Eurocrash: a defining moment for European integration 
"We are now in a defining moment for European integration and the European Union", says José Manuel Durão Barroso , president of the EU commission. He was addressing MEPs in the EU parliament in Strasbourg, ostensibly speaking to a: "Joint European Parliament Debate on the forthcoming European Council meeting and the Multiannual financial framework". These are the things designed to make you want to give up the will to live, before you have even got past the title. Richard North 13/06/2012
http://www.eureferendum.com/Wednesday 13 June 2012
"We are seeing", says Barroso, "that even when governments are taking the right steps towards reform, they