Cameron in European Council: Weak, weaker... (Updated)

Without democratic government and sufficient powers at the European Union or eurozone level, the national leaders have been forced to proceed further on the road of intergovernmentalism, although credible and sustainable solutions need durable and legitimate foundations.

While we wait for the conclusions from the European Council, this is how the leaders of the euro area countries and other EU member states have tried to manoeuvre despite these self-imposed structural weaknesses: Statement by the euro area heads of state or government (9 December 2011; 7 pages).


United Kingdom

If Britain has been a constant gardener of weakening its position in the European Union, prime minister Cavid Cameron managed to drive the wedge further in, by alienating almost all the rest of the participants, by demanding escape clauses for British financial services from internal market rules.

With the global financial system in danger, Nero would have been proud of Cameron's priorities.

Let us look at some early reactions after the EUCO all-nighter, especially with regard to the United Kingdom.

Financial services are, as we know, part and parcel of the internal market. What remains of UK goodwill capital to press for future concessions among the 27? Le Monde quotes the French president Nicolas Sarkozy on Britain's ”unacceptable” demands regarding financial regulation, the absence of which Sarkozy sees as a root cause of the current problems.

On Fundación Civil, the headline of Mario Conde says that the English have become ”anti-system” in the European Union, but he also notes that the fiscal compact is all discipline (Merkel), but no eurobonds or new tasks for the ECB (in Spanish).

According to David Cameron, the agreement between the EU countries is not in Britain's interest, so he hopes that the EU institutions will protect British interests and he wishes the rest of the union well in their endeavours to safeguard the euro.

How many Europeans do you think, by now hope that Cameron arranges an exit referendum?

***

Update 9 December 2011: The euro area statement has been revised, tentatively bringing the participants to 26 (all but UK). Here is the web page with the statement in all EU languages.



Ralf Grahn

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

Media reports: Sarkozy's euro speech in Toulon

I already tried to present the essentials of the speech by the French president Nicolas Sarkozy, plus a few comments.

President Sarkozy's speech in Toulon is frontpage news in Europe, but what do the media reports emphasise?

The Financial Times sees the emerging shape of a last-ditch eurozone deal.

The New York Times runs through the views of the different proponents.

Reuters underlines Sarkozy's view that governments must keep control of the European Union, as well as the looming presidential election in five months.

The Guardian thinks that Sarkozy's focus appeared to be on a new deal enabling the leaders of the 17 eurozone countries to strike political bargains among themselves.

The Wall Street Journal brings up the internal challenge from the right-wing populist leader Marine Le Pen.

The BBC highlights the Franco-German ties central to Sarkozy's thinking.

EUobserver draws attention to Sarkozy's intergovernmental credo.

Financial Times Deutschland leads with an intergovernmental European Monetary Fund.



Ralf Grahn

Sarkozy: French president and German chancellor to save euro

Yesterday, 1 December 2011, president Nicolas Sarkozy promised the French people later retirement, longer working weeks and smaller public deficits. Europe offers more sovereignty through added opportunities to act.

If France and Germany are united, Europe is united. On Monday the two countries are going to make proposals to guarantee the future of Europe. Sarkozy promised to do his utmost to create an area of stability and confidence at the heart of the eurozone.

Europe has to be rebuilt on more solidarity and discipline. More political responsibility means rejecting blind adherence to the rules of competition and free trade.

Europe needs more democracy. The accountable politicians make the decisions. No march towards supranationality. The heads of state or government and intergovernmentalism are the road ahead for European integration.

The eurozone needs more qualified majority voting [in the Council]. Europe has to protect its commercial interests and to rethink Schengen.

Europe has to end social and fiscal dumping among EU member states. Europe needs to protect its industries against global predators. Europe needs to protect the common agricultural policy.

The euro has to be defended. This is the reason for the heads of state or government as the government of the euro area. France has proposed a European Monetary Fund to serve as a bastion against speculation.

