A budget for the Eurozone?

On 16 February 2017 the European Parliament adopted three resolutions about the future of Europe.

Bresso and Brok

The report by Mercedes Bresso and Elmar Brok for the Committee on Constitutional Affairs (AFCO), procedure 2014/2249(INI), about exploiting the possibilities within the existing treaties, led to the European Parliament resolution of 16 February 2017 on improving the functioning of the European Union building on the potential of the Lisbon Treaty P8_TA-PROV(2017)0049, which I presented in Finnish here.   

Verhofstadt

The AFCO report buy Guy Verhofstadt, procedure 2014/2248(INI), about treaty reform for a democratic and capable European Union, led to the European Parliament resolution of 16 February 2017 on possible evolutions of and adjustments to the current institutional set-up of the European Union P8_TA-PROV(2017)0048, which I presented in Swedish here, with a follow-up blog entry here.  

Böge and Berès

Reimer Böge and Pervenche Berès prepared the report for the Committee on Budgets (BUDG) and the Committee on Economic Affairs (ECON). Under the procedure file number 2015/2344(INI) you can follow the hectic pace.

The joint report A8-0038/2017 was voted in committee and tabled for the plenary on Monday, debated in plenary Tuesday and adopted by the European Parliament Thursday (16 February).

 

The report contains an informative explanatory statement about background and recent positions (pages 8-18) and a second working document about academic contributions to the debate on budgetary capacity for the Eurozone, highlighting five aspects: (1) reasons for creating a common capacity, (2) functions of the fiscal capacity, (3) possible resources for financing the capacity, (4) challenges, conditions and obstacles, (5) governance (pages 19-29).

The Committee on Constitutional Affairs delivered an opinion on legal aspects (pages  34-36) and the Committee on Budgetary Control an opinion on the necessity to establish a budgetary and fiscal capacity within the eurozone as necessary to complete the Economic and Monetary Union (EMU)(pages 38-39).  

The minority opinion by three ECR members rejected the aim totally (page 33), but the proposal was not uncontested more widely: the committee vote being 54 for, 28 against, with 6 abstentions (pages 41-42).

Plenary debate

The three reports about the future of the EU were discussed in a joint plenary debate, where the rapporteur Reimer Böge argued for adoption:

Es geht darum, wegzukommen von einem Flickwerk, das wir in der Vergangenheit immer wieder erlebt haben, wenn eine Krise über uns hereinschwappte. Nach der Krise ist vor der Krise. Deswegen die Idee, ergänzend eine Fiskalkapazität zu entwickeln, für die Eurozone, aber genauso offen für die Nicht-Euroländer, mit klaren Vorgaben, was die Konditionen angeht, die Konditionalität. Mit klaren Vereinbarungen zur Finanzierung, auch im Hinblick auf die Frage, wie man Ländern, die durch Schocksituationen in Not gekommen sind, helfen kann, damit sie möglichst schnell aus diesem Strudel wieder herauskommen.

Ich glaube, das ist ein fairer und vernünftiger Ansatz, der das Instrumentarium, das wir heute haben, vernünftig ergänzen kann. Dazu gehört natürlich auch, dass der ESM in Richtung eines europäischen Währungsfonds weiterentwickelt wird. Die Berichterstatter der verschiedenen Berichte sind sich auch darüber einig, wie die Governance-Struktur in Zukunft dort auszusehen hat.

The co-rapporteur Perveche Berés added a few main points:

On ne peut pas à la fois critiquer la politique monétaire de la Banque centrale en disant qu’elle outrepasse ses pouvoirs et laisser les gouvernements sans moyens d’intervenir. On ne peut pas déplorer le bas niveau d’investissement, y compris dans des pays qui ne sont pas dits «de la périphérie», qui sont au cœur de la zone euro et penser que le plan Juncker peut suffire.

La question de l’investissement n’est pas suffisamment traitée au cœur de notre Union économique et monétaire. Alors, après beaucoup d’autres travaux, ce Parlement, pour la première fois, va se prononcer clairement pour un budget de la zone euro, autour de trois fonctions majeures. D’abord, le retour de la convergence. A-t-on assez en tête cette réalité que, au sein de la zone euro, les divergences depuis le déclenchement de la crise ont été plus importantes qu’en dehors de la zone euro? Ne serait-ce que parce que les mécanismes du pacte de stabilité ont miné les stabilisateurs automatiques au sein des pays de la zone euro. Sait-on qu’on a mis en place un mécanisme intergouvernemental – à améliorer – pour faire face aux chocs asymétriques, avec le mécanisme européen de stabilité qui est aujourd’hui totalement sous-employé et qui représente potentiellement un budget de 5 % du PIB des pays membres de la zone euro? Sait-on que nous ne disposons d’aucun outil au sein de la zone euro pour faire face à un choc asymétrique, une hausse brutale du prix du pétrole, une chute brutale du niveau d’investissement?

Nous sommes le seul espace monétaire intégré qui ne dispose pas d’outils. J’entends ici ou là beaucoup nous dire: «Mais il y a le pacte, et le pacte devrait être l’alpha et l’oméga de la gouvernance économique».

Mes chers collègues, soyons honnêtes entre nous. Cela fait 20 ans que le pacte de stabilité est là et cela fait 20 ans que nous voyons bien ses limites.

Ce que nous proposons avec ce budget de la zone euro, c’est simplement d’équiper les pays membres de la zone pour faire de leur monnaie ce qui leur a été promis au premier jour en permettant une convergence entre ces économies, en permettant de remettre en place des mécanismes d’ajustement aux chocs asymétriques.

 

Resolution P8_TA-PROV(2017)0050

European Parliament resolution of 16 February 2017 on budgetary capacity for the euro area P8_TA-PROV(2017)0050 was adopted after massive defeats for the alternative motions for resolutions by the ENF (Marine Le Pen et al) and EFDD  (Nigel Farage et al) groups and a few votes on details, by 304 votes against 255 (68 abstentions) (point 8).

