis. The banking union legislation will be a key part of the agenda over the next months (the Commission should publish a draft law on banking union next week), and it is vital in separating the link between national banks, which have grown as part of an EU-wide financial system, from national governments, many of whom are simply too small to support such large financial sectors.

However like most initiatives banking union focuses on preventing similar problems next time - in order for it to have an appreciable effect on today's crisis there would need to be a deal on old banking debt that has been taken on by national governments, in particular Spain and Ireland. (The Fiscal Stability Treaty, the six pack and the yet-to-be-passed two pack share this weakness too). Could this be agreed? Would there be joint liability for debt already generated and taken on by national governments (that the ECB pressured the protection of banks to ensure the stability of the system means that there was also a European interest in these national financial systems from early on in the crisis too)? It's a highly political area and the Irish government - and no doubt Spain too - are eager to reduce their debt as far as they can while avoiding austerity.

But it's not just in Ireland and Spain's banking case that the debt question is posed (though they raise the spectre that rigid application of public debt rules bear little relation to the ability to weather economic crises), since debt and economic growth is a European question. So what is the ECB buying time for: for an agreement on economic union? How far should economic union be extended? If debt needs to be shared to ease the burden and to provide breathing room for reforms and recovery in the most crisis-hit countries what kind of institutions do we need, and how do we make them accountable?

Merkel has signalled that she wants a convention by the end of the year to decide on the future of the EU, and apparently France and Germany are moving closer together on political union. Barroso has also called for a EU Treaty "renewal". There's very little detail on what is meant by different people about economic or fiscal union, so it's hard to get a debate going it. It's likely that the only debate we'll get is on the results of a convention - hardly a good way to build such a union or to build support for it. In any case Barroso is supposed to put forward some ideas in his State of the Union speech on September 12th. If he does put some ideas on the table, it could be one of the few opportunities for civil society to study the up-coming integration debate.

The Fiscal Stability Regulation

The second proposal of the two-pack, the Fiscal Stability Regulation (PDF), focuses on budgetary surveillance where Member States are “experiencing or threatened with serious difficulties with respect to their financial stability”. The Regulation would only apply to the Eurozone Member States. The Regulation would mean that Eurozone Member States will, just like Member States requesting precautionary assistance from the EFSF, ESM or IMF, be subject to a higher level of budgetary surveillance than would normally be the case under the Eurozone legislation so far.

The Regulation

- The Commission can decide whether a Member State should be put under enhanced surveillance, and whether to prolong that status every 6 months. The Commission must put Member States receiving financial assistance on a precautionary basis under enhanced surveillance if they actually draw on the precautionary aid;

- If a Member State is under enhanced surveillance, it must adopt measures aimed at addressing the sources or potential sources of difficulties and, on request from the Commission, the Member State shall: communicate information on the financial situation of financial institutions under the surveillance of national supervisors to the Commission, ECB, and European Banking Authority; carry out stress tests to test the resilience of the banking sector to financial and macroeconomic shocks; be subject to regular assessments  of its supervisory capacities over the banking sector; communicate information needed for the monitoring of marco-imbalances

- The Commission will conduct regular review missions in Member States under enhanced surveillance. If further measures are needed, the Council may recommend that the Member State seek financial assistance on a qualified majority vote;

- Where financial assistance is sought, the Commission will prepare an analysis of the sustainability of the Member State’s government debt;

- The Member State receiving financial assistance will prepare a draft adjustment programme in agreement with the Commission to be approved by the Council by QMV. If the Commission highlights significant deviations from the programme, the Council may make a finding of non-compliance by QMV;

- The monitoring under adjustment programmes will suspend the monitoring over other Eurozone legislation;

- There will be “post-programme surveillance” as long as a minimum of 75% of the financial assistance received by a Member State has not been repaid, and this period may be extended by the Council, voting by QMV. For this surveillance, the Commission will conduct regular review missions and the Council may recommend corrective measures to the Member State on a QMV vote;

- For qualified majority votes, only Eurozone members can vote in procedures under this Regulation, with the Member State concerned excluded from the vote.

European Parliament Report

The report in the Economic and Monetary Affairs Committee was drafted by Jean-Paul Gauzes (EPP). The report was adopted by Committee by 25 votes to 4, with 13 abstentions. It was passed in a plenary vote, but I haven’t been able to find out what the vote was.

The report contains 72 amendments, and the main changes are:

- Like the Excessive Deficit Regulation, more referenced to employment and social protection have been made in the recitals, and in the first article with regard to wage formation and collective agreements;

- Amendment 8 would include a recital referring to ECJ case law that Member States can restrict the free movement of capital on ground of public security, stating that this may be possible to fight tax evasion where a Member State faces serious difficulties in retaining financial stability. It would also insert a reference to the ability of the Council, on a Commission proposal, to authorise restrictions in the free movement of capital concerning third countries. Provisions addressing this are also to be included as articles;

- It would make it a requirement for Member States to report debt issuance plans to the Commission and Council;

- The report seeks to tie the decision that a Member State is at risk more closely to objective factors, including warnings from the European Systemic Risk Board;

- Requiring the Commission to examine the potential negative spill-over effects generated by Member States, including in the field of taxation, and the Council may make recommendations to the Member State regarding this on a proposal from the Commission;

- Requiring the Commission to report the findings of its reviews (including post-programme reviews) to the European Parliament;

- Requiring Member States intending to request financial assistance to inform the European Parliament;

- That the assessment of government debt sustainability also include an assessment of the impact of the adjustment programme on the Member State’s ability to repay, and the Commission will make public its methods of economic assessment;

- The Commission would be given the power to approve draft macroeconomic adjustment plans, with the Council being able to reject an approval by qualified majority voting. Likewise, the Commission can adopt recommendation for a new draft plan where it judges the old one to be insufficient; a recommendation which the Council can reject. (This would increase the power of the Commission in comparison to the original draft);

