Wednesday, August 29, 2012

A new EU treaty, a December summit… Déjà vu anyone?

A key question for the future institutional arrangement of the Eurozone is whether further integration will happen at the level of all 27 member states, within the framework of the EU treaties, or whether the Eurozone will simply press ahead with an ‘inter-governmental’ deal, circumventing the acquis communautaire and non-eurozone members.

This is critical for the UK as under the latter option, Britain will have little to no leverage over future Eurozone integration, whereas under the former it’ll have a solid veto, which it can use to extract all kinds of concessions in pursuit of its national interest. Following Cameron’s veto to an EU-27 treaty change last December – which resulted in the intergovernmental fiscal treaty - a host of eurosceptics and status-quo defenders alike now tend to argue that the precedence has been set; Eurozone members can do whatever they want inter-governmentally, they say, and use the EU institutions at that. Britain has been reduced to the role of a spectator. The plot has been lost and the goose has been cooked.

From there, some eurosceptics reach the conclusion that Britain should withdraw altogether, whereas the status quo defenders say Britain should hop on the train towards more integration (at which point they cease to be status quo defenders and turn into brave souls advocating that Britain signs up to a euro superstate).

So has the goose been cooked?

Well, this week’s Spiegel magazine splashed with the news that the German governmet is pushing for a new EU treaty that will consolidate and expand Eurozone budget oversight powers – referred to in Germany under the euphemism of ‘political union’ - under a firm legal framework. Chancellor Angela Merkel is reportedly pushing for a convention – comprising representatives from national governments and parliaments, the European Parliament and the European Commission – to be formed by the end of the year, with a first meeting to be agreed at an EU summit in December. If the article is accurate, a ‘convention’ would be about a ‘full’ Treaty change, not the limited one agreed in December 2010.

One of the main changes sought is the provision for the ECJ to rule if national budgets comply with the EU's fiscal rules, with the option of credible sanctions for non-compliance, something Merkel failed to secure in the inter-governmental fiscal treaty last year – courtesy of French nervousness over loss of souveraineté.

It’s difficult to gauge how credible the story is – speaking on ARD Merkel said that “I am not calling for a convention… that’s not the point”. Though politicians’ denials count for zero these days, it’s probably right that December is not realistic as a start date for a new EU treaty. Apart from everything else that needs to be sorted first, EU leaders still remember how long it took to push through the European constitution/Lisbon treaty – which Europe’s citizens didn’t like that much (as for being a ‘crisis’ this was of course a mere prelude to what has come to pass since). And unlike the Lisbon treaty, codified central fiscal controls would be about decisions over taxation and spending – the bread and butter of national politics. Also, non-euro member states – such as Poland - oppose a new treaty at this time on the basis that it would widen the euro/non-euro divide with a negative impact on the single market.

But while it is clear that there is no great enthusiasm for it, it is difficult to escape the conclusion that at some point in the near future, the eurozone will need a new set of rules if it is to stay together in the longer term. As good as the EU is at fudging it, ploughing on incrementally with economic and fiscal integration is politically unsustainable. So the question for Britain’s leverage in Europe really becomes, how bad does the Germans want to anchor Ordnungspolitik in EU law. Well, as we argued in the Telegraph back in February:
 “The Germans in particular – ever conscious of their Constitutional Court– know that the current arrangement involving an ad hoc euro treaty is legally dubious. As long as the Germans feel uncomfortable, Cameron maintains his leverage.” 
This is key. For a range of reasons (see here, here and here), the Germans don’t have that much confidence in Eurozone inter-governmental arrangements, as it leaves them more at the mercy of the ‘Club Med’ and creates a grey zone between EU law and the German ‘basic law’ which is just too awkward to bear for many Germans. Sooner or later, there will be an attempt at EU treaty changes.

Does the UK know what it wants?


Rik said...

Desperate times, desperate people, desperate measures.

1. You still miss the point the EU law is of higher order. Meaning a colision between EU law and basically anything else (except say the German Constitution) will have to be decided in favour of EU law.
Otherwise the E-Court would cut away one of the pillars the EU is in practice based upon. Not to mention its own position in it. Simply donot see them doing that.
2. Merkel simply needs something like that to make the 'pro quo' part (control) work. So imho it is very likely she will try it.
One measure at the time as we have seen take many more years as you bump into al sorts of nasty stuff like Constitutions and referenda. And first after say 5-10 years you know if it is possible. Better do it all at once.
3. Which brings us to the next point. It is completely unlikely that it will work on EU level within that timeframe. Snowwhite is more realistic.
- EU level means countries involved with no Euro problem including troublemaker UK.
- Likely referenda, Constitutional problems, requiring Constitution-change. Requiring often qualified majoritues and double voting.
- Doubtful if several countries are pro anyway. I simply donot see that happening seen the recent past even in the EZ. Eg in Holland a considerable majority of the MPs (in the present polls) is against including the major parties. And it would likely need a constitution change with 2/3 majority (if I am coorect and approval by current and following parliament (which could take 4 years)even when there would be majorities (it will not be dealt with by this parliament, so first after the election). Plus likely a referendum that looks like a no go. And that is only Holland. Germany has its popular Constitutional Court. We are talking 27 countries here simply utterly unrealistic.
- Plus a high degree of uncertainty if it will make it all the way. It simply is not PMs agreeing and then basically rubberstamping.
4. UK this is THE moment to reneg. Make the EU 2 stream: EZ with further integration and a minimum for the rest with the possibility to join on other issue. If Cameron doesnot take this chance he should simply be removed for somebody who will. A better opportunity is very unlikely to rise again. If he doesnot want to run the very realistic chance that his people vote for an exit, he should come home with a good deal or make room for somebody who can.

Anonymous said...

The answer to your question is no, at least as far as the EU is concerned. But that is nothing new!

Bugsy said...

Does the UK know what it wants? The answer is : ask us the question, give us a referendum, we will tell you exactly what we want: Much less EU, control of our Law and Order; Business Regulation; Borders; Immigration Policy; Fishing; Agriculture and an end to financial support through medium for failed Eurozone policies.

Jesper said...

Most people are aware of the 'Boiling frog' story?

It seems like we are in the frogs place and we're given two different options:

1. Slowly abandoning the subsidiarity principle by slowly and irreversibly taking more and more power to the center. A good example of this option is advocated in a speech by Draghi:
The slow approach doesn't seem so bad at first but the end result is quite identical to:
2. Quickly introducing a new treaty which irreversibly takes a lot of power very quickly to the center.

Merkel is, by asking for a treaty, masterful in making it clear that we have to decide if we want to be boiled or not. The time to decide is now and actually go for the (unspoken, secret) third option:

3. Keep and safeguard the subsidiarity principle. Keep the EU (as it is said in the treaties) as a market economy and consequently allow banks to fail and sovereigns to default.

Rollo said...

Why do we call these meetings 'Summit'? One of the reasons we are in this ludicrous EU is because politicians of all persuasions (except of course those rare ones who are in politics for the public good) love to play on a bigger stage; and how much higher can you go than a summit? Why don't we call them what they are, a descent into pig-swill?