European Council: competing agendas

The heads of state or government meet in the European Council today in a weird atmosphere. The two largest ”shareholders”, Angela Merkel and Nicolas Sarkozy (Merkozy) have ganged up to sort out their internal differences and to impose their solution on the rest of the participants, leading to much discussion.

Then we have the formal (provisional) agenda, written by the president Herman Van Rompuy, the man who was mandated by all the leaders to produce a report on stronger economic union. This he did, although the public had to rely on leaks to get access.

With the Merkel & Sarkozy letter on the one hand, and the Van Rompuy report on the other, the meeting looks set to start with two competing agendas (in a wider sense).

Would credible, accountable and democratic government look like this?

If this is how it starts, how will it end?



Ralf Grahn

Merkozy euro proposals face EU members and Standard & Poor's

Even if the web is overflowing with reports and comments on the Merkozy proposals, there is cause to record the primary sources from the last two days.


Paris

The German chancellor Angela Merkel met the French president Nicolas Sarkozy at the Elysée Palace in Paris Monday, 5 December 2011. The Elysée web pages offer a video recording of the press conference (with French voice-over for Merkel) and a French transcript on the same page:

Conférence de presse conjointe : Mme Angela Merkel et M. Nicolas Sarkozy

The detailed proposals will be presented in a letter to president Herman Van Rompuy Wednesday, and subsequently published. They want a new Treaty, preferably among the 27, but between the 17 eurozone countries and open for others if needed, Sarkozy said before outlining the six proposals to be detailed in the letter.

Sarkozy sees that Franco-German unity leads towards a Europe of governments. Eurobonds are no solution to the problems.

According to Merkel, mandatory (golden) budget balance rules are needed, which can be verified by the Court of Justice of the European Union in order to make the governments respect their engagements regarding the stability and growth pact. The desired changes cannot be made without Treaty change.

Merkel described the monthly Euro Summits as thematic meetings dedicated to growth issues - labour law, innovation, development of infrastructure – in a spirit of convergence and competitiveness.

The leaders want clarity in principle during the European Council Thursday and Friday, and the conclusion of the Treaty amendments in March 2012.

The leaders dedicated a joint statement to the credit rating agency Standard and Poor's (in French and English):

Communiqué conjoint franco-allemand


Berlin

The German chancellery offers a web page with the six proposals outlined:

Strategie zur Überwindung der Staatsschuldenkrise

Germany has now reinstated ”economic government” (Wirtschaftsregierung) to describe the monthly Euro Summits.

The German transcript of the joint press conference:

Pressestatements von Bundeskanzlerin Angela Merkel und dem französischen Staatspräsidenten Nicolas Sarkozy (5 December 2011)

The recent German government policy statement:

Regierungserklärung: Ziele und Leitlinien für den Europäischen Rat (2 December 2011)

The technical decision of the eurozone finance ministers to expand the the European Financial Stability Facility (EFSF) through leverage:

EFSF: Maximierung beschlossen (30 November 2011)


Brussels

The president of the European Council and of the Euro Summits, Herman Van Rompuy, has invited the heads of state or government. His invitation letter 6 December 2011, a day after the meeting between Merkel and Sarkozy, refers to draft conclusions prepared on the basis of his interim report, unpublished.


Intergovernmental Europe

Above we saw the state of main sources for the public, news reports and opinion: an outline of the unfinished the Franco-German proposals and the unpublished interim report by Van Rompuy.

Intergovernmental Europe remains true to its role as an underachiever with regard to democratic rule, good governance and transparency at the European level. The citizens of the EU are promised even more intergovernmentalism in the future, instead of credible, accountable and democratic government.


Standard & Poor's

However, one essential piece we have to add is the flurry of negative assessments from the credit rating agency Standard & Poor's between 5 and 6 December 2011 for eurozone sovereign debt and the EFSF. Since there are several announcements and new developments are possible, I link to the thematic page:

European Sovereign Ratings and Related Material

For those in a hurry the synthesis announcement offers the main picture. It promises a review based on the upcoming European Council 8 to 9 December 2011, with possible downgrades of one notch for the strongest governments and eventually two for the rest:

Standard & Poor's Puts Ratings On Eurozone Sovereigns On CreditWatch With Negative Implications (5 December 2011)

***

I have put the eurozone on democracy watch, with negative implications.