- The Commission can also make changes to the adjustment programme where there is a significant gap between forecasts and realised figures, which the Council can reject by QMV within 10 days of the decision;

- Similarly, the Commission will be empowered to decide whether a Member State has significantly deviated from the adjustment plan, with the Council having 10 days to reject this decision;

- Adjustment plans must take into account the need to ensure sufficient means for fundamental policies such as education and healthcare;

- A Member State subject to an adjustment plan shall audit existing debt to assess the reasons for its accumulation;

- Social partners and civil society shall be given the opportunity to express their views on the Commission public recommendations and opinions provided for under this Regulation;

- A Member State can be placed under “legal protection” if it is going to default on a decision of the Commission (which can be rejected by the Council within 10 days). Under legal protection a Member State should be able to stabilise and honour its debt. Legal protection would: have the effect of “close-out netting” or “credit event” provisions becoming inoperative; maintain (freeze) loan interest rates and ensure that new loans (apart from financial assistance) are to be reimbursed as a priority; creditors of the Member State must make themselves known to the Commission within 2 months or have their debts extinguished; the Member State submits a recovery and debt settlement plan to the Commission for approval;

- For post-programme surveillance, the Commission can take these decisions, with the Council having the power of rejection.

Thoughts

The European Parliament has put forward some amendments to increase scrutiny and oversight over the budgetary monitoring, with more reporting to the European Parliament and opening up Commission recommendations and opinions to the comment of social partners and civil society. There are also references to the need for the social impact of the adjustment programmes to be assessed and for the necessary funding for health and education to be ensured.

However the drive to empower the Commission is striking. In all cases the Council can reject the Commission’s decision so the Commission still needs the Council’s consent in a way, but it matters that the consent can be implied through inaction and that it doesn’t have to be won in a vote. This would make it more likely for the provisions of the Regulation to be exercised since it is politically difficult for Member States to vote on issues for another Member State. The “legal protection” amendments are the most radical. I don’t know much about state bankruptcy, but the provisions seem to be far too concerned with ensuring that creditors can be paid off (and by implication that the failed adjustment programme be taken as far as possible to secure enough repayment as possible, despite this failure). That the Commission can declare this protection without an application by the Member State goes too far in empowering the Commission. There is no way this amendment will pass in the Council, and it should be noted that the Commission is considering ways bankruptcy could be dealt with in the Eurozone.

Excessive Deficit Regulation

The Excessive Deficit Regulation (PDF) builds on the six-pack legislation’s provisions on budgetary surveillance.

The Regulation

The Regulation would establish a common budgetary timeline (mid-term budgetary framework to be published by 15^th April, draft budget laws published by 15^th October, and budget laws should be adopted by 31^st December), and require the creation of national independent fiscal councils for monitoring the implementation of national fiscal rules for achieving budget balance.

For budget monitoring, the relevant information is (simplified list taken from Article 5(3)):

(a)    The targeted budget balance as a percentage of GDP;

(b)   The projections at unchanged policies for expenditure and revenue as a percentage of GDP;

(c)    Targeted expenditure and revenue as a percentage of GDP;

(d)   A detailed description of measures to be included in the budget to bridge the gap between the targets in (b) and (c);

(e)   The main assumptions about expected economic developments and important economic variables, based on independent macroeconomic growth forecast;

(f)     Any additional indications on how recommendations to the Member State will be met.

The Commission will give its opinion on the draft budgetary laws by 30^th November, and national parliaments can require a Commission presentation to them. There will also be an overall assessment for the Eurozone.

When a Member State is under the excessive deficit procedure it falls under closer budgetary scrutiny, with regular reports to the Commission on the execution of the budget on the general government and sub-sector levels. Under Article 7(6), the Commission can require a Member State to carry out and report on a comprehensive independent audit of its accounts and provide additional information on its progress on the excessive deficit. The Regulation would increase the Commission’s power in monitoring Member States’ budgets and involvement in budgets where there is an excessive deficit procedure in force.

European Parliament Report.

For the Economic and Monetary Affairs Committee, Elisa Ferreira (S&D) drafted the report for the Parliament’s response at first reading. The report was endorsed in Committee by 18 to 12, with 14 abstentions, and in plenary by 501 to 138, with 36 abstentions. The report was endorsed by an EPP-S&D-ALDE-Greens/EFA coalition.

The report submits 81 amendments that will be the Parliament’s starting negotiating point with the Member States in the Council. The main changes are:

- Greater reference to employment and social partners to be added to the recitals;

- It would add (non-binding) calls for a Financial Transaction Tax and a Common Consolidated Corporate Tax Base to the recitals;

- Specifies that the Regulation does not affect wage formation or collective agreements;

- Would define “particularly serious not compliance” as a deviation of 1% GDP in one year or an average of 0.5% GDP each year for two years from the budgetary objective if there are no exceptional circumstances;

- Gives some more flexibility with the deadlines;

- “Expected economic developments” will include an estimation of the assumed macroeconomic multiplier effects (so stimulus packages can be taken into account);

- Specifies that the Commission’s power to specify content of draft budgetary plans is through delegated acts, which brings it under closer control and scrutiny by the Parliament and Council;

- The European Parliament can also require that the Commission present its budgetary plans to it and the relevant EP Committee, as well as the Eurogroup, will discuss the Commission’s opinion on national budgetary plans and the budgetary situation in the Eurozone. The Commission may update its opinions in the light of these discussions;

- Overall assessments of the Eurozone shall also include stress tests that provide “an indication of the risks to public finance sustainability in the event of adverse financial or budgetary developments.”