The resolution recalls that various crises and global challenges require the euro area to make, as soon as possible, a qualitative leap in integration. At the level of principles the resolution reminds us that:

The transfer of sovereignty over monetary policy requires alternative adjustment mechanisms such as the implementation of growth-enhancing structural reforms, the single market, the Banking Union, the Capital Markets Union, to create a safer financial sector, and a fiscal capacity to cope with macroeconomic shocks and increase the competitiveness and stability of Member States’ economies, in order to make the euro area an optimal currency area.

Convergence, good governance and conditionality enforced through institutions being held democratically accountable at euro-area and/or national level are key, notably in preventing permanent transfers, moral hazard and unsustainable public risk sharing.

It lays down the aims of the Eurozone budget:

The fiscal capacity should fulfil three different functions:

– first, economic and social convergence within the euro area should be incentivised to foster structural reforms, modernise economies and improve the competitiveness of each Member State and the resilience of the euro area, thereby also contributing to Member States’ capacity to absorb asymmetric and symmetric shocks;

– second, differences in the business cycles of euro-area Member States stemming from structural differences or a general economic vulnerability create a need to address asymmetric shocks (situations whereby an economic event affects one economy more than another, for instance when demand collapses in one specific Member State and not in the others following an external shock beyond the influence of a Member State);

– third, symmetric shocks (situations whereby an economic event affects all the economies in the same way, for example variation in oil prices for euro-area countries) should be addressed to increase the resilience of the euro area as a whole.

After discussing these functions (pillars), as well as governance, democratic accountability and control, the European Parliament called on the European Council and the EU Commission to act swiftly and decisively in order to establish a budget for the Eurozone:

• the European Council to set guidelines, as described above, by no later than the EU meeting in Rome (March 2017), including a framework for the long-term sustainable stabilisation of the euro area;

• the Commission to come forward with a White Paper with an ambitious core chapter on the euro area and the respective legislative proposals in 2017 by using all means within the existing Treaties, including the convergence code, the euro-area budget and automatic stabilisers, and to set a precise timeframe for the implementation of these measures.  

The euro currency needs robust structures at the European level.

Ralf Grahn

Political crisis at the bottom of euro troubles – solutions?

The first four instalments were Transparency during the eurozone crises and Euro crises: European Council eviscerated? and Eurozone governance: Fundamental flaws but better presentation and Euro crises exposed and added to EU lack of legitimacy and democracy. The articles were based on my speech at the 22 February 2012 Attac seminar about the implications of the new fiscal discipline in the EU. These blog entries contain some modifications, updates and documentary references, which complement the oral presentation.

Here I continue the discussion with facts and opinion beyond the short address.


”Comprehensive solutions”

After umpteen ”comprehensive solutions”, the limits at EU and eurozone level are finally sinking in (although the solutions deemed possible and necessary are likely to drive us to distraction or despair).

In The European Council in 2011, the tone of EUCO and Euro Summit president Herman Van Rompuy was quite sober. In the General Report on the Activities of the European Union 2011, even Commission president José Manuel Barroso had toned down his often flowery rhetoric.

”Victories” had turned sour often enough for a mood of quiet determination to become appropriate.


Breathtaking, still...

Still, what the cascade of conclaves, summits and institutions has churned out during a short period is breathtaking by EU standards, and ordinary citizens of the union have most certainly been left out of breath by:

The European Financial Stability Facility (EFSF) of the euro countries (beefed up), the European Financial Stabilisation Mechanism of the EU, the permanent European Stability Mechanism (ESM) already beefed up, the integrated planning tool the European Semester, with the Annual Growth Survey (AGS), the Euro Plus Pact (23 countries), the six-pack legislation, the Green Paper on eurobonds (sorry, stability bonds), the two-pack proposals, the TSCG or ”fiscal compact” to be signed, the Commission's first Alert Mechanism Report, as well as the rescue packages for Ireland and Portugal, and now twice into the seemingly bottomless pit of Greece, firefighting in Spain and Italy etc.

Fast and unprecedented by EU standards, but we are still far from where we should be.

Without the operations of the much vilified European Central Bank (in conjunction with other central banks in the world), meltdown would probably have occurred in the eurozone in December or a little later, with disastrous consequences for Europe and the global economy.

We have seen emergency solutions to the financial and economic ills, but not acknowledgement of the root cause, the political crisis at the bottom of this.

The crucial issues of legitimacy, democracy, sufficient powers, accountability and transparency have been almost totally absent from the discourse of the national and EU leaders, and these challenges have figured only marginally in the wider public debate.

Essentially, our leaders communicate their desire for nicer interior design of the prison they have built for themselves and their hope that the crises will somehow go away.

Are we getting what we deserve to get? Or, should we upgrade our thinking and that of our leaders?



Ralf Grahn
speaker on EU affairs, especially digital policy and law

P.S. 1: For better or for worse, between the global issues and the national level, the European Union institutions and the eurozone coteries shape our future. At the same time we see an emerging European online public sphere. More than 900 euroblogs are aggregated by multilingual Bloggingportal.eu. Is your blog already listed among them? Are you following the debates which matter for your future?

P.S. 2: Referring the anti-piracy treaty #ACTA to the Court of Justice of the European Union (CJEU) marks a lull in the proceedings, but not an end to the political battle. A few moments ago, the online petition launched by @Avaaz for the European Parliament (and the national parliaments) to reject ACTA had already been signed by 2,444,822 netizens, but more are welcome until the official burial.

Euro crises exposed and added to EU lack of legitimacy and democracy

The discussion began in the entries Transparency during the eurozone crises and Euro crises: European Council eviscerated? and Eurozone governance: Fundamental flaws but better presentation. This is the fourth instalment based on my speech at the 22 February 2012 Attac seminar about the implications of the new fiscal discipline in the EU. This text contains some modifications, updates and documentary references, which complement the oral presentation.


Democracy

The preceding discussion about openness (transparency) brings us to the the need for democracy.

Let me start with the good news.

In addition to EU citizenship and the principle of equality of citizens (Article 9 TEU), Article 10(1) of the Treaty on European Union tells us:

The functioning of the Union shall be founded on representative democracy.

Even the second paragraph – Article 10(2) – looks promising:

Citizens are directly represented at Union level in the European Parliament.