Ralf Grahn

Merkozy fiddles while eurozone burns

The president of the European Council and the Euro Summits, Herman Van Rompuy, and the leaders in the 25 other European capitals sit twiddling their thumbs, waiting for Merkozy.

What makes it even more absurd is that few expect the German chancellor Angela Merkel and the French president Nicolas Sarkozy to sort out much of their mutual differences today, let alone the euro crisis.

The Elysee blog of Arnaud Leparmentier (Le Monde) discusses the issues on the table and the persisting malfunction of the Franco-German ”engine”:

Accords et désaccords entre Merkel et Sarkozy, juste avant leur énième rencontre (4 December 2011)

The hopeless machinations of ”sovereign Princes” continue, instead of the needed rise to the federal level, records Jean Brochier.

Laurence Boon states on Telos that an intergovernmental eurozone just does not work.

Trisha Craig notes the impassioned plea for German action from the Polish foreign minister Radek Sikorski (via The Economist).

If it does not work, try more of the same, is how Andy Carling sees the EU institutions and the political parties reacting to the existential crisis.

***

Despite the imminent bankruptcy of intergovernmental Europe and the Franco-German duopoly, the two (and other) national leaders refuse to change tack.

Our national leaders never have time for EU democracy, but there is always time for another eurozone failure.

What impact can we expect from the European Council 8 to 9 December 2011 in the real world?



Ralf Grahn

Euro: Waiting for Merkozy

Heads of government (or state) in most European capitals may think about Samuel Beckett, as they wait for Merkozy.

At least publicly their common president of the European Council and the Euro Summits, Herman Van Rompuy, has not published proposals to overcome the euro crisis.

More than anything, we seem to experience a cacaphony of silence from the national capitals and Brussels.


Franco-German positions

Monday, 5 December 2011 at 13:30, the French president Nicolas Sarkozy receives the German chancellor Angela Merkel for a working lunch at the Elysee Palace.

What, if anything, are they going to bring to the table?

Friday, 2 December 2011 the German Parliament (Bundestag) heard and debated the government policy statement presented by chancellor Angela Merkel (Regierungserklärung durch die Bundeskanzlerin zum Europäischen Rat am 9. Dezember 2011 in Brüssel).

The Toulon election rally speech by the French president Nicolas Sarkozy and the government statement by Merkel have been widely reported and commented. Here are a few attempts to compare the two messages, ahead of the meeting between Sarkozy and Merkel in Paris tomorrow, 5 December 2011.

Charlemagne published two blog posts on the common euro problem, but two differing visions (part I and a more detailed comparison in part II).

On the Coulisses de Bruxelles blog, Jean Quatremer discussed similarities and differences. The European Council may continue until Sunday.

Le Figaro offers another synthesis of the Franco-German views.


Bystanders

In addition to David Cameron and Herman Van Rompuy the list of bystanders ahead of the European Council (#EUCO on Twitter) 8 to 9 December 2011 seems long, with few exceptions to date.

One of the few government sources I have stumbled across is the Swedish foreign minister and euroblogger Carl Bildt, whose message is more Europe, but not more Europes. Splitting Europe into new groups is not the way forward.

Ahead of the General Affairs Council (GAC) 5 December 2011 the Swedish government is positive about the need for improved budgetary discipline, but reserved about the need for treaty changes. The customary annotated agenda offers some background, but no concrete proposals.

The Swedes may be happy to be outside the eurozone right now, as The Economist reports, but how realistic is Bildt's hope to evade the consequences of being a euro outsider by reaching effective decisions unanimously and then ratifying them in 27 EU member states?

The government of Finland refers to president Herman Van Rompuy's proposals on ways to strengthen the economic union, improve fiscal discipline and deepen the euro area's integration. The debate will concentrate on the possibility of limited Treaty changes or corresponding arrangements. The President’s proposals are based on the mandate he was given in the October meeting.

This text and one about the General Affairs Council are written as if Van Rompuy's proposals existed (and only the public was kept in the dark).