- The requirement of Member states to report debt issuance to the Commission and the Eurogroup will be included;

- The Commission will be required to present a report on a roadmap towards Eurozone Stability bonds and present a proposal for a Eurozone sustainable growth instrument aiming at mobilising approx. 1% GDP per year over 10 years, including an increase in EIB capital and project bonds, to be invested in European infrastructure, science and technology;

- Eurozone Member States may agree an annual coordinated public debt issuance framework (this is for a future proposal, however);

- A European Redemption Fund shall be established based on joint liability and strict conditionality for 25 years (after which it will be wound up), covering debt over 60% GDP of non-assistance programme Eurozone Member States on a roll-over period of 5 years. There will also be a fiscal consolidation strategy and a structural reform agenda. The ERF’s day-to-day management will be under the Commission following a regulation by the EP and Council;

- Under the excessive deficit procedure, the relevant Member State will present its national plan, including areas of European Added Value, such as EIB credit lines;

- The Commission shall present a report, and possibly a proposal, on a European Debt Authority to the Parliament and Council that would be responsible for managing and coordinating all issues relating to the annual debt issuance plan of the Member States.

Thoughts

The report is clearly very ambitious, particularly inserting the creation of a European Redemption Fund, likely as a way of aiding Italy and Spain. The Parliament is keen to introduce a greater scope of variables to the process and to highlight the importance of social partners, respect for wages and collective agreements, and European solidarity through national plans indicating EIB and other economic help. It’s also clear that the Parliament is using this opportunity to push its ideas on to the agenda and to overcome being overshadowed by the European Council summitry that’s dominated the past 2-3 years of crisis. The Parliament has also tried to introduce more democratic and parliamentary controls over the Commission’s power, especially in ensuring the oversight of its delegated powers by the Parliament and Council. By reserving a right to demand Commission reports and the right of debate, the Parliament tried to ensure that all these plans are open to political debate and discussion.

Still, the need for the Parliament to cram requirements for further reports and debates on further aspects of Eurozone reform highlights how one-dimensional the current “fiscal union” is. The more radical elements are sure to be thrown out or heavily watered down – I don’t expect to see the redemption fund survive negotiations with the Council – but there are some grounded ideas for improving the content of reporting, planning, and of improving democratic oversight.

Fiscal Compact Plus: The 2-Pack of Legislation

The Fiscal Compact and the European Stability Treaty may still have obstacles to overcome before they fully enter into force across the signatory Member States, but the Fiscal Compact has its origins in the six-packof legislation adopted last year by the European Parliament and Council. That the Parliament had a full and equal say over the substance of the Fiscal Compact as EU legislation shows that it’s come a long way from the stereotype of the cross-border talking shop and it now decides on big ticket European issues.

The six-pack hasn’t marked the end of Eurozone legislation however, with a two-pack being introduced at the end of 2011. The two-pack consists of a proposed regulation for the Eurozone on the monitoring and assessing of draft budgetary plans under the excessive deficit procedure (PDF), and a proposed regulation on the strengthening of economic and budgetary surveillance of Member States experiencing serious difficulties in financial stability (PDF). I’ll just call these the “Excessive Deficit Regulation” and “Financial Stability Regulation” respectively for short. Both proposals would increase the Commission’s role in Member States’ fiscal affairs.

The European Parliament has voted on reports on these proposals in Committee stage, but the Socialists and Democrats Group abstained from the report votes after they failed to delay the vote (they wanted to revisit the provisions after the French elections). The votes were close enough that the Committee referred the reports to plenary to gauge political support in the EP as a whole.

In the following blog posts I’ll look at each proposal in turn and the Parliamentary reports:

1. Excessive Deficit Regulation.
2. Financial Stability Regulation.

A much needed referendum debate

Sigmund Gabriel of the German opposition SPD (PES) has called for Eurobonds as a necessary part of the solution to the Eurozone crisis, and for the referendum required to permit German participation. Although Gabriel is just one of the Troika that heads the SPD (Steinbrueck and Steinmeier are the other two), the - increasingly frequent - judgments from the German Constitutional Court in Karlsruhe have made it clear that further integration may require a referendum. So there has been a bit of a debate lately on when and how a referendum should be held over Europe - notably coming from the Finance Minister.

The German Constitution can be changed by the German Parliament (which is why it could be argued that the independence of the Bundesbank from political interference and pressure is slightly mythical), but Karlsruhe has essentially stated in its Lisbon Treaty Judgment that at some point a referendum would be needed. So despite the outcry from the governing parties that the SPD are being irresponsible in backing Eurobonds:

"Merkel spokesman Georg Streiter said the a German referendum "lies a very long way in the future"..."

Any fiscal union will need explicit consent from the people of the Eurozone, and there has to be an open political debate about the alternatives with competing proposals. The step-by-step approach that has been taken so far (in Europe generally, but in Germany and by Merkel especially) has a corrosive effect on the confidence in national and European political leadership and ability, and in the idea that there is a solution. What we have now is a strategy that breeds cynicism, to the extent that it's hard to know if there is a strategy at all and we have to engage with a new type of Kremlinology centred entirely on the contents of Merkel's head! Without even a debate on the future of fiscal union, it's hard to see any political deal produced at the end of this process being accepted after all the suspicion and bickering that will likely continue for another 2 years, if not longer.

So the debate is necessary for any plan to have a hope of working. Speaking in favour of Eurobonds is not the same as making an open commitment to Eurobonds to be introduced as soon as possible (the SPD are still quite close to the government on conditionality, but with more solidarity); it needs to be part of a deal that covers conditions and democratic oversight. It cannot be a technical fix introduced at breaking point, but the product of an open political process. Utopian to hope for given all the summitry, but necessary if we're to have any hope of creating a workable compromise.

Note: Juergen Habermas' (et al) article in the Frankfurter Allgemeine Zeitung (here in German) has been linked to the SPD's move, and Habermas will be involved in the SPD's manifesto for the next German elections. Other interesting articles on the SPD's website on Eurobonds and meeting their Spanish counterparts here and here.

ESM to be examined by the European Court of Justice

The Irish Supreme Court, following a challenge by independent TD Thomas Pringle, has referred 3 questions on the European Stability Mechanism to the ECJ in Luxembourg to test its compatibility with the EU Treaties. Given that securing access to the permanent bail-out fund was the main reason most Irish people voted Yes to the Fiscal Compact, it has the potential to cause severe economic and political fallout.