However, the European Union is essentially ”owned” by the member states, represented in the two most important institutions, the European Council and the Council, by their governments. The member states hold the treaty making powers (and fairly little radical change can be accomplished without bumping into the walls of the absurdly detailed treaties).

New competences (powers) require treaty change, almost a mission impossible with unanimous decisions and national ratifications by every member.

The member states control expenditure through the long term budget (officially the multiannual financial framework MFF), so the European Parliament is allowed to play along with regard to the annual budget within the framework.

The member states limit the EU's opportunities to tax and to borrow for its policies.

Most importantly, the citizens are not able to vote in, or out, those who govern the union.

In short, the European Union could not become a member of the EU, because it is not a functioning democracy, although it has democratic elements or ornaments.


A democratic union

In my view, it would be better for the security and prosperity European citizens in a globalising world to have a fully democratic union, with accountable government, robust structures and needed powers, starting with foreign and security policy and a common defence, plus a real federal budget.

It is not for the Basic Law to prescribe the contents of the policies to shape, but to offer the ground rules for democratic government and to guarantee fundamental rights.

The arrangement with multiple unanimity rules, 27 national governments dealing with each other in diplomatic mode and as many national parliaments more or less diligently scrutinising what they are up to, was artificial.

The repeated financial, economic and sovereign debt crises since 2008 have exposed fundamental flaws.

The informal coteries and intergovernmental agreements have worsened the situation.

The current system is neither legitimate nor effective.

In interdependent 21st century Europe the question should be the sovereignty of the people, not the sovereignty of states.



Ralf Grahn
speaker on EU affairs, especially digital policy and law

P.S. 1: For better or for worse, between the global issues and the national level, the European Union institutions and the eurozone coteries shape our future. At the same time we see an emerging European online public sphere. More than 900 euroblogs are aggregated by multilingual Bloggingportal.eu. Is your blog already listed among them? Are you following the debates which matter for your future?

P.S. 2: Referring the anti-piracy treaty #ACTA to the Court of Justice of the European Union (CJEU) marks a lull in the proceedings, but not an end to the political battle. A few moments ago, the online petition launched by @Avaaz for the European Parliament (and the national parliaments) to reject ACTA had already been signed by 2,436,282 netizens, but more are welcome until the official burial.

Eurozone governance: Fundamental flaws but better presentation

This blog post continues the discussion in the entries Transparency during the eurozone crises and Euro crises: European Council eviscerated?, based on my speech at the 22 February 2012 Attac seminar about the implications of the new fiscal discipline in the EU. This text contains some modifications, updates and documentary references, complementing the oral presentation.

I am appalled by the crucial role two coteries, the Eurogroup and the new Euro Summit - both meeting informally – play in European economic policy making. I am disappointed in the way the coordinating General Affairs Council (GAC) and the European Council (EUCO) have failed to grow up, despite the possibilities offered by the Lisbon Treaty.

However, every cloud has a silver lining, or there are pockets of excellence everywhere.


Council press office

Since our discussion with the Council press office last November, some things have improved from the citizen's point of view.

Let us follow the paper trail of the Eurogroup and the official institutions to make our case.

The Council press office has recently added a web page called Eurozone Governance, accessible from the Council's front page, as well as the home page of the European Council. This is an improvement, and the contents have been upgraded. We could even say that the presentation has improved a lot (web page Documents).

After the fact, we learn i.a. that the EU finance ministers have agreed to shore up IMF resources by €150 billion (19 December 2011), the text of the Treaty on stability, coordination and governance in the economic and monetary union (TSCG) – also known as the ”fiscal compact” or the ”stability union” - and the text of the Treaty establishing the European Stability Mechanism (ESM) between the euro countries.

Nowadays, there are also articles about the main issues, with helpful links, so the materials are available in one place, in a much more user friendly manner.

The frequency of press releases has also gone up, and the various conclusions, as well as explanatory and official statements have also been posted.


Democratic debate

If presentation has improved, what am I carping about?

Despite better presentation, the fundamental flaws of structure and procedures remain.

The essence of democratic debate is seeing citizens and media as potential sources of input, not just a nuisance or subjects to be informed about the outcomes.

This is where the Eurogroup and the European Council fail miserably, and the Council configurations largely.

Thus, the Euro Summit which combines traits of the Eurogroup and the European Council is hardly a dream prospect with regard to openness.

Ahead of the Eurogroup Monday evening, we had a short statement (14 February 2012) from the president Jean-Claude Juncker announcing the chief reasons for the postponement of the ordinary meeting. The Eurogroup statement (21 February 2012) on the second bailout package for Greece offers the public highlights about the sacrifices of the euro area taxpayers, the private bondholders and the Greek people, but it does not contain any links to the underlaying documents and assessments. We are supposed to take the decisions on trust.

But this is the crux: They don't really have a mandate from me.



Ralf Grahn
speaker on EU affairs, especially digital policy and law

P.S. 1: For better or for worse, between the global issues and the national level, the European Union institutions and the eurozone coteries shape our future. At the same time we see an emerging European online public sphere. More than 900 euroblogs are aggregated by multilingual Bloggingportal.eu. Is your blog already listed among them? Are you following the debates which matter for your future?

P.S. 2: Referring the anti-piracy treaty #ACTA to the Court of Justice of the European Union (CJEU) marks a lull in the proceedings, but not an end to the political battle. A few moments ago, the online petition launched by @Avaaz for the European Parliament (and the national parliaments) to reject ACTA had already been signed by 2,427,532 netizens, but more are welcome until the official burial.

Today, Saturday 25 February 2012, European citizens join forces through more than 150 demonstrations for open and democratic legislation and Internet freedoms. In Finland Stop ACTA Helsinki convenes in front of the Central Railway Station at 14:00 hours.

Euro crises: European Council eviscerated?

The European Council was inaugurated as the supremo among the official EU institutions just two years ago, by the Lisbon Treaty. A cascade of meetings, both official ones and inofficial summits, has followed during the financial, sovereign debt and economic crises.

It may sound paradoxical, but my feeling is that the European Council has been gutted by the euro area crises and by design.

This blog post continues the discussion in the entry Transparency during the eurozone crises, based on my presentation at the 22 February 2012 Attac seminar, but with some modifications, updates and documentary references.