The Irish Independent sees prime minister Enda Kenny capitulating to Merkel on budget rules, anticipating that the European Central Bank would build a ”firewall” to give eurozone governments time to repair their finances. Another national referendum looms on the horizon. Here Van Rompuy is said to be preparing his proposals, with national (Irish) officials participating in the process.

***

The markets and EU citizens need democratic and sufficient powers, good governance and transparency to the European level from Merkozy.

The governments, too, are waiting for Merkozy, but with varying apprehensions and reservations, based on their national agendas.



Ralf Grahn

EU and euro crisis: Internal weaknesses and unanimity

Some countries are born weak, some achieve weakness and some have weakness thrust upon them. The United Kingdom joined the EEC (later EU) late and grudgingly, after its EFTA strategy failed. Britain has worked hard to drag the course of European integration down to its own level, reluctantly agreeing to further steps while opting out of essential policy areas and core groups. Representing a member state seen as playing as much against as for its team, prime minister David Cameron is and has thrust himself into the position of being an obstacle, a nuisance or an irrelevance.

However, weakness is not confined to Britain. The European level is a shining example. The less than robust and democratic structures of the European Union and the eurozone are root causes of the worsening euro crisis. Given the structural weaknesses, calls for more or better leadership often have a hollow ring.

Yesterday we looked at the eurozone ”institutions” with regard to economic policy; informal gatherings with the Euro Summit as the icing on a cake of impotence.

A few days ahead of the European Council, there is no public proposal from president Herman Van Rompuy (who is also the president of the Euro Summits, and has been mandated to propose solutions). An apt illustration of the state of EU and eurozone level power, governance and transparency.

Through the feebleness of the European level, common solutions become hostages of national perspectives and power struggles, since fundamental remedies need unanimity among the EU members or participating states.

Never underestimate internal weaknesses as an explaining factor in intergovernmental Europe.

However chancellor Angela Merkel and president Nicolas Sarkozy patch up their mutual differences on Monday in Paris, the next ”comprehensive solution” requiring unanimity will be met by 25 other national lists of caveats at the European Council 8 to 9 December 2011 (somewhat fewer if the serious talks are restricted to the euro area members or a core within the core).

Does this have the look of credible structures and convincing solutions to the euro crisis, based on democracy at the right level?



Ralf Grahn

Merkel and Sarkozy brewing Faustian pact

A new week, and a new episode in the eurozone cliffhanger is about to begin. Only democratic and legitimate government with sufficient powers at European level can lay the robust and politically acceptable foundations needed.

Euro bonds won't work without a political authority that backs them up, says the European Economic Policy blog, but continues that we have seen over the last week that the EU has no intention of establishing such a government.


In the Wall Street Journal, Irwin Stelzer states:

One thing is certain: The euro cannot survive without a major change in the governance structure of the euro zone.

In a fairly detailed blog post Arend Jan Boekestijn wonders if it is five past twelve, instead of five to twelve for the eurozone (in Dutch).

We are still not offered any useful and open information by the German and French governments, but we see more and more reports about a new disciplinarian code among eurozone governments in the making. The Wall Street Journal article adds important details to what it calls fiscal union.

The pact, it is hoped, could liberate the ECB to intervene massively in the bond markets, something many see as necessary to prevent the eurozone from collapsing.

Have I understood correctly? If things go bad – and they already have – this intergovernmental agreement would put in place a state of emergency in individual countries, based on their prior consent. Formally democratic government would be preserved, but the policies dictated by the pact.

For all we know, these extraordinary powers could be assumed outside the political and institutional framework of the European Union (and the eurozone) with nothing in the way of transparency and public debate to influence execution.

And we still have no convincing promises of democratic European level government where the national level has failed? A Faustian pact, if I may say, dear Angela Merkel and Nicolas Sarkozy.



Ralf Grahn

Merkel denies eurozone remedies twice

In concrete terms the French president Nicolas Sarkozy and the German chancellor Angela Merkel accepted the invitations from the Italian prime minister Mario Monti to visit Rome in a near future.

At the mini-summit in Strasbourg (Elysée video) president Sarkozy repeated the promise of treaty modification proposals from France and Germany ahead of the European Council 9 December 2011. He did not offer any concrete information about the contents.