The questions are:

"1.Is the EU Council decision of March 25th 2011 to amend article 136 of the TFEU valid and does it violate treaty or EU law principles?


2.If the decision of March 25th 2011 is valid, is a member state entitled to join the ESM before the decision comes into force?

3.Is the terms and operation of the ESM Treaty compatible with the principles and provisions of the EU Treaties?"

As far as I know, this is the first time that either the Fiscal Compact (not included in this challenge because the referendum changed the constitution to permit ratification) or the ESM Treaty will be examined by the ECJ for compliance with the EU Treaties. The Supreme Court has asked for a quick answer from the ECJ given the seriousness of the matter (The Journal.ie reports that a full panel of seven Supreme Court judges heard the case).

Even should the Treaty prove to be in compliance with the EU Treaties, it still needs to be decided by the Supreme Court whether or not it violates the Irish Constitution.

Eurozone politics should not be a game of football

It was a tense summit last week, but it had a clear result: 1-0 to Hollande. Or was that Merkel? Maybe Monti?

After last week's summit the German papers have turned to rage - how could Merkel give in to Hollande on banking union?! - to pride - aha! of course Merkel tricked Hollande into a banking union with supervision from the ECB! This is the most depressing part of European summitry: the debates are so childish and miss the point entirely.

The deal made last week (PDF) is the same as the deal that stands this week. The same deals are known, there have been no further explanations. But the point-scoring narrative rumbles on for days afterwards, instead of actually asking if the proposed system will work, or if something else needs to be done.

The Eurozone leaders are slowly, ever so slowly, inching their way towards closer economic and political union in order to deal with the crisis. Clearly the weight of the financial sector of the Eurozone cannot be contained in the periphery, which does not have the fiscal firepower to essentially deal with the European banking crisis. Loans provided on the basis of austerity conditions funnelled through state coffers to the banking system - and funded for by taxpayers through national austerity programmes - will not work, never mind the horrific social costs. A banking union is one necessary part of economic union, in order to divorce the European banking system from a patchwork of sovereigns too individually small to prevent its collapse. This will be the easy part; the second part is much, much harder.

Closer economic and political union in the Eurozone is needed to ensure that there is enough solidarity and support between Member States so that states can recover from economic and state finance crises without threatening the Eurozone system, and also ensuring both the responsibility of the Member States and securing the social cohesion of national societies (and therefore the Eurozone as whole politically). This requires a delicate balance between the democratic rights of the Member States to determine their own economic and social policies, and on the democratic rights of the Member States not to be punished for the democratic decisions of other Member States and their fall out.

Merkel and the German government are coming from the point of view that discipline and austerity are necessary, otherwise solidarity will be taken advantage of, with the problem being that the sort of austerity and discipline being demanded is asking the impossible. As brilliantly explored over on the Social Europe Journal, Greece has undertaken more "adjustments" in a year than Germany did during its entire programme of reforms in economically good times. The focus on the Fiscal Stability Treaty is also a narrow-minded approach which overlooks the actual course of the crisis in many countries: countries like Ireland and Spain had surpluses, while Germany and France broke the rules, and this has not translated into a deeper crisis in France and Germany than in Spain in Ireland. Holding ever more rigidly to the rules will not solve anything.

On the other hand, there cannot be a blank cheque of solidarity, it needs to be built through a system where there is true give-and-take. Everyone will make concessions, and Member States will have to undertake to keep government debt in general low as well as federalising certain policy areas, in return for fiscal support and stimulus in times of trouble.

France, and other countries, have trouble with the European F-word, but there needs to be more democratic accountability at the European level, and the system needs to be reliable, transparent and agreed upon for it to gain public trust. Hollande seems to be moving towards thinking of the political side of the union, though it could also force an answer to the West Lothian question in the European Parliament.

The step-by-step approach of Merkel is a failure. We cannot continue with a drip-drip trickle of treaties, summits and agreements that edge us towards a solution without ever getting us there - a method corrosive to public trust. It's time to be clear about the options and to discuss how far we are willing to go in the Eurozone. In the end the public needs to be brought along in all Member States, so we all need to confront the concessions we need to make.

Choppy waters for the Fiscal Stability Treaty in the Bundestag

BY CC norbert_blech

It's interesting to see the politics of passing the Fiscal Stability Treaty in the German Bundestag over the last few weeks. Angela Merkel's government needs the opposition for the two thirds majority needed to pass the Treaty, and the opposition Social Democrats and Greens are trying to extract concessions on a growth agenda for Europe that echoes some of François Hollande's proposals.

The opposition wants:

- The strengthening of the European Investment Bank.
- Bonds for the indebted countries of the EU (I understand this to mean bonds that cover the debts in excess of the 60% of GDP-limit).
- Better use of the EU structural funds.
- Project bonds.
- A financial transaction tax.

(There is also an issue of how it will affect the Bundesländer, or the states, and local government).

The biggest clash lately has been over the financial transaction tax (FTT). Initially the government said that it would be impossible for an FTT to be brought in before the end of the legislative period, but now the Commission has come out contradicting the German government. The Süddeutsche Zeitung reports that it could be possible to pass a law on FTT by the end of the year, and collect the tax in 2014 (in the next German legislative period). If the FTT is to pass this year, it will be under enhanced cooperation between at least 9 Member States, given that taxation is still subject to the veto and the UK refusal to sign up to an FTT. Die Süddeutsche notes that the finance ministers of Germany, France, Spain, Italy, Greece, Portugal, Finland, Belgium and Austria signed up to the principle of an FTT in February, though obviously there would be a lot of detail to hammer out between them, and there's no guarantee an FTT coalition will look the same when it comes to passing the law.