Sarkozy is confident that the European Central Bank will act. The euro area countries have to accept stricter budgetary discipline, including scrutiny of budgets, quick and automatic sanctions and a ”golden rule” on balanced budgets. Convergence is the key concept.

France and Germany campaign for a new Treaty.


Comment

Internally the all but confirmed presidential candidate Nicolas Sarkozy showed some bravery in Toulon by exhorting the voters to work longer and harder and to prepare for public belt-tightening.

More than ever since the Fouchet plan, Sarkozy assumes the Gaullist legacy to marginalise the EU institutions permanently, especially the Commission and the European Parliament.

He casts the president of France and the chancellor of Germany as the saviours of the euro currency, although even these two countries still have to agree on a joint proposal ahead of the European Council 9 December 2011.

The rest of the eurozone countries and particularly the other EU member states are relegated to pawn status.

Sarkozy's ferociously protectionist blasts may go down well in France, but how many among the 17 – now divided into core and non-core countries - or 27 welcome his calls to scrap free trade and the competition rules underpinning the internal market, as well as social and fiscal ”dumping” [later remembered and added: plus free movement and Schengen]?

Perhaps Sarkozy sees a golden opportunity to create a eurozone core in his own image, when a euro crash seems imminent without extraordinary measures and most of the new EU member states are still outside the eurozone, as are the open market economies Denmark, Sweden and the United Kingdom.



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

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

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

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.

***

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?

***

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.

***

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).

***

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

Merkel and Sarkozy: Eurozone letter to Van Rompuy

Yesterday morning the primary sources about our new ”economic government” were limited to video of the Élysée press conference and the press release from German chancellor's office.

Since then, we have more official materials about the proposed Twin Peaks ”economic government” of the euro area. The website of president Nicolas Sarkozy has posted the text of the press conference, with chancellor Merkel's remarks translated into French.

On this page you can choose the joint letter from Merkel and Sarkozy to Herman Van Rompuy, the president of the European Council, in French, English and German, which makes the proposals available in a more finely chiseled form.

The German chancellor's office offers a report of the summit: Deutschland und Frankreich für starken Euro. There is also a shorter English version: Germany and France in favour of European economic governance.

The press conference has been transcribed and the French parts translated into German: Pressekonferenz von Bundeskanzlerin Merkel und dem französischen Staatspräsidenten Sarkozy.

The letter to Van Rompuy can be found here as well: Gemeinsamer Deutsch-Französischer Brief an EU-Ratspräsident Herman Van Rompuy.

The same page offers links to the letter in English and French.

***

Yesterday I wrote three blog entries about the the summit between Merkel and Sarkozy, including interesting media reports and comments: Eurozone: Our new ”economic government”, Eurozone Twin Peaks ”economic government” in media and Eurobonds and eurozone reform rebound despite Merkel-Sarkozy summit.



Ralf Grahn

Eurobonds and eurozone reform rebound despite Merkel-Sarkozy summit

Chancellor Angela Merkel and president Nicolas Sarkozy can hardly have imagined that the issues of eurobonds and profound euro area reform would disappear, only because they swept them under the carpet yesterday.

After the official statements by Merkel and Sarkozy and my reactions to the proposed eurozone ”economic government”, we made a first tour of European media reactions to the Franco-German proposals.

Blogs and mainstream media contribute to our understanding of the challenges for the euro area and the European Union, beyond yesterday's announcements.


Protesilaos Stavrou

According to Protesilaos Stavrou, eurobonds are necessary, but first the European banking system needs to be cured and sovereign debt restructured: The eurobond is the only way forward – But under what conditions? (16 August 2011).


Jan Seifert

Jan Seifert invited readers to an intelligent discussion about how the eurobonds need to be constructed in order to contribute to solving the public debt crisis: How Eurobonds are the way forward (16 August 2011).