Eviscerated European Council?

Already, the latest statements from the informal summits for the EU as a whole, such as 26 October 2011, and the formal European Council conclusions, 23 october 2011 (EUCO 52/1/11) and 9 December 2011 (EUCO 139/1/11), look pretty anaemic.

It is as if the European Council had been eviscerated, emptied of content of late.

The spring meeting has traditionally been dedicated to all aspects of economic issues, but we have to wait to see what EUCO produces in terms of substance 1-2 March 2012 in the light of the EUCO annotated draft agenda (Council document 5354/12).


Summit or EU institution?

The first two years of the European Council as an official EU institution could be marked down as a lost opportunity with regard to openness and closeness to the citizen of the European Union.

In the beginning, EUCO president Herman Van Rompuy underlined that the European Council was an official institution, but in practice it continued to act as an international summit between leaders, without adopting practices of openness and good governance.

By this I mean in particular the preparatory phase from the Council configurations through the coordinating General Affairs Council (GAC), which has proved a real disappointment.

In order to illustrate the point, I ask you to look at the draft agenda of the GAC and the background note ahead of the 28 February 2012 meeting. Do we see clear proposals going in and can we expect the GAC to make public propositions to EUCO for public debate ahead of conclusions?

For comparison, we also have the customary annotated agenda from the government of Sweden: Allänna rådets möte den 28 februari 2012 – Kommenterad dagordning. Thin, is how I see it, instead of a clear paper trail from proposal to discussion, with public debate in between.

***

Perhaps some of us find it comforting to see that we citizens are in such noble company – at least in part with the heads of state or government of the non-euro states – watching more of real policy making disappear into the even bigger black hole of beefed-up Eurogroup support and the permanent Euro Summit.

Perhaps some of us are comfortable with the GAC and EUCO continuing to labour in the mode of diplomatic conferences, instead of as accountable and transparent institutions of European government and governance.

Perhaps we should not be. Yesterday, the Swedish economist Anders Bäckstrand wrote on Europaportalen that the euro crisis has started a process towards a more distinctly political Europe, but political legitimacy is necessary for this to succeed.



Ralf Grahn
speaker on EU affairs, especially digital policy and law

P.S. 1: For better or for worse, between the global issues and the national level, the European Union institutions and the eurozone coteries shape our future. At the same time we see a European public sphere emerging. More than 900 euroblogs are aggregated by multilingual Bloggingportal.eu. Is your blog already listed among them? Are you following the debates which matter for your future?

P.S. 2: Referring the anti-piracy treaty #ACTA to the Court of Justice of the European Union (CJEU) marks a lull in the proceedings, but not an end to the political battle. A few moments ago, the online petition launched by @Avaaz for the European Parliament (and the national parliaments) to reject ACTA had already been signed by 2,427,119 netizens, but more are welcome until the official burial.

Today, Saturday 25 February 2012, European netizens join forces through more than 150 demonstrations for open and democratic legislation and Internet freedoms. In Finland Stop ACTA Helsinki convenes in front of the Central Railway Station at 14:00 hours.

Euro cliffhanger: Crashing or not?

A short while ago @NinaMariaPotts tweeted me this:

@RalfGrahn Utterly depressing. #eurozone and #eu economies about to fall off a cliff - and #EU still scrambling around in the dark #crisis

Her tweet comes quite close to what I am feeling: Each day we see one step back from the abyss, but two forward steps towards the edge of the cliff (even if steps can here cover passivity).

I found the following blog post thanks to @TeraEuro. Blick Log writes clearly and offers us a background to the impending crash (in German): Europas Staatsanleihen: Ursache und Wirkung einer Finanzkatastrophe.

@npthinking made me notice this news item from Reuters about a Franco-German initiative to cobble together a new stability pact in no time and outside the EU Treaty framework. Since the public is given little useful (or convincingly hopeful) information from official sources, every rumour has to be taken seriously until proven to be wrong.

Thanks to @TeraEuro I stumbled across this blog post on Naked Capitalism: Is a Eurofix Around the Corner? Is it still possible that the euro crash could be averted, or did it become unavoidable a while ago?

Even if effective and expedient solutions are used, the basic questions about European level democracy are left unanswered and festering.

The euro and European level democracy are hanging off a cliff. Tune in for the next episode on the screen of your choice. Happy end not guaranteed.



Ralf Grahn

UK views on eurozone decisions

What has actually been agreed in the eurozone or EU27 this far in response to the crisis in the eurozone, which has turned into a crisis of the euro itself? A while ago I collected the main documents in a blog post with brief descriptions.

A more detailed hearing has recently been published by the UK House of Lords Select Committee on the European Union: Inquiry on European Council of 23 October 2011 and the Euro Summit on 26 October 2011 (26 pages).

On 8 November 2011 David Lidington MP, Minister for Europe (Simon Manley, Director, EU Directorate, and Victoria Dean, Head of EU Strategy Department) gave evidence to the EU Committee.

Britain is one of the ten members still outside the eurozone and one of only four EU member states outside the Euro Plus Pact.

Being outside does not protect the UK economy if the euro area economy crashes, so the government of Britain hopes that the eurozone can solve the problems which require further fiscal and economic integration.

Naturally the risk of UK isolation was on the mind of the participants, so the integrity of the single market is seen as important.



Ralf Grahn

Crises of euro and democracy

Our national leaders never have the time to make the EU democratic, but they always have time for another eurozone failure.

A few days ago I asked a few basic questions about European level democracy, but instead of direct answers each ”comprehensive solution”, (mini-)summit and official statement has eliminated options, widened the distance to EU citizens and brought the crash a little closer.

Instead of popular sovereignty we have looming doom.


Jürgen Habermas

Spiegel Online International kindly serves an antidote provided by the philosopher Jürgen Habermas (in English):

Habermas spells out precisely why he sees Europe as a project for civilization that must not be allowed to fail, and why the "global community" is not only feasible, but also necessary to reconcile democracy with capitalism.

According to Habermas the citizens have been reduced to spectators in European integration:

He says that states have no rights, "only people have rights," and then he takes the final step and brings the peoples of Europe and the citizens of Europe into position -- they are the actual historical actors in his eyes, not the states, not the governments. It is the citizens who, in the current manner that politics are done, have been reduced to spectators.