It's worth noting that the Süddeutsche also reports that the German finance minister, Wolfgang Schäuble, seems to be considering another extra-EU treaty if it would be a faster way of achieving an FTT. What could this mean for the talking point of the month, the Banking Union? If an FTT was seen as a way of financing support of the financial sector without burdening the taxpayer, then it could be dangerous for other Eurozone countries to sit out talks on this FTT if it could be expanded to fit into the Banking Union or be taken as a model for it. Another extra-EU treaty would be a bad direction to go in: the EU provides a procedure for further integration of a group of Member States, and circumventing the EU institutions further poisons the trust in the rules and procedures agreed to by all Member States being respected.

The Fiscal Stability Treaty is part of a piecemeal approach that is rightly open to criticism: it doesn't solve the crisis in itself, and without a comprehensive deal on what a fiscal union will look like, these half-measures will erode confidence in the ability of the Eurozone to get its affairs in order. Hopefully this initiative of the German opposition will help push a more balanced and fairer approach to the Eurozone crisis, but it would be better if the left started cooperating across borders on what it wants to see from a fiscal union.

Mmm... Banking Flavoured Union

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

Protest votes and constructive campaigns

Yesterday I voiced my reluctant support for a Yes vote in the Irish referendum over on the Guardian's Comment is Free website. Vincent Browne, an Irish journalist and broadcaster, contributed to the argument for a No vote. Perhaps it's unfair of me to go on about the referendum after the polls have closed (we should see the result later today), but this part of Vincent's argument in particular stood out for me:

"[On voting No] I will do so in awareness of the risk there is involved were a majority to do as I will do, and in disagreement with many of the claims made by the no side in the campaign."

Unfortunately this line devalues the rest of the argument, since it seems to be made from the viewpoint that he hopes that there is a Yes vote to prevent the consequences of a No vote, while at the same time being free to issue a protest vote. (But then perhaps I've misread it and he simply wants to emphasise that he is aware of the consequences). Vincent goes on to outline that he is voting No: in protest against the government, in opposition against the EU elite, in opposition against the German elite, in opposition to the neo-liberal agenda, to express indignation at the disregard for the procedures and rules of the EU, to prevent the fiscal rules from being written into the constitution, and in solidarity with those in Europe who have not had the chance to vote on it in referendum. I'm at a lost as to how a No vote could practically advance a political agenda on these fronts.

Now, it must be stressed that we wrote our arguments separately and without knowing the main arguments that the other would use, so we weren't really responding to each other. In fact, Vincent's argument is an extract of a longer article over at Politico.ie here. By coincidence, it was written on Tuesday, the same day I came out in favour of a Yes vote. In the director's cut version of his argument, Vincent admits that there will be austerity in any case and that we may have to ratify the treaty for a bail-out in the future (if we vote No now, then we would need to vote Yes in the future to get a bail-out, which he thinks will probably be necessary), but he bases his position on the need for a different kind of society:

"We need to work towards a radically different society, where people have some real control over their lives; where inequalities of wealth, income, power, influence, social capital and cultural capital are radically narrowed; where patriarchy is subverted; where respect is accorded to everyone equally, regardless of status, class, sex, wealth or position; where protections for workers are buttressed, not dismembered by “labour market reforms”.

And to achieve that those of us who believe in this kind of society have to win arguments and minds through thoughtful debate, diligent and truthful analysis expressed in accessible forms, devoid of the familiar weary clichés and bombast."

I would be interested in that debate, and in what Vincent sees as the main steps to get there. And what would be the kind of Europe that would facilitate this? What kind of Eurozone would be a more equal, just and lasting project?

I ended up siding with the Yes side this time around because I couldn't see any viable political agenda that could be pushed forward by voting No. If there was a more focused campaign, not limited to a single referendum, but on demonstrating support in Ireland and elsewhere in the Eurozone for the type of Eurozone people want to see, then it could form an effective rival vision. If Vincent - or others - are interested in promoting a vision of or a campaign for a more equal and workable Eurozone, then I would be interested in joining and supporting that.

In any case, I would like to hear what kind of Eurozone Vincent would vote for.

A very reluctant Yes on the Fiscal Stability Referendum

This is the fourth time I've written out this post. Over the last 2 months I've painfully shifted from a pretty definite No to a reluctant Yes on the Irish Fiscal Stability Treaty referendum.

I really don't like this treaty. It's clear that it will neither have prevented the crisis (if preventing excessive borrowing was the problem, the pre-crisis surpluses in Ireland and Spain would have meant those countries wouldn't be in the mess they're in), nor will it do anything to solve it. As I've pointed out before, the Treaty is 90% existing EU law, since the European Parliament has passed the "six-pack" of legislation last year. It's already mostly in force - it has caused political complaints in Belgium, and was part of the reason for the collapse of the Dutch government this year.
For these reasons I originally wanted a No vote as a political message against austerity and to promote a more balanced approach at the European level. I don't oppose some level of collective budget discipline nationally if it leads to a positive reform of the Eurozone: Eurobonds, the ECB becoming the lender of last resort, a banking union so that banking problems will not be localised and made the problem of one or two Member States, etc. But it should come as part of a grand bargain where it's not simply about the core and the periphery, but about building a working Euro-system. Suggestions that ratifying the FST would give Germany enough confidence in the Eurozone to sign up to Eurobonds "sometime in the future" did not comfort me.

So why have I moved towards a Yes? Two main reasons: the European Stability Mechanism (Treaty here: PDF) and the direction of Hollande.

Only Member States who have ratified the FST will have access to the ESM for future bail-outs. Given the extent to which the IMF has lent to Ireland more than it would have already if we hadn't have been part of a European bail-out programme, I have not been convinced by the No side's arguments that we will find another bail-out somewhere. It's argued that we'll get something from the IMF (which I doubt since we've already been lent 15 times our normal share), or that we will still be given access to the ESM despite being excluded from it since Eurozone politicians will not want to risk the stability of the Euro. I'm not convinced by these arguments: they require a political leap of faith, and for such a leap to be worthwhile, there needs to be the plan and the tactics behind it, not to mention the opportunity for it to work.