Merkel dug in her heels, by stressing the independence of the European Central Bank and by showing no greater willingness to adopt eurobonds than before. She welcomed the Commission proposals regarding fiscal discipline, but was negative towards eurobonds which could level the bond rates in Europe.

Essentially Merkel repeated what she had said in the Bundestag debate on the German federal budget for 2012 the previous day. A short quote from the press release shows one Yes and two times No:

Den Vorschlag der Europäischen Kommission zur Einführung von Euro-Bonds lehnte die Kanzlerin ab. Vielmehr müsse es begrenzte Änderungen der EU-Verträge und eine bessere Überwachung der Euro-Stabilitätsregeln geben. Es gebe bei Verstößen gegen den Stabilitäts- und Wachstumspakt bisher keine Möglichkeit einzugreifen.

Beim Euro-Rettungsfonds EFSF müssten Leitlinien festgelegt werden, die die Investoren überzeugten. Am Mandat für die Europäische Zentralbank dürfe nichts geändert werden, so Merkel.

Monti saw the need for a fiscal union which guarantees stability. In this context eurobonds are worth exploring.

Atlantico has interviewed the French EU expert Jean-Luc Sauron, who sees the need for growth as well as for repression in the eurozone.

***

Our national leaders never have time sort out the unanswered questions about European level democracy and legitimacy.

But I wonder if there is going to be a eurozone to save by the time our national leaders get around to effective solutions, unanimously adopted and ratified within an intergovernmental framework adored by the French leadership.


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

Ireland's Enda Kenny bane of euro?

Tomorrow, Friday 18 November 2011 (see calendar), prime minister David Cameron has an opportunity to impress chancellor Merkel in Berlin with his vision of British Europe.

More serious for the prospects of the eurozone were the statements from Enda Kenny, the prime minister of Ireland, at the press conference 16 November 2011, following talks with chancellor Merkel. Kenny thanked Germany for its help in saving the Irish economy, but he saw no chances for treaty reform.

The conflict between national referendum politics and the need for democracy, sufficient powers and leadership to meet at the European level may well earn Ireland and Enda Kenny a place in the end-of-history books, despite Kenny's confession that to unravel the euro is to unravel the EU.

For Ireland as an individual eurozone country, the painful reforms are starting to bear fruit, but what if the euro area implodes and – if we believe Kenny – the European Union?

Perhaps an Irish referendum could show the way out after the crash?



Ralf Grahn

British or European Europe?

What makes the leading government party of the biggest eurozone and EU member state tick? Despite too little, too late, Germany participates fully in all the policy areas of the European Union. For Germany, the symbols of the EU express a feeling of community in Europe.

Compare the conference of the Christian Democratic Union CDU in Leipzig – Für Europa. Für Deutschland – with the steady stream of war-like propaganda from anti-EU media and campaigners in the United Kingdom, negative public opinion, the open hostility among the political class and the efforts of successive UK governments to play as little as possible for the team, while demanding most in return.

The previous British prime ministers Tony Blair and Gordon Brown pretended that the UK was at the heart of Europe, while standing on the brake and devising opt-outs. According to David Cameron ”we sceptics have a vital point”.

Compare the European values of the CDU (and Germany) with the sovereignty cum narrow national interest discourse streaming from Westminster.

The euroblogger Jon Worth called on Labour to embrace more constructive EU politics than those expressed by the shadow foreign secretary Douglas Alexander. He also proposed that UK politicians should drop the indiscriminate and narrow-minded use of the 'national interest' in relation to the European Union.

For those who think that prime minister David Cameron showed great restraint and wisdom by calling for the EU to be turned into a flexible network of nation states promoting open markets, Kosmopolit wrote a long blog post on the problems of the UK's approach to the EU. Long term all the EU member states (except Britain and Denmark) are bound to join the eurozone, so where are Cameron's long term allies?

Timothy Garton Ash asks Cameron to present his vision for Europe, if he has one. At this moment Cameron's British Europe is purest waffle. Chancellor Angela Merkel's German vision for political union in Europe is still only part right, but let the European leaders choose between these alternative routes forward.



Ralf Grahn

CDU for Europe and Germany

Despite too little and too late, why is Germany more influential than the UK in the European Union?

Imagine the Conservative party conference in the United Kingdom under the motto: For Europe. For Britain.