Eva en Europa

The Spanish euroblogger Eva en Europa mentions Habermas, but she advances beyond that to propose a third Convention to improve the democratic legitimacy and the political future of the European Union.

As I see it, Europe needs a Convention to craft its first Basic Law, but first our domestic leaders have to understand that they must hand over ownership of the European Union to its citizens.



Ralf Grahn

Merkel and Cameron on EU and euro

Thursday, the German chancellor Angela Merkel met the new prime minister of Denmark, Helle Thorning-Schmidt. Friday brought the UK prime minister David Cameron to Berlin for talks about the European Union, the eurozone crisis and bilateral issues.


David Cameron

Merkel started the press conference by emphasising the common interest of Germany and the United Kingdom to make the European Union competitive. Both countries want the internal market to succeed. The EU budget for 2012 should acknowledge the domestic consolidation efforts by keeping in line with inflation, but nothing more.

A strong eurozone is in Britain's interest. Stricter rules and enforcement require limited treaty change among the members of the eurozone, according to Merkel.

Prime minister David Cameron underlined the common aims concerning the internal market, budget discipline and the EU budget. A sustainable euro is in everyone's interest, although differences remain regarding crisis measures.

Merkel and Cameron are united on a global financial transaction tax (FTT), but not on a European one.

Cameron replied to the Bild magazine headline about what the UK is (still) doing in Europe, by stressing his country's positive role for competitiveness and productivity.

The institutions of the eurozone need to defend the currency and to take all the necessary measures, according to Cameron.

The United Kingdom remains outside the Euro Group of 17 countries, the euro summits, the ECB and the Euro Plus Pact joining 23 EU members (see EUCO paragraphs 11-12 and Annex I), but it is hard to guess how Cameron's friendly advice was received deep down by his step-by-step host.


CDU positions

Previously we have looked at some differences between Germany and Britain in European politics: the CDU party conference, European values, British Europe as an alternative, Ireland as a risk to needed treaty reform, the euro area and the EU, as well as CDU's next steps to overcome the euro crisis.



Ralf Grahn

Merkel and Thorning-Schmidt on EU and euro

The German chancellor Angela Merkel met the leaders of Denmark and the United Kingdom, the two EU member states with opt-outs from introducing the euro currency.

First a look at the press conference with the new prime minister of Denmark.


Helle Thorning-Schmidt

Denmark takes on the presidency of the Council of the European Union from the beginning of 2012, after Poland. Merkel told the Danish prime minister Helle Thorning-Schmidt that even if the 17 countries of the eurozone need to solve certain problems on their own, Germany does not forget that the union of 27 belongs together and that the internal market is the foundation for the euro.

Limited treaty reform is necessary among the euro area countries, according to Merkel.

Thorning-Schmidt underlined the need for all 27 EU member states to face the crisis together, by using the community method and the EU institutions.

Merkel wanted to see the Council presidency of Denmark as a bridge between the eurozone and the rest of the member states. Denmark is committed to the stability and growth pact, as well as a competitive country.

Thorning-Schmidt said that the discussions about treaty reform continue in December, but seemed to prefer a strictly limited basis ahead of the European Council.



Ralf Grahn

Germany: CDU's next steps in euro crisis

We have looked at some of the differences between Germany and Britain in European politics: the CDU party conference, European values, British Europe as an alternative and Ireland as a risk to much more than treaty reform.

How does the CDU understand the euro crisis, and what does the party propose for the immediate future?


Stability and growth pact

After defending the European values, explaining the benefits of the European Union and the necessity of the euro currency, the resolution adopted by the Christian Democratic Union CDU proceeded to scorn the previous red-green coalition for letting Greece into the eurozone and for failing to meet the Maastricht criteria during four consecutive years, weakening the stability and growth pact (SGP) and the respect for Germany.

Some countries have lived beyond their means and become indebted. They have failed to enact structural reforms in order to become competitive, and their enterprise sectors have been too narrow, based on construction or financial services.


Stability union

The CDU rejoiced that first steps towards a stability union had already been taken [two years into the crisis, my addition]. These are then duly noted: advance budget control (European Semester), strenghtened SGP, rescue packages for Greece, and the establishment of the EFSF to be replaced by the permanent European Stability Mechanism ESM.


Euro Plus Pact

The CDU resolution Starkes Europa – Gute Zukunft für Deutschland underlines that solidarity requires massive reforms for stability and competitiveness in countries needing help.

The Euro Plus Pact is seen as an agreement among 17 eurozone leaders and six other EU members to strenghten the economic union in the EMU, by increasing competitiveness.


Immediate tasks

The resolution set the following immediate tasks within the framework of the Lisbon Treaty:

1) Adopting a constitutional rule for budget balance (Schuldenbremse) of the German type in every euro area member and as a requirement for eurozone entry.

2) Adherence to the rules of the stability and growth pact (SGP) by reduced spending, structural reform and sustainable growth. The structural funds should be focused even better.

3) Each state is responsible for its own finances. Rejection of transfer union and of automatic liability.

4) Rejection of eurobonds.

5) CDU defends the independence of the European Central Bank (ECB) and the Deutsche Bundesbank. Strict separation of monetary policy and economic policy. EFSF reform will allow the ECB to end the purchase of state bonds.

6) The debt crisis must lead to adequate regulation of financial markets and institutions.

7) Global regulation of financial institutions is necessary.

8) CDU wants a global, EU-wide or even a eurozone-wide financial transaction tax (FTT).

9) The CDU wants the European People's Party (EPP) to field a top candidate in the election to the next European Parliament.

***

Beyond the immediate tasks, the CDU sees the need to complete the economic and monetary union (EMU).



Ralf Grahn

German CDU defends European values, benefits and euro currency

The Christian Democratic Union CDU party conference adopted a resolution equating a strong Europe with the good fortunes of Germany: Starkes Europa – Gute Zukunft für Deutschland (23 pages).

What does the leading government party of the largest member state of the European Union (proportionately even bigger in the eurozone) say, when the financial, debt and growth crises in the eurozone have worsened into a crisis of the euro itself?