Hollande's election earlier this month may have raised the prospect that such a strategy might pay off, but it's clear from the news and the outcome of the summit on the 23rd May, that any progress on the Eurozone will be in addition to the FST, rather than going back to the drawing board - and an Irish rejection won't change that. The best we can hope for by rejecting the FST is to be faced with the FST plus some sort of growth treaty (or plus a growth protocol to the original treaty). There's little payoff for risking the uncertainty over Ireland's access to the ESM in my opinion, and I do not want to take the risk of greater austerity by Ireland being unable to access any fund. And on the "No to Austerity" platform of the No side, it doesn't really fit in with the state of existing law and Eurozone rules. The Treaty itself won't add any more to austerity in law, but it will impact on the confidence needed for any further steps in economic union.

I also can't see any Eurozone vision or strategy on the No side that could form the basis of working toward an alternative. It's very much of the "reject, and then let the rest of the Eurozone come up with a better deal to sell us" variety, and it smacks too much of populism for my political taste. So despite the almost equal bankruptcy of political vision on the Yes side, I have to reluctantly support a Yes vote.

A referendum on political tactics

When the Fiscal Stability Treaty was agreed back in January (PDF), despite being short and to the point, it was hard to assess. First of all, the treaty is already 90% EU law, the European Parliament having passed the “six-pack” Barroso mentioned in his State of the Union speech – you can find the legislation here. The budgetary requirements have also caused a political storm in Belgium and been one of the causes (or the excuse for, on the part of the PVV) the collapse of the Dutch government.

However, though the treaty changes little in legal terms, it’s not something that could simply be voted against to force another renegotiation, as only 12 states need to ratify it before it comes into force. In addition, in the treaty for the European Stability Mechanism (PDF), it stipulates that only countries that have ratified the FST will have access to its funds for a bail-out. Despite the six-pack legislation not being subject to much debate in Ireland, the debate has so far centred around the big question of how Ireland secures its funding. The current bail-out arrangement lasts until 2013 when Ireland is supposed to return to the markets. Though there is widespread acceptance that the current austerity policy (essentially, the last 5 years) is not enough and that there should ideally be an investment and growth policy, the bail out loans cover the budget deficit for the Irish state, and without it Ireland would have to default, leading to harsher, more sudden cuts.

So far the No side has failed to come up with an alternative to the question: where would the money come from if we need a second bail out? It seems perverse, since the government line is that we won’t need one since Ireland is “on track”, but since the No side is based on the fact that the current bail-out programme won’t solve anything, it is not a question that can be ignored. One solution put forward by the No side is that Ireland could veto the ESM treaty – though this would be difficult since it can only be vetoed by states amounting to 10% of the subscriptions, of which Ireland makes up under 2%. All the political parties involved have trouble articulating a vision on Europe, and on making alliances to achieve their vision. This may partially be a result of the referendum process in Ireland and treaty structure of the EU as past referendums could block a treaty and force a renegotiation. This is not the case here, and though the quality of the debate is much higher than before (there have been no strange claims along the lines of abortion or conscription), the lack of an alternative vision is palpable. It means that the Irish government has an unimaginative and poor European policy, but in this case it helps the Yes side since the No campaign cannot rely on the “back to the drawing board” vote in the same way anymore.

But now there’s a Socialist in the Élysée talking about growth and leading the charge against austerity in Europe. The promise of Hollande to renegotiate the FST has already played a part in the campaign so far. For the No side this is the sign that a No vote would really count in the European debate on austerity. So far the messages from Hollande have been quite mixed, and there might not be a renegotiation of the FST per se:

“Hollande says he agrees with all existing provisions in the fiscal treaty, including tight limits on budget deficits and public debts.

[...]

Informal contacts have been taking place between Hollande’s camp and the authorities in Berlin, Frankfurt and Dublin, and despite Hollande’s public insistence on renegotiation, all signs suggest the ground is being prepared for a compromise.

Two of Hollande’s senior aides – policy director Michel Sapin and Europe adviser Catherine Trautmann – have indicated to The Irish Times that they may be open to a “growth pact” in the form of a protocol or a separate legal text, a fix that would leave the fiscal treaty as it stands.”

Would a No vote help bury the austerity policy, or would it leave Ireland unnecessarily politically exposed while an extra treaty is put together – or new proposals are made within the EU legislative system? With only a month left before the vote there will be no alternative treaty before the vote, so it will be down to what tactics seem most credible. Ireland will listening closely to what the Élysée says in the next few weeks.

UPDATE: Van Rompuy has called a summit for the 23rd of May, so the outcome could impact on an Irish referendum - especially if any growth pact is tied to the Fiscal Stability Treaty.

Merkel's Intervention

Merkel's intervention in the French elections yesterday - effectively attacking Hollande by stating that there will be no renegotiation of the Fiscal Stability Treaty - strikes me as bizarre. If she's hoping that this will discredit Hollande and lead to voters voting Sarkozy, I can't see how it will work (will those who voted for the far-right be more willing to vote for the candidate closest to German policy, or the candidate who is almost setting himself up as the leader of an anti-German leadership alliance?).

It's also starting to seem a bit desperate. Hollande's position isn't really so radical: no renegotiation of the treaty itself, but some new measures before it will be adopted. Since 90% the treaty is already EU law, Merkel's discipline provisions are in reality safe from Hollande. Even the Eurobonds Hollande is proposing aren't connected to mutualising debt, but for investment in infrastructure, etc. Calls for the remit of the ECB to also have encouraging growth and employment as part of its task will find a lot of sympathy in other states too. Is Merkel really going to set her face against all of this?

