Tuesday 5 June 2012 Tuesday 5 June 2012 Monday 4 June 2012
Countdown to treaty: shaking the kaleidoscope
One thing also must be factored in – not that you would know it from the increasingly parochial English press. France is in the middle of a bitter and increasingly fractious election campaign, which rules out Hollande as a direct player in the emerging European drama – until after 17 June.
Thus, it was to Berlin that our little Maoist Barroso trotted off last night, ostensibly to see Frau Doktor Merkel, and much else besides. Of the crumbs we are allowed to know, Merkel encouraged EU oversight of banking, paving the way to a more centralised oversight of the European financial sector. Barroso called for an economic union.
It is easy to make out from this that there are differences between the German chancellor and the commission president – and maybe there are. In fact, there most certainly are. But this is also a ritual, pre-treaty dance – not so much seven and seventy veils. We are being shown what they want us to see. In les couloirs, though, more and different words are being spoken, the likes of which we are not allowed to know.
And right in there is Schäuble, the German finance minister in name, but Europe's man, bought and paid-for. In a Handelsblatt interview (pictured above), he is calling for a "proper fiscal union". Before there is any discussion of debt policy, he says, a new level of integration is necessary.
However, before we get there, we are dragged into internal German politics, a place no sane man wants to be. Merkel hasn't even got her fiscal pact approved yet, and for that she is reliant on the Social Democrats and the Greens. But they want a transaction tax, while Merkel's own CDU is vehemently opposed to the idea. With a general election next year, she is not even mistress in her own house.
And on top of that, Germany's Economics Minister Philipp Rösler (not a name we hear very often), has refused again to boost the growth to fund new debt, blocking the idea of increasing government deficits - a direct snub to Hollande.
This, though, is old news and, while London takes another day off, European shares and the euro are falling, as further news is awaited. Meantime, the Jewish Press is reporting that Russia is ready to lend money and expertise to solve the eurocrisis.
So far, Brussels has not turned to Moscow for help - yet, says this paper. But if the situation deteriorates, that soon might be the case. And then, with G7 also being dragged in, with hopes of Chinese intervention, we will know that we are really in trouble … as if we didn't already.
COMMENT THREAD
Richard North 05/06/2012 Euro: politics in the driving seat
… nothing less than a European Parliament and a European government which really do exercise legislative and executive power within the Federation.
These remarks were held to have triggered the process which led eventually to the constitutional convention which produced the draft convention which eventually morphed into the Lisbon Treaty – thus giving the man some claim to paternal rights.
Thus, when the man is reported in the German press as saying that "Europe is now on the precipice", it is still, after all this time, a significant event.
And when he talks of "chaos, fire and avalanches" and a global economic crisis, such as those now living have never experienced, then calling for Europe to "summon up the courage to build a fiscal union with a common budget and uniform tax policy and guarantee the public debt", this is no ordinary politician talking.
In the wake of Merkel, he is also saying that, if the euro fails, the EU will fall apart. Greece threatens to sink into chaos and then the incipient run on the banks in Spain, Italy and France "will trigger an avalanche that buries Europe". Without the euro, Europe will disappear from the political world stage.
Briefly mentioned in the Telegraph and then in the Guardian, neither do his intervention justice, failing to convey the effect he will have.
The Guardian is particularly poor, playing catch-up after the weekend, its current story telling us that the EU is "edging towards an controversial new blueprint for a federalised eurozone". But, instead of dating it from the May meeting in Brussels, it has Paris and Brussels responding to "Spain's pleas for an EU rescue of its beleaguered banks".
But, from this paper and others, we are getting news of diverse meetings, suggesting that the tempo is increasing. In particular, we have Barroso meeting Merkel and French foreign minister Pierre Moscovici making a pilgrimage to Brussels, where he said eurozone bailout funds should be used to inject cash into collapsing banks.
Since such direct payments are impossible under existing rules, this is de facto support for a new treaty, somewhat reinforced when Moscovici added that France wanted the European Council at the end of the month to set up a "eurozone banking union". Spiegel is also talking up the need for Spanish bank recapitalisation, and has Merkel pressurising Spain to aceept bailout money, rejecting the idea of a "bailout lite". Spain, on the other hand, believes that the EU commission could take a plan for bank aid to the European Council on 28-29 June.
With every passing hour, therefore, the idea that we are in for another treaty round seems to be firming up, even to the extent that it is being played down by the EU commission. Contradicting Welt, spokeswoman, Pia Ahrenkilde-Hansen said: "There is no master plan".
The notion, we are told, was also rubbished in Berlin – but not ruled out. "We are talking about several years and certainly not a solution that we are thinking about in the current problematic situation," said Merkel's spokesman – something again we already knew.
Bringing this right up to press, we have Merkel in Berlin, prior to meeting with Barroso declaring that she is open to establishing a European banking authority. She says she will discuss with Barroso, "what extent we have to put systemically (important) banks under a specific European oversight".
So far, there has been no public response from any senior UK political figures, but we expect them to be behind the curve on this. Much weight is being given to Soros, particularly by the Daily Mail, even if he too seems to be behind the curve when it comes to political developments.
Politics, rather than economics, is currently in the driving seat, even if the market will have the final say.
COMMENT THREAD
Richard North 05/06/2012 The royal road to the new Europe
It starts by reminding us that last June, Jean-Claude Trichet – then still ECB president – was arguing for "giving euro area authorities a much deeper and authoritative say" in the formation of economic policies. He was also suggesting a central finance ministry to fit with the existing single market, single currency and a single central bank.