In Germany the the theme of the main government party, the Christian Democratic Union CDU meeting in Leipzig is: Für Europa. Für Deutschland.


CDU 2011 Leipzig

The party conference supports the EU politics of Angela Merkel, the German chancellor and leader of the CDU, DW-World reports (in German): Verunsicherte CDU folgt Merkels Europa-Kurs.

Merkel called for a breakthrough for a new Europe, based on the values of freedom, solidarity and justice, in the framework of a social market economy. The CDU offers highlights from Merkel's speech on Europe in a press release: ”Für Deutschland. Für Europa”.

After the epoch-making accomplishments of Konrad Adenauer and Helmut Kohl, the task of the present generation is to complete the economic and monetary union (EMU) and to establish a political union, Merkel told the party delegates.

Europe has to emerge stronger from the debt crisis. This means more, not less Europe. If a country breaches the stability and growth pact (SGP), there has to be a right to intervene. All EU countries are part of the domestic politics of Europe, and they need to act responsibly. The constitutional rule of balanced budgets (Schuldenbremse) is one of the steps in this direction, according to Merkel.

With overwhelming support, the CDU party conference adopted guidelines equating a strong Europe with the good fortunes of Germany: Starkes Europa – Gute Zukunft für Deutschland (23 pages).

Far from the adoption of democracy and effective powers Europe needs, it still beats opt-outs, budget rebate, permanent obstructionism, constant criticism and general nastiness as means to win friends and influence people in Europe.



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

Merkel's Germany in Europe

Update: I have posted a readable version of this article on Grahnlaw Suomi Finland, because my first experience with the new Blogger interface resulted in the text "sausage" below, and I was unable to create separate paragraphs to make the text readable. On 28 May 2009 I posted the text of chancellor Angela Merkel's speech at the Humboldt University on Europe in the blog post Merkel's Germany: The European mainstream? The following day I wrote an entry with my impressions: And Quiet Flows the Spree – Merkel's Germany in the EU. The tenor of the address, as I saw it:

The first things that come to mind are the limits set by Merkel, on the scope of the speech and the European agenda.

For Merkel, the European Union seemed to be very much a union of heads of state and government – first of all those of Germany and France – assisted by their governments. Despite this predominantly intergovernmental view, shared by most national governments in the EU member states, Merkel must have known how brittle the hopes of effective international action and internal reform on energy and other crucial issues are, but she offered no visions beyond the Lisbon Treaty. Later crises Since then, we have entered the second global financial crisis. The Lisbon Treaty has entered into force, and events have proven its shortcomings, but the Franco-German ”engine” is still focused on looking for intergovernmental solutions within the scope of the current treaties. With the governments mainly silent, outside observers increasingly question the will of the European Union and the eurozone to establish robust and democratic structures. Spiegel International Online Spiegel International Oline offers a broad compilation of thoughts about how Germany's EU policies, but also transatlantic relations, have changed during the chancellorship of Angela Merkel: Self-Important Approach Worries Berlin's Allies (31 August 2011). Democratic, very German Even now, with a population of 82 million, Germany is the elephant in the China shop, both in the European Union (502.5 million) and the euro area (332 million) (Source: Eurostat). However, Germans would be even more influential in a European federation, based on 'one person, one vote', encompassing the citizens of for instance the current eurozone countries. Should Germans be afraid of a European level representative democracy? Should anybody else reject a parliament and a government giving each voter approximately the same weight? Joschka Fischer For ideas outside the dogms of the Franco-German ”engine”, let us turn to the person who made the 2000 Humboldt speech on Europe. What does Joschka Fischer think today? His latest Project Syndicate column appeared 30 August 2011: Europe's Shaky Foundations. Fischer's analysis of the political weaknesses of the economic union, the ineffectiveness of remedies currently employed and his geopolitical views merit discussion among Europeans interested in our (or even only their own) future. Is his analysis correct? Does he offer the right remedies? Why is he vague about the democratic underpinnings of real powers at European level? These are some of the questions we as Europeans need to discuss. Bloggingportal For continuing discussion about the eurozone challenges, the future of Europe, as well as EU politics and policies, follow the new articles from 841 euroblogs on multilingual Bloggingportal.eu, an important part of the European public space. I invite you to read and to discuss on my four blogs about EU politics and law: Grahnlaw (EN), Grahnblawg (SV), Eurooppaoikeus (FI) and Grahnlaw Suomi Finland (EN SV FI). I am also active on Twitter (although I can follow back, only as slots become available) and on Facebook. Ralf Grahn P.S. Sorry. The new Blogger interface made the blog post into a "sausage", and I was unable to correct it by getting the paragraphs separated.