The Eurozone crisis is worsening day by day and the same austerity approach isn't working for anyone (even in Ireland there is talk that a second bailout might be needed - indeed, the Yes side in favour of the Fiscal Stability Treaty relies on this need for access to bailout funds to gain support for the treaty). While economic reforms are necessary, this extreme austerity is an insane way of going about it. The German government wants its fellow Eurozone states in a strange limbo of danger, where there is enough stability that the reforms can be implemented, but sufficient economic danger to ensure governments will enact these reforms.

While the German government may think it's the only way bailout states won't flush money down the drain, the political logic doesn't - and cannot - add up. The lack of a solution simply worsens the situation and spreads the crisis to yet more Eurozone states, while draining away the political support for the Euro in general, leaving people cynical that any of this mystic summitry the European Council engages in is a waste of time. All pain, no gain.

For Merkel to refuse even  Hollande's modest proposals would be disastrous. The political winds are starting to blow against austerity, and Germany's great adapter will have a very tumultuous EU on her hands if she decides she won't give an inch.

Rutte's Dutch government falls

The Dutch government has collapsed with the minority Liberal (VVD) - Christian Democrat (CDA) coalition government unable to agree an austerity budget with the far-right PVV led by Geert Wilders. The so-called Gedoogcoalitie ("Tolerance Coalition") relied on the votes of the anti-Islamic Partij voor Vrijheid (Party for Freedom) and had been discussing the budget, which would have delivered around €16 billion in cuts to bring the Netherlands into line with the EU's 3% deficit rule, when Wilders stormed out at the last moment.

Wilders said (from De Volkskrant):

"Ik accepteer niet dat ouderen moeten betalen voor onzinnige Brusselse eisen. Als ik hier ja tegen had gezegd, had ik de kiezers met het schaamrood op de kaken tegemoet moeten treden.

['I do not accept that the elderly must pay for Brussels' nonsensical rules. If I had agreed (to the budget), I would have to face the voters with shame' (own translation)]"

It seems odd that Wilders has decided to pull the plug on the government now since his PVV has gone down in the polls recently while the party of the Dutch PM, the right-wing liberal VVD, has been doing well in the polls. However the Socialist Party has overtaken the Labour Party in the polls, and is against the 3% rule, so perhaps Wilders has calculated that by avoiding endorsing the austerity measures (and campaigning on a more populist anti-EU line) will be better for him and the PVV in the long run, rather than buying into the establishment and damaging the PVV's populist appeal (where the SP might be a challenger in an anti-EU austerity campaign at a later date).

In any case the fragility of the Dutch government in adopting austerity measures while its economy has been performing comparatively well in Eurozone terms strikes a strange image. This is, after all, the Netherlands that has waged its finger at other Eurozone countries and told them to fix their budgets. Even the Commission has picked up on this theme:

"For their part, EU commission spokespeople retorted by saying the rules were not invented in their institution, but instead agreed among EU governments in meetings chaired by no other than the Dutch authorities. "The three-percent target comes from the Stability and Growth Pact agreed in Amsterdam in June 1997, under the Dutch EU presidency. It is perhaps good to remind everyone the history of the deficit target," commission spokesman Olivier Bailly said during a press conference."

For the near future it doesn't look like the Dutch political scene will simplify in terms of political parties any time soon, so a certain level of instability might remain even after elections...

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.

Irish Attorney-General: there must be a referendum

Ireland is set to have a referendum on the Fiscal Stability Treaty in June after the Irish Attorney-General advised that the treaty warranted one. The government has been hoping to avoid a referendum – the watering down of the treaty’s language on requiring constitutional debt breaks to only preferring them while also accepting normal legislation with the same content was clearly an attempt to avoid referendums by ensuring that countries could introduce the changes domestically by a package of legislation.

The referendum will probably be held in June, which will hopefully give time for a full debate, but I have to admit that the first thing I thought when I saw the June date was that it might be a godsend for the Irish government if Hollande is elected in France and he goes through with his plan to withdraw France from the treaty. Of course, the treaty does not require unanimity to come into force – it only requires 12 countries to ratify it before it starts to have effect. This will affect the dynamic of the ratification process across Europe and in the Irish referendum debate. The government might argue that Ireland could be left behind and even endanger its position in the Euro if it votes against (since it would be opting out of a Eurozone policy and this could make the economic situation in Ireland less politically certain in the eyes of busihttp://www.blogger.com/post-create.g?blogID=7620652438500849718ness) – but if a core Eurozone country like France turns against the treaty, this will provide a more serious challenge to the treaty and encourage the movements against the treaty in Ireland and other parts of Europe.

It should be noted that 90% of this treaty was passed into European law at the end of last year by the European Parliament (the not-really-that-infamous “six pack” of legislation). Which proves that the EP really is more legislatively powerful in the EU than is generally thought, and that the media is rubbish at keeping track of important legislation in Brussels.

So one final point: the EP is debating the idea of “stability bonds” – it might be a good idea to have some debate on this outside the Brussels Bubble when we can still write to our MEPs and try to influence Parliament. That’s what it’s there for, after all...

The Fiscal Stability Treaty

We've got our new Fiscal Stability Treaty (which you can read here). Frankly, it's hard to know how to approach it, given the fact that I've posted about it when it came out and on the problem it poses for the European left. Not much has changed in terms of the general aims and principles of the compact. Also there's a great summary of the text over at the European Union Law Blog:

"The provisions are intentionally vague in order to avoid any conflict with the enhanced powers of the EU post-Lisbon. The only meaningful instrument is the sui generis infringement procedure in case a participating Member State has failed to apply the automated deficit correction mechanism. However, this procedure is substantially weakened by the fact that Member States, and not the European Commission, must petition the ECJ. This will happen only in extraordinary circumstances and with great unease.

In addition the provisions on economic coordination are totally bland. I fail to understand how these texts may enhance economic policy coordination – they are restating existing opportunities in EU law."