European values

Europe is a community of values, says the resolution, referring to the founding values of the European Union (as in Article 2 TEU) and the EU Charter of Fundamental Rights (enshrined in Article 6 TEU).

The CDU still rejects a unitary European state, but the EU works according to federal principles in areas of conferred powers. The European idea has brought people unprecedented peace, freedom, prosperity and social justice.


Benefits of Europe

The political and economic benefits of EU membership surpass the costs for Germany by a wide margin.

In order to master the challenges of the 21st century, the CDU wants to complete the economic and monetary union (EMU) and mould the EU into a strong political union.

In the globalised world of the 21st century, Europe needs to promote universal human rights, international law and freedom for all.

A strong Europe can shape international rules to counter climate change and protect biodiversity, as well as regulate energy and trade issues, but this requires European unity.

Despite the rise of China and the other BRICS, the 500 million people of the European Union remain the largest internal market in the world and offer the opportunity to promote democracy and the social market economy globally.


Defending the euro

The CDU wants all the 17 eurozone states to defend the common currency. The euro has brought Germany jobs - 9 million depend on the internal market – and growth (€50 billion extra in the last two years).

The euro is the safeguard of low inflation and high purchase power. The euro brings predictability to international trade and global currency policy. The euro also brings political stability.

The euro is a great community project, necessary for the good fortunes of Europe.

The CDU wants to strengthen Europe and widen the scope of action by turning the monetary union into an enduring stability union, as intended from the start. For the common euro currency to succeed, we need to stick to firm rules (stability and growth pact SGP).

The CDU is prepared to learn the lessons from the current crisis and to prepare Europe for the future challenges.

The CDU congratulates itself for having brought back financial stability and budget disciplin to Germany, and the party wants a stronger Europe to emerge from the debt crisis.

***

European values, benefits from European integration and the will to improve the euro project lay the foundation for the CDU (and Germany) in European politics.

The foundation gives the analysis focus and shapes the remedies proposed.



Ralf Grahn

Euro crash or rescue?

We have gone from a crisis in the eurozone to a crisis of the euro area and currency.

A stark warning from The Economist. According to the the Free exchange blog, the eurozone is in a death spiral. Only a guarantee for sovereign debt from the European Central Bank and a major commitment from the core economies to bail out the periphery, plus substantial labour market, public-sector, and tax reforms in the weak economies, can prevent financial collapse and break-up.

The United States, China, Russia, the United Kingdom and others have told the eurozone to put its house in order before they put fresh money on the table.


Germany and France

The German chancellor Angela Merkel and the French president Nicolas Sarkozy have claimed leadership of the eurozone, bilaterally, through the new eurozone summit structure recently endorsed (point 7) and the Frankfurt group.

Merkel and Sarkozy are thus the ones to judge on the outcomes at eurozone level, including how they approach new responsibilities for the ECB.

According to Reuters UK, Merkel and Sarkozy are preparing for something else: a retrenched, core country eurozone heading toward deeper economic integration, including on tax and fiscal policy.


Multi-speed Europe?

Splitting the euro area would mean the emergence of an increasingly multi-speed Europe: 1) the core euro area, 2) the dropouts, 3) the prospective entrants (Sweden?), 4) Denmark and the United Kingdom with opt-outs, as well as 5) countries joining the European Union at some point.

EU Treaty changes need the agreement and ratification of all member states, hardly a piece of cake. There are no indications of democratic government at the level of such a core eurozone (outside EU structures), but the more monumental a question, the less transparency and good governance are in evidence.

Paradoxically, where intergovernmentalism has failed, Merkel and Sarkozy seem to contemplate more of the same.


Second update 10 November 2011: Ulrike Guérot of the ECFR writes about the stubborn refusal to advance on the road of European democracy and legitimacy: Germany in Europe: the politics of disintegration.


The Wall Street Pit discusses the Franco-German plans, putting emphasis on if the European Central Bank will act to prevent meltdown in Greece and Italy or concentrate on curtailing losses.

The governance conundrum would became even more tangled, already comprising: The so called market forces, the individual EU member states, Angela Merkel and Nicolas Sarkozy who have claimed leadership, the Frankfurt group, the Euro Group (17 or less) and chairman Jean-Claude Juncker, the euro summits (17or less) and president Herman Van Rompuy, the Ecofin Council (all 27 member states) and the Council presidency (Poland), the European Council (27) and president Herman Van Rompuy, the European Central Bank and president Mario Draghi, the European Commission through president José Manuel Barroso and Ecfin commissioner Olli Rehn, the G20 and its members, and the IMF.


Update 10 November 2011): More thoughts on the subject are offered by Charlemagne's notbook (The Economist) in: Two-speed Europe, or two Europes? - Let me add that president Sarkozy has shown that he does not understand the intrinsically democrativc nature of ”federalism”.


Greece and Italy have been very much parts of the problem these last days, because they have lost the trust of markets and politicians.


Greece

According to BBC News Europe, the discussions to form a government of national unity keep rumbling on in Greece.


Italy

By yesterday Italian state bonds had become ruinously expensive, but according to Reuters there are some signs that the parliament would pass emergency legislation within the next days and that prime minister Silvio Berlusconi would make way for a government of national unity, headed by Mario Monti.

If Greece and Italy fail, the crash of the euro may take down other countries as well.



Ralf Grahn

Can the euro be saved?

Can the euro be saved without democratic and robust government at European level?

This is a question every EU citizen needs to think through. Our leaders are invited to start thinking about sustainable solutions.

A group of Spanish bloggers call for a better Europe, of citizens. Check and join @moreurope on Twitter and the More Europe Manifesto, already in eight languages.


Ralf Grahn

Eurozone: Citizens concerned

If the national governments want something better than the impending crash, why don't they get to grips with the issues of democratic empowerment and sufficient powers at European level?

This is where we stand today: Eurozone: A matter of common concern, a real concern for citizens and businesses alike.

According to Jacques Delors, the former president of the European Commission, the euro and Europe are on the brink of the abyss. Notre Europe has collected the interviews and media reactions: Jacques Delors face à la crise de l'euro.