Then, say Reuters authors Noah Barkin and Daniel Flynn, "the idea seemed fanciful, a distant dream that would take years or even decades to realise, if it ever came to be". And they are not wrong. At the time it seemed yet another ritual call for "more Europe" from an ardent integrationist, for which there seemed little appetite.
But now, one year later, we are told that Germany is pushing its partners for precisely the kind of giant leap forward in fiscal integration that the now-departed European Central Bank president had in mind.
After falling short with her "fiscal compact" on budget discipline Merkel, we are told, is pressing for much more ambitious measures, including a central authority to manage eurozone finances, and major new powers for the European Commission, European Parliament and European Court of Justice.
This is the thrust of the Welt story which we reviewed yesterday and what could be spin is already being locked in, as we see Germany centre stage.
You would expect a Berlin-centric story from a German newspaper, just as you see British papers seek to plant a Union Jack on EU stories, so a note of caution is warranted. The idea of these "more ambitious measures" took shape at the Brussels dining club (aka European Council) last month and are being worked upon by senior EU officials.
This is very much in character for the modern, post-war Germany, which is still diffident about asserting its own power and seeks solutions within a European context. And, within that context, we don't yet know the true position of France, without which nothing can happen.
The Reuters Barkin and Flynn duo are nevertheless playing to the gallery, telling us that until [eurozone] states agree to the steps mooted, and the unprecedented loss of sovereignty they involve, the officials say Berlin will refuse to consider other initiatives like eurobonds or a "banking union" with cross-border deposit guarantees.
It's how you tell 'em that makes the difference, for the same thing could be put slightly differently. Essentially, Berlin cannot agree to the steps mooted and the unprecedented loss of sovereignty they involve, until or unless there is a treaty change, which is what I was saying in May, prior to the informal dinner in Brussels.
"Of much more interest is the dark game being played by the EU Commission", I wrote at the time, observing that we could see the commission going for the main chance – the economic governance that it had always hankered after.
Whatever the media are saying, therefore, it is vital to keep in mind that this is primarily an EU initiative. Brussels, not Berlin, is in the driving seat (even if it is there under license from Berlin) and the proposals are coming for senior EU officials. Germany has ceded the ground to them.
Anyhow, we learn that the goal is for EU leaders to agree to develop a road map to "fiscal union" at the European Council on 28-29 June (which we knew already from Welt). But we also learn that member states will then "put the meat on the bones of the plan in the second half of 2012".
This is new information, with several European sources having told Reuters that this will include a timetable for overhauling EU treaties, "a step Berlin sees as vital for setting closer integration in stone". Reuters cites a government official in Berlin saying: "The fundamental question is relatively simple. Do our partners really want more Europe, or do they just want more German money?"
We now get a classic example of why one should not go to financial commentators for views about the EU, as we get Erik Neilsen, chief economist at Unicredit telling us, "The world is not coming to an end; rather, it feels as if we are on the doorstep to another major European integration move". So far so good, but he then asks: "But why do these initiatives only come when we are on the edge of the cliff where the risk of an accident is so much higher?"
There speaks ignorance writ large. That, Mr Neilsen, is the way the European Union works. That is the doctrine of beneficial crisis, used as a mechanism for facilitating change when the political will is absent, and there is no popular assent. It is only because we are "on the edge of a cliff" that the moves can even be considered.
What we have to be conscious of is that the political geography of the EU is now being re-written under our very noses, with incredible rapidity. From the look of it, the "colleagues" are not going to let Greece go without a fight.
In order to keep the eurozone intact, we may well see a variation on the plan which was emerging in February, with massive financial transfers being made, initially in the form of a new Marshall Plan, in exchange for fiscal sovereignty – effectively creating the Socialist Republic of Europe.
Everything will, of course, depend on France. Hollande is not Jacques Chirac, and he is known to have worries about ceding so much sovereignty. "It's a big challenge for Hollande," says a senior French official. "I think that he is ready for (closer fiscal integration) but I think the rest of the French political class - both on the left and right - is not".
The EU, thus, is on the cusp. The "colleagues" are going for broke, risking everything for one huge lunge towards the final goal. If they succeed, they will get their country called "Europe" – smaller than intended – but a single state nonetheless. If they fail, the likelihood is that the European Union will collapse. Everything is to play for.
And, for all the drama, while the story is on the Welt front page, which is talking in terms of "the royal road to the new Europe", the British media and political establishment – as always – have dropped the ball. The "pop royalty" is getting its outing and the collective brain is on hold.
COMMENT THREAD
Richard North 04/06/2012
Tuesday, 5 June 2012
This happens every time a new treaty is in the offing. All sorts of characters emerge, ideas are thrown up, new ideas emerge, and the whole thing is given a thorough shaking. Only after a while does the pattern emerge that will become the final form.
Into this then intrudes the rump of the English media, with very little idea of what is going on. TheIndependent has Merkel at odds with Mariano Rajoy, as opposed to The Guardian, which has Paris and Brussels responding favourably to Spain.
In the historiography of the European Union, Joschka Fischer has a special place. On 12 May 2000, as German foreign minister, it was he who delivered a speech to Berlin's Humboldt University calling for "Europe" to furnished with a constitution and to become a full federation with:
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