I agree. We already have the Stability and Growth Pact part of the EU treaties, and the "6-pack" of legislation passed at the end of 2011 essentially tightened up the Economic and Monetary Union - which is already having an effect on national politics and budgetary policy in Belgium. Apart from enforcement mechanisms, the treaty offers little that is new: no Eurobonds, no expanded role for the ECB, nothing on investment - coordinated or otherwise - or any firm kind of economic strategy that would back up the vague mentions of growth as a goal. Good thing the treaty has the cumbersome title of "Treaty on Stability, Coordination and Governance in the Economic and Monetary Union" - if they'd called it a treaty on fiscal union they might as well have tied their credibility up in a bag and drowned it in a well.

This treaty does nothing to address the crisis, and it's only preventative in the sense that it aims to ensure that Member States don't continuously rack up debt. While this might prevent a future Greece/Italy crisis, it would be totally useless in an Irish-style crisis where budgets were balanced or in surplus before the crash and collapse in tax receipts. "Stability" is the key word. The treaty is designed to maintain the stability of a currency union which is made up of members who have joined having met the criteria and stuck to the criteria once inside the club. It does nothing to provide a mechanism for resolving crises, but rather the deficit correction ethos is directed towards isolating any crisis and protecting the stability of the currency union as a whole. It won't work, and it's hard to see how it could be politically attractive without being balanced with more fiscal solidarity - a transfer union. That's not to say that some budget discipline isn't necessary to promote stability in the good times and to build trust between Member States, but without a true fiscal union this trust isn't reciprocated and so the treaty is of questionable political and economic value.

Institutional politics and the UK

It's clear from the treaty that the Commission and ECJ will be involved under the treaty. The European Parliament and national parliaments will be involved via some sort of meeting with representatives of their relevant committees - how this works in practice is simply not mentioned - and the European Parliament president will be invited to talk at some EuroSummits. The President of the EuroSummits (yes, a president will be elected for the same 2.5 years as the European Council presidency currently held by Van Rompuy) will organise the summits (held 2x a year and after European Council summits) and report back to the European Parliament.

Clearly the European Parliament only has a slight consultative role, and it's demands for policies for economic growth have been ignored. Given that it's new president has made fighting for the EP's position under these issues a key part of his presidency, the Parliament might reject the treaty and try to weaken political support for it.

The treaty also leaves Cameron in an odd position. I've written about the strangeness of the British demands regarding the single market before, but we should be clear about one point: nothing in this treaty (or in the possible treaty within the EU) affects the single market legally. If the treaty had have been part of the EU treaty system is wouldn't have changed the single market legally. The British concern for national influence and the financial market is essentially about political and institutional influence.

The UK won't block the use of EU institutions - Cameron has confirmed this, though he points out that he will be on the look out to ensure that there is no abuse that would damage the British national interest. I have no idea what practical policy or action this would refer to as all single market legislation has to be voted on within the EU structures. One possibility would be that the UK would try to ensure that the Eurozone countries didn't discuss single market issues in their meetings, but it would be a bit hard to enforce in practice as ministers and heads of state and government could discuss these issues at the meetings without having them on the official agenda. However, the UK is helped by the fact that EuroSummits will take place after European Council summits, so this limits their potential as a platform for countries to agree and discuss issues in advance without the UK. On the other hand, as it isn't a signatory to the treaty, the UK won't have a right to be involved in the EuroSummits unlike other non-Euro participating countries.

Overall the UK hasn't gained anything by using it's veto,* and hasn't lost out legally from using it either. It's in good will, influence and future participation in negotiations and debates that it has lost. How big of a loss depends on the future of the Fiscal Stability Treaty...


*And using it prematurely at that, given that denying use of the EU treaty system would be a bigger threat later on in negotiations - it's hard not to get the impression that Cameron doesn't know the first thing about the practical aspects of negotiation...

A stronger, more active European Parliament?

Martin Schulz, the former leader of the Socialists and Democrats Group in the European Parliament has been elected the President of the Parliament for 2.5 years.* He's set out his stall for parliamentarianism: that he'll stick up for the EP within the EU's institutional triangle and in the ongoing negotiations for the New Fiscal Compact (acceptance speech [PDF]):

"The intergovernmental agreement on a new fiscal union will be the first test. In the negotiations, representatives of our Parliament initially failed to secure support for their call to combine budgetary discipline with measures to foster growth and employment. But it is just such a sensible compromise that the citizens of Europe want! For this reason as well, we must have a seat at the table at European summits."

So there are two political goals here: for the Parliament's resolution on the fiscal and stability union to be incorporated in some way into the New Fiscal Compact, and for the EP to have a seat at European summits (probably for the EP president who currently only reports on the Parliament's view to the European Council, but is not part of the European Council - while the Commission President is a member). Interestingly, Proinsais de Rossa, an Irish MEP who is stepping down soon, has claimed that the European Parliament might reject the new treaty. This wouldn't block the treaty - it won't be part of the EU treaty system - but it could politically damage the ratification process, especially if Ireland holds a referendum on the pact.

Polscieu has picked up on Schulz's line on first reading agreements - agreements between the Council and Parliament on a draft of legislation so it can be passed quickly. If Schulz's "re-thinking" of the issue leads to fewer first reading agreements, then we're likely to see more parliamentary debates on legislation and a strengthening of the Parliament's political voice and profile. Since the EP is now equal to the Council as a legislator in almost every area (that the EU has competence in) but foreign policy, the loss in profile by first reading agreements is self-inflicted. That's not to say that first reading agreements don't have their place, but it's hard to see why the statistic of 72% of legislation passed by co-decision (now called "ordinary legislative procedure") being decided under such agreements in the last parliament (2004-9) should be repeated again for this parliament.

If Schulz makes progress on all three counts, then the EP's public profile should increase - particularly if the EP gains a bigger role at European summits, given that most of the media attention is focused on these "zero-sum game" events. We'll see what his record is by the next European elections.




*The first 2.5 years of the Parliament presidency was held by Jerzy Buzek (EPP) - the two biggest political groupings traditionally make a pact to share the presidency between them during the life of the Parliament.