In Le Taurillon, Nessim Znaïen highlighted some proposals by Delors in the interview published by Le Temps.

Spencer Kimball, on European Dialogue, stated that US, EU debt crisis escalates in the face of political gridlock.

The Green MEP Reinhardt Bütikofer cautiously speaks about the need for empowering the European Parliament in the management of the euro crisis.

The calculus of not saving the Euro goes beyond economics, but it is in fact a political decision, Maxime Larive wrote on the Foreign Policy Association blog.

The blog of the office of György Schöpflin MEP noted the threat of intergovernmentalism. The Franco-German plans to govern the euro are expressly designed to circumvent the Commission and the European Parliament. The pressure to reassert state-national interest over a European-level interest neglects and probably damages the EU’s conflict resolution function.

Come September, when, or rather if, the permanent bailout mechanism takes over the role of the ECB, we shall see whether these crisis measures are enough to save the euro, Finn Maigaard wrote on the Foreign Policy Association blog.

Finland insists on getting collateral for participating in the second Greek rescue package. Other eurozone governments have reacted and the markets are raising alarms, Peter Spiegel wrote on the FT Brussels blog.

The current crisis in Europe isn’t just a Greek or German or Irish or Portuguese problem, it’s a European one, Jason O'Mahony wrote.

Protesilaos Stavrou wrote that if things stay as they are then we will reach a dead end that will signal the start of the collapse of the euro and of everything that took decades to build. The blog post offers practical proposals on remedies for the systemic crisis.

The European Central Bank is forced to act as a fire department, because chancellor Merkel postpones the saving of the euro. After months of silence, the German president Christian Wulff finds nothing better to say than to criticise the independent ECB, Eric Bonse wrote on Lost in Europe (in German).

Laurence Boon, on Telos, explains that eurobonds are no miracle cure, but they could be a help on certain conditions.

Megan Green reasons that Eurobonds could work, but we'll probably never know. Throughout the euro crisis, EU leaders have repeatedly demonstrated that their top priority is their own national self-interest, despite the huge potential downside risks this poses to the common currency.

Although the European Union is formally a democracy, it does not act like one. We're in the middle of a massive crisis, but when it comes to the solutions, we are talking about national solutions to European problems, wrote The European Citizen.

***

If the national governments want something better, why don't they discuss politically legitimate government and sufficient solutions to European problems?

The new articles on 841 euroblogs are just one click away. Follow and participate in the discussion about the eurozone and other European issues on multilingual Bloggingportal.eu, an important part of the European public space.



Ralf Grahn

Eurozone: Friendly fire or collateral damage?

We continue monitoring the new era of European disintegration, especially in what is still known as a eurozone of 332 million inhabitants in 17 countries.

Yesterday, chancellor Angela Merkel noted how closely the break down of the euro was related to the fate of the whole European project:

Scheitert der Euro, steht das europäische Projekt insgesamt auf dem Spiel.

(Merkel's full ”Stabilitätsunion” speech in Magdeburg.)

The Financial Times tells us that the German Bundesbank opposes ECB bond buying (22 August), still. Spiegel Online International reports that president Christian Wulff has joined the prominent opponents in Germany: German President Questions Legality of ECB Bond Purchases (24 August 2011).

For good measure, the German Bundesbank criticised the decisions of the 21 July 2011 eurozone summit on the second Greek bail-out and the added flexibility of the EFSF, as well.

In the context of the second bail-out of Greece, in the blog post Eurozone issues collateral and honesty (24 August), we saw the eurozone summit statement and the following deal on collateral between Finland and Greece. The eurozone partners did not warm to footing the bill, but for the government of Finland it remained a question of how, not if, collateral will be given.

Peter Spiegel on the FT Brussels blog continued by asking [UPDATED] Will Finland sink the Greek bail-out? (24 August). Markets and market watchers were becoming jittery.

The Open Europe blog looked at positions taken by leading politicians, country by country: Collateral Thinking (24 August 2011).

(By the way, the populist True Finns (Perussuomalaiset) have just decided to call themselves The Finns in English.)

Ruth Berschens in Handelsblatt tells us today that the collateral for Finland is off the table. The headline sounds conclusive: Sicherheitspfand für Finnland ist vom Tisch (25 August). However, the euro area governments seem to be discussing real estate as collateral.

If they reach no positive outcome, the Greek bail-out may unravel, and with it the eurozone as we know it.

We could then be left wondering if the eurozone broke up and the EU declined through friendly fire or as collateral damage.

***

The new articles on 841 euroblogs are just one click away. Follow and participate in the discussion about the eurozone and other European issues on multilingual Bloggingportal.eu, an important part of the European public space.



Ralf Grahn

Peter Spiegel (FT Brussels blog): Merkel-Sarkozy weaken Commission?

After Protesilaos Stavrou, we look at what another valued euroblogger wrote about the joint letter, or should we say letters, from the German chancellor Angela Merkel and the French president Nicolas Sarkozy to Herman Van Rompuy, the president of the European Council invited to come up with concrete proposals by October.


FT Brussels blog

On the FT Brussels blog, Peter Spiegel discussed the sidelining of the European Commission. Van Rompuy would chair the summits, aided by a new secretariat, and new analytical capacities would be created (to complement those of the Commission, the ECB and the IMF).

The intergovernmental approach would play into the hands of the governments of the bigger eurozone countries, like France and Germany.

Spiegel foresees some nasty institutional fights: Is the Sarko-Merkel plan anti-Commission? (18 August 2011).

Since then, Stanley Pignal has discussed the ideas of the Belgian acting finance minister Didier Reynders on eurozone reform, a finance minister for the euro area and eurobonds, on the FT Brussels blog: Reynders redux (19 August 2011).

***

I agree with the analysis about the intergovernmental thrust of the Franco-German letter, but the eurozone summits would undermine the Euro Group as well as the Commission.

When chancellor Merkel and president Sarkozy say that ”(t)he European Parliament, the European Commission and the national parliaments should be associated to this process in their respective capacities”, it looks like a polite way of telling them not to expect any crumbs from the table of the leaders of this silent coup.

***

Multilingual Bloggingportal.eu is an important part of the European public space, bringing you the new articles on 839 euroblogs.



Ralf Grahn

UK euro entry: Sour grapes?

The Liberal Democrats seem to have easily agreed to the demand by the Conservative Party to exclude the introduction of the euro currency, as stated in the coalition programme:

We will ensure that Britain does not join or prepare to join the Euro in this Parliament.

While the visceral hatred of all things EU and euro among the conservative power base should not be underestimated, one reason for this seemingly effortless agreement brings to mind the “sour grapes” in Aesop’s fable The Fox and the Grapes.




The latest edition from the House of Commons Library: Economic Indicators, May 2010 (Research Paper 10/35, 13 May 2010; 40 pages) tells us the following about government deficits:

The UK’s 12% deficit in 2010 is expected to be the largest in the EU, with Ireland’s 11.7% second highest. A 10% UK deficit in 2011 would be below Ireland’s 12.1% and only slightly above that of Greece (9.9%, though the IMF programme envisages 7.6%). However, the UK’s gross debt would remain less than two-thirds of Greece’s.

The UK’s gross public debt was estimated to rise from 68.1 per cent in 2009 to 86.9 per cent of GDP in 2011 (page vii).


According to the EMU convergence criteria (or Maastricht criteria) for the third stage in economic and monetary union (EMU) low inflation is a necessity, so the UK would fail the price stability test.

Britain has not participated in the exchange-rate mechanism for two years without devaluation against the euro (its favourite remedy for economic ills), so it clearly fails to qualify.

Failing on all grounds, the United Kingdom could not introduce the euro in a foreseeable future even if it wanted to. Somehow the invisible hand of the markets seems to guard Britain in comparison with the eurozone basket cases.

In such circumstances it is easy to trumpet defeat as victory.




Ralf Grahn

Euro Group leaders rescuing the euro

The latest in our series of blog posts inspired by the rescue actions in the eurozone was More on the EU’s no-bailout rule (European financial stabilisation mechanism), 14 May 2010.



The problem

In addition to the mind-boggling sums involved and the sudden calls for solidarity national leaders have done little consistent work to prepare their citizens for, the population has been bewildered by seemingly contradictory rules:

If EU bailouts are prohibited, is financial assistance allowed?

EU citizens have been taught that their country is not liable for the commitments of other member states: the so called no-bailout rule (Article 125 TFEU). On the other hand, EU financial assistance is expressly allowed in case of a serious threat of severe difficulties caused by natural disasters or exceptional occurrences beyond the control of a member state, according to Article 122(2) TFEU.

If citizens can make neither head nor tail of this, it is the responsibility of the national political leaders and the institutions of the European Union to elucidate.

This means that we have to sift through the paper trail left by the European Council, the Commission and the Council.

If the EU institutions work properly and transparently, the answers should become clear. If not, a vacuum is left to be filled by all sorts of protests, conjectures and conspiracy theories.

There is a lot to look at, so we have to advance patiently, one step at a time, without being stunned by the magnitude of the decisions. On the contrary, these monumental actions require detailed scrutiny and open discussion.



Euro Group

If we oversimplify matters crudely, we can say that the economic policy coordination specific to the second largest reserve currency in the world, the euro, depends on an informal intergovernmental arrangement.

Article 137 of the Treaty on the Functioning of the European Union (TFEU) refers to the Protocol on the Euro Group.



Protocol No 14 aims at ever closer coordination of economic policies within the euro area, and the Euro Group has a president, elected for two and a half years (Jean-Claude Juncker). Article 1 contains the substance of the arrangement (OJEU 30.3.2010 C 83/283):

Article 1

The Ministers of the Member States whose currency is the euro shall meet informally. Such meetings shall take place, when necessary, to discuss questions related to the specific responsibilities they share with regard to the single currency. The Commission shall take part in the meetings. The European Central Bank shall be invited to take part in such meetings, which shall be prepared by the representatives of the Ministers with responsibility for finance of the Member States whose currency is the euro and of the Commission.

The Ministers of Finance (although not specifically mentioned as such) meet informally to discuss. The Euro Group does not make formally binding decisions.



Eurozone leaders


However, it was an even more informal meeting of the heads of state or government of the euro area countries which set things in motion on 7 May 2010:



Statement of the heads of state or government of the euro area (press release)


Based on the principles of responsibility and solidarity, the participants expressed their political will to provide 80 billion euros (110 billion with the IMF) to Greece, in exchange for the Greek reform package, which was described as ambitious and realistic.

The leaders reaffirmed their commitment to ensure the stability, unity and integrity of the euro area, and they stated that the institutions of the euro area (Council, Commission, ECB) as well as the eurozone member states agreed to use the full range of means available to ensure stability.

The national leaders said that their countries were prepared to accelerate the consolidation of public finances. They promised strict enforcement of recommendations under the Stability and Growth Pact.

The meeting expressed support for the European Central Bank (ECB) in its action to ensure the stability of the euro area.

Taking into account the exceptional circumstances, the Commission would propose a European stabilisation mechanism to preserve financial stability in Europe, to be decided at an extraordinary ECOFIN meeting 9 May 2010.


The President of the European Council decided to accelerate the work of the Task Force, given the preparedness of the national leaders to:

- broaden and strengthen economic surveillance and policy coordination in the euro area, including by paying close attention to debt levels and competitiveness developments;

- reinforce the rules and procedures for surveillance of euro area Member States, including through a strengthening of the Stability and Growth Pact and more effective sanctions;

- create a robust framework for crisis management, respecting the principle of Member States' own budgetary responsibility.

The press release noted that the Commission would present its proposals on May 12.


Finally, the leaders agreed on the need to make rapid progress on financial markets regulation and supervision.



My impressions

The meeting was a first response to a grave crisis threatening one of the core aims of the European Union: an economic and monetary union (EMU) whose currency is the euro.

The leaders of the eurozone member states said the right things, although only words followed by deeds have the ability to convince hard-nosed or jittery markets.

The Ministers of Finance (ECOFIN) and the European Commission were left to nail down the details of a persuasive package over the weekend.




Ralf Grahn

My Europe Tweets for even better Europe Days

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Ralf Grahn