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.

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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.

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



Ralf Grahn

Spiegel Online International on eurozone crisis

It is annoying not to know if the joint, but divided Twin Peaks proposal is intended to bless us with a new ”economic government” (gouvernement économique FR) or just enhanced ”economic governance” (wirtschaftliche Steuerung DE) of the euro area.

Even if the key concept has proved slippery, I tried to evaluate the Franco-German proposals in the blog post Merkel-Sarkozy letter: My reading, part of an extended series about the euro crisis (Eurokrisen).

Let us compare notes with Spiegel Online International, about what the German chancellor Angela Merkel and the French president Nicolas Sarkozy proposed to Herman Van Rompuy, the president of the European Council invited to come up with concrete proposals by October.


Spiegel Online International

In the aftermath of the Paris summit, Stefan Kaiser on Spiegel Online International spoke about ”true economic government”, but found the exact meaning unclear. He interviewed professor Henrik Enderlein, who saw the proposal as an attempt to sideline Jean-Claude Juncker (the chairman of the informal Euro Group): What Will a European Economic Government Entail (17 August 2011).

The following day, German media comments harvested by Spiegel Online International were unclear about the contents and unsure of how helpful the proposals would be: 'Merkel-Sarkozy Plan Already On Shaky Footing' (18 August 2011).

Spiegel Online International looked at the state of the German coalition government: Will Merkel's Coalition Hinder Euro Rescue? (18 August 2011). The FDP welcomed the rejection of euro bonds, the introduction of a debt brake, greater competitiveness and stability. However, economic government or offering ”Brussels” more powers, tangled the nerves of many among the government parties.

If Merkel's coalition partners lap up the debt-brake, the plan is triggering massive resistance in southern eurozone countries. Stefan Simons and Carsten Volkery report in Spiegel Online that the difficulties to enact balanced-budget amendments start at home for president Sarkozy. Debt-brakes have been in place since the Maastricht Treaty, to what effect? See: The Great Debt Brake Swindle (18 August 2011).

For a quick overview, I recommend the Graphics Gallery about the global debt crisis offered by Der Spiegel, 18 slides including eurozone and US federal deficit figures.

Spiegel Online International takes a step back to gain a wider view of the European project. Roland Nelles contrasts the passion of ”The Federalist Papers” with the failure of citizens to engage for a better Europe: How to Get Europeans to Care about Europe (19 August 2011). The current

... intransparent, technocratic policymaking among leaders generates exactly the kind of dangerous Europe-fatigue that is helping the populist idiots win support.

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The Paris summit taught us more about the limits of our current political leaders, than about the real challenges.

In my view, without real powers and real democracy at European level, our continent will remain ill equipped to enhance the security and the prosperity of its citizens in a volatile world.

With Dylan Thomas: Do not go gentle into that good night.

Follow the discussion about the future of Europe and the eurozone on Bloggingportal.eu, an important part of the European public sphere.



Ralf Grahn

Eurozone ”economic government” lost in translation?

Did the (Twin Peaks) ”economic government” for the eurozone get lost in translation?

For the blog post Eurozone: Our new ”economic government” I watched the video of the press conference at the Élysée Palace, in Paris. Based on what I heard and saw, I stated the novelty:

Both leaders describe their proposals as ”economic government” (gouvernement économique, Wirtschaftsregierung).

Since ”economic government” has been used mainly by the French, whereas others have usually spoken about ”economic governance”, I corroborated this novelty by referring to the German press release 'Deutschland und Frankreich für europäische Wirtschaftsregierung', although the link now leads to another press release headlined 'Deutschland und Frankreich für starken Euro', which seems to have airbrushed ”europäische Wirtschaftsregierung” by replacing it with ”starken Euro” (which, incidentally, is another cup of tea).

I did not see ”Wirtschafsregierung” in the text, either, so a minor act in Ministry of Truth style seems to have taken place at the German chancellor's office.


Transcripts

In the blog post Merkel and Sarkozy: Eurozone letter to Van Rompuy, I referred to the French version of the press conference text:

According to the Élysée version, president Sarkozy refers to the letter to Van Rompuy with the joint proposal for

...un véritable gouvernement économique de la zone euro. Ce gouvernement économique sera constitué du Conseil des chefs d'Etat et de gouvernement.

In the German transcript only Sarkozy's second ”gouvernement économique” is preserved as ”Wirtschaftsregierung”:

...eine wirtschaftspolitische Steuerung der Eurozone vorzusehen. Diese Wirtschaftsregierung besteht aus den Staats- und Regierungschefs.

According to the two transcripts (and part translations), chancellor Merkel does not use the term ”Wirtschaftsregierung”, so the the use of term seems to rest on the airbrushed press release.


Letter to Van Rompuy

As I noted and wondered in the blog post Merkel and Sarkozy letter: My reading, the different ”original” language versions of the joint letter to Herman Van Rompuy employ different terms.

French:

- des réunions régulières des Chefs d'État et de Governement de la zone euro : ces sommets se tiendront deux fois par an si nécessaire des sessions extraordinaires seront convoquées. Ces sommets constitueront la pierre angulaire du nouveau gouvernement économique de la zone euro.

German:

- Regelmässige Treffen der Staats- und Regierungschefs des Euro-Währungsgebiets: Diese Treffen werden zweimal pro Jahr und wenn nötig zu außerordentlichen Sitzungen einberufen und dienen als Eckpfeiler der verbesserten wirtschaftlichen Steuerung des Euro-Währungsgebiets.

English is hardly the source language, but the target language:

- Regular meetings of the euro area Heads of State and Government: these meetings will be convened twice a year and when necessary in extraordinary session to act as the cornerstone of the enhanced economic governance of the euro area.

Conclusions?

Grandiloquent to speak about ”economic government” to begin with, given the substance and lack of real democratic legitimacy of the proposals, although heads of state or government, more easily than outside observers, might perceive railroading the other EU institutions and eurozone arrangements on a permanent basis as part of their higher calling.

We have a joint letter, but which version should president Van Rompuy and the rest of us read with regard to the crucial term?

Has ”economic government” reverted to ”economic governance” outside France and the French language?

To set the record straight, could the Ministry of Truth (Berlin branch office) offer guidance?

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On multilingual Bloggingportal.eu you find the new posts from 839 euroblogs, including on the debt and economic crises in the eurozone.



Ralf Grahn

Merkel-Sarkozy letter: My reading

In the blog post Merkel and Sarkozy: Eurozone letter to Van Rompuy you find links to the letter on two websites in three languages, as well as transcripts of the press conference and some press releases.

Here is a link to the letter in English, as posted on the presidential Élysée web portal.

A few lines into the text, we start to wonder when the French and German leaders were last updated about growth figures and events on the financial markets and stock exchanges, as well as sentiments:

In the last months, the Heads of State and Government of the euro area have taken all the necessary measures in order to preserve the stability of the economic and monetary union.

Merkel and Sarkozy refer to paragraph 16 of the declaration of heads of state or governement of the euro area and EU institutions (my addition, based on original) of 21 July 2011, which said:

16. We invite the President of the European Council, in close consultation with the President of the Commission and the President of the Eurogroup, to make concrete proposals by October on how to improve working methods and enhance crisis management in the euro area.

In other words, the declaration referred to recognised institutional players, without inciting member state activism, although the letter somehow leaves the reader with such an impression.

We should be grateful for every effective and democratic proposal to stop the worsening slide. Let us quit nit-picking in order to look at how France and Germany propose to strenghten further the governance of the euro area, in line with existing treaties.


Eurozone governance

Whereas the leaders spoke about ”economic government” in both French and German at the press conference, the letter more humbly refers to enhanced ”economic governance” of the euro area.

However, the French version uses ”gouvernement économique” whereas the German version resembles the English translation. Strange, when speaking about key concepts.

The Twin Peaks solution of two annual summits could hardly be more intergovernmental, although only the regularity and the special chairman are new in this ongoing coup d'état.

Having just wanted to set their leading role in concrete, the wish to reinforce the eurogroup of finance ministers sounds as reassuring as the first pronouncement about human rights following a military coup.

The leaders must doubt the analytical capacities of the Commission, the ECB and the IMF, since the new European Stability Mechanism ESM should be equipped with ”complementing” analytical capacities in particular as regards debt and capital markets analysis. No prizes for guessing if transparency and accountability would decrease, or the ”unseen hand” of political remote control from the zone's main capitals increase.

Market reactions have shown that the proposals are seen as ineffective, but the more I think about them, the more I find them harmful as well.


Constitutional debt-brake

Merkel and Sarkozy propose a mandatory constitutional debt-brake for every euro area country. Germany already has one, and Sarkozy is trying to rally support for an internal balanced budget rule in France.

The member states are already internationally bound by the Stability and Growth Pact (1997), but how many of them are willingly going to enshrine such a rigid and permanent rule internally?

Although I am a firm supporter of sustainable public finances, hard and fast rules make bad law.

What happens when one or more euro area parliaments refuse to obey the diktat?

It sounds pompous, but essentially the euro area states have politically agreed to the Ecofin recommendations, so they should carry them out:

All Member States of the euro area should confirm without delay their resolve to swiftly implement the European recommendations for fiscal consolidation and structural reforms, especially as regards labour-market, competition in services and pensions policy, and adapt appropriately their draft budget.

The leaders sent a signal on coordination of direct taxes, but the required unanimity for meaningful common rules remains as elusive as ever.

Macro-economic conditionality seems to be targeted at the weaker economies with potentially greater problems to master their public finances as well.

Euro area legislation (Article 136 TFEU) could give the Franco-German aspirations a shot in the arm.


Financial Transaction Tax

We can expect a joint proposal on a Financial Transaction Tax, also known as a Tobin Tax or Robin Hood Tax.

The United Kingdom has rejected it before seeing the proposals (Commission one included), so eurozone Ireland has been content to require an EU-wide tax. Merkel's coalition partner FDP has sent the same kind of signals.

The European public favours a tax on financial transactions, but without fiscal and political union this remains just another example of the limits of intergovernmental deal-making.

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All in all, the Franco-German proposals would enhance the influence of the heads of state or government (of the biggest eurozone states) at the expense of the other EU institutions, without solving the fundamental problems of the euro area: lack of robust institutions and democratic legitimacy at European level.

How about the confidence factor?

BBC News tells us that European stock markets continued to fall today.



Ralf Grahn

Eurozone leaders talk and shares fall

This afternoon BBC Business News reports that Shares fall in Europe and US as confidence drops (18 August 2011).

Why are the markets so ungrateful after chancellor Angela Merkel and president Nicolas Sarkozy promised the eurozone ”economic government”, consisting of two annual summits for heads of state or government in the euro area, as well as constitutionally enshrined debt-brakes?

Perhaps the commentariat could give us a few clues.

Ambrose Evans-Pritchard's Telegraph blog post In defence of PIGS (17 August 2011) named the non-decisions succinctly:

No eurobonds, no fiscal union, no boost to the EFSF rescue fund, no change of policy on the ECB’s mandate. Zilch.

The LabourList post by Jon Worth argues that it is better to save the Euro and the EU through fiscal integration than provoke the mother of all financial crises: The Eurozone predicament is undesirable, not unexplainable (16 August 2011).

Professor Karl Whelan argues on the IIEA blog that it is certainly unlikely that a continent-wide campaign to pass rigid fiscal rules that run counter to textbook macroeconomic principles will do much to boost the Euro’s popularity: The Merkozy Summit – Bad Politics, Bad Economics (17 August 2011).

Vihar Geogiev writes on European Union Law that this proposal will not solve the urgent problems of the eurozone. Any further dodging of the eurobond issue will only add damage to the eurozone economy. The proposals on ”economic government” stay within the logic of intergovernmentalism, which is a recipe for failure: Dissecting the New Franco-German Proposal for the Eurozone (17 August 2011).

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While effective and democratic European level solutions remain officially banned, remember to check old and new comments on Bloggingportal.eu about the continuing eurozone descent.



Ralf Grahn