Pietro De Matteis

According to Pietro De Matteis, on the Europe Today blog (Ideas on Europe), it has become increasingly evident that there is no other durable solution for the European economy(ies) than to move towards further fiscal and budgetary integration: The Eurozone Council: are we a step closer to a European Government? (17 August 2011).


WSJ Europe

The Wall Street Journal Europe concludes that Merkel's and Sarkozy's eurozone plans stopped short of more fundamental steps toward refashioning the area into a federal entity that would issue its own debt, disappointing investors hungry for a more radical solution to the euro-zone crisis: Franco-German Proposal Disappoints (17 August 2011).


NZZ Online

Chancellor Angela Merkel has repeatedly changed course during the eurozone crisis, belatedly and too little at a time, say some. Have her initial positions been tactically aimed at reigning in profligate countries, or have later changes been signs of weakness? The coalition parties CDU-CSU and FDP are baffled. Almost paradoxically the opposition Greens and SDP are prepared to support more radical eurozone reforms, despite popular resistance, NZZ Online reports: Wenig Vertrauen in die Führung (17 August 2011).


Fabien Cazenave

Fabien Cazenave, on the Fabien l'Européen blog, writes that the summit offered stronger political signals than he had expected. He seems to think that the Ecofin Council will be marginalised, whereas I have understood that the heads of state or government want to overshadow the informal Euro Group. Anyway, the tenor of the proposals is intergovernmental, and Herman Van Rompuy will remain the captive of their decisions and non-decisions.

Are all the euro area countries really going to ratify the ”Golden Rule” of balanced budgets within a year? An EU-wide Tobin tax on financial transactions would need unaniomous approval (which could usher in an autonomous European Union budget), but do we really see the United Kingdom accepting that? The common tax rate for French and German businesses is the good news from the meeting, but we have to wait for the detailed proposals.

Cazenave ends his post by discussing some French reactions, as well as the need for parliamentary democracy: Réunion Merkel-Sarkozy : des propositions fortes, mais sont-elles les bonnes ? (17 August 2011).


Beyond Brussels

The daily digest of Beyond Brussels records that: Sarkozy-Merkel meeting failed on the markets (17 August 2011).



Ralf Grahn

Eurozone: Our new ”economic government”

The German chancellor Angela Merkel and the French president Nicolas Sarkozy, who met in Paris yesterday 16 August, propose no eurobonds or treaty changes in the forseeable future.

They are going to enhance economic growth, improve competitiveness and combat public debt by asking for two eurozone summits annually, to be chaired by a person nominated for two and a half years. They propose the current president of the European Council, Herman Van Rompuy as the chair of these summits.

Consequently the informal Euro Group, already eclipsed by eurozone summits 'ad hoc', would permanantly move even farther outside the limelight.

Public debt is the hard core of their proposals. The Stability and Growth Pact (SGP) should be strengthened by introducing a ”Golden Rule” of budget balance (Schuldenbremse) as a constitutional rule in every member state of the euro area, within a year.

Internationally, France and Germany want to impose a tax on financial transactions.

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

Merkel and Sarkozy did not even begin to address the lack of democratic legitimacy of their intergovernmental ”government”, or the absence of public support for its maze of treaty provisions, secondary legislation, intergovernmental coordination and peer pressure, political declarations and international agreements.

Can we expect the financial and stock markets to regain confidence?

President Sarkozy does not envision any new increase in the capacity of the European Financial Stability Facility EFSF to intervene.



See:

Zone euro : conférence de presse franco-allemande (video 48:29 min)

Deutschland und Frankreich für europäische Wirtschaftsregierung (Artikel, 16 August 2011), which refers back to the old communiqué 7 August 2011:

Deutsch-französisches Kommuniqué zur aktuellen Situation in der Euro-Zone (7 August 2011), about implementing the decisions by the eurozone summit 21 July 2011 and welcoming recent measures by the governments of Italy and Spain.

***

Bilaterally, in the spirit of the Franco-German Elysée Treaty the two countries continue efforts to harmonise their fiscal and economic policies aiming for greater convergence. They have set their sights on uniform tax rates for corporations, with detailed proposals due by 2013.



Ralf Grahn

Eurozone RIP?

Is the meeting today in Paris going to be remembered as the event which set in motion the chain reaction leading to the demise of the first eurozone?


Ongoing obstruction

Already the decisions of the 21 July eurozone summit to bail out Greece a second time and to beef up the bail-out funds (EFSF, ESM) are causing cracks in the government coalition. See Financial Times Deutschland: Koalition rangelt um erweiterten Rettungsschirm (13 August 2011).

The following day, the FTD editorial sharply criticised the parliamentary delaying tactics, which could lead to the break-up of the eurozone:

Das hält diese Währungsunion nicht mehr aus. Wenn die Beschlüsse von Brüssel nicht zügig parlamentarisch umgesetzt werden, war's das. Entweder wir akzeptieren die Transferunion - oder wir schrumpeln zu einem Hartgeld-Resteuropa, das sehr viel höhere volkswirtschaftliche Kosten zu stemmen hätte, als die Ausweitung des Rettungsschirms je verursachen könnte.

Was langfristig dennoch bleibt, ist die Frage nach der demokratischen Legitimation.

See: Tempo bei der Euro-Rettung (14 August 2011).


Potential mutiny

German chancellor Angela Merkel is facing a mutiny by her coalition parties CDU-CSU and FDP, if she moves on eurobonds. The German version of EurActiv offers a detailed overview of positions taken by German politicians, as well as others: Euro-Bonds: Pro und Contra zu gemeinsamen anleihen (15 August 2011).

After stark warnings from the parties, especially the Bavarian CSU and the liberal FDP, a government spokesman stated that the eurobonds were off the agenda of Merkel's meeting today with the French president Nicolas Sarkozy. See Deutsche Welle: Berlin and Paris snub 'eurobonds' despite growing support (15 August 2011).


Empty-handed leaders

According to a press release from the chancellor's office, Merkel and Sarkozy are working on common proposals to improve working methods and crisis management in the eurozone, but what are the leaders left with, when the Germany rejects the eurobonds and takes them off the table? See: Bundeskanzlerin Merkel trifft Staatspräsident Sarkozy in Paris (15 August 2011).

Despite a brief spell of optimism on financial markets and stock exchanges, what is going to happen when the leaders of Germany and France step out empty-handed?

RFI carries the telling headline: Programme minimum pour la rencontre Sarkozy-Merkel (16 August 2011).

Even if the German and the French side have publicly swept the eurobonds off the table, Spiegel Online International still yesterday started its customary review of German editorials by saying:

The issue of euro bonds will loom large at German Chancellor Angela Merkel's crisis meeting with French President Nicolas Sarkozy on Tuesday.

On the whole, the editorialists seem more nuanced and receptive to eurobonds (at least as a necessary evil), than the leading politicians of the government parties. See: Euro Bonds 'More a Band-Aid Than a Miracle Cure' (15 August 2011).

Deutsche Welle notes that the liberal MEP Guy Verhofstadt has called for Merkel to embrace eurobonds. Everybody is talking about eurobonds, well, almost everyone (except the German and French leaders). Given the current positions, the report ends by wondering how Merkel and Sarkozy are going to profile themselves as crisis managers: Alle reden über Eurobonds – fast alle (16 August 2011).

Not going away

In The Wall Street Journal Europe, Marcus Walker notes that Berlin and Paris have dismissed the eurobonds ahead of today's meeting, but continues:

But the realization is dawning in both countries that Europe may need radical change to save its common currency.

See: Eurobond Debate Rises in Germany, France (16 August 2011)

***

If the national leaders are too limited or weak to launch an effective and democratic eurozone, could Merkel and Sarkozy use the press conference to enlighten us about how the dissolution of the first eurozone is going to proceed and share their thoughts about what happens after that?

Interested, among others, are 331,965,504 eurozone inhabitants.



Ralf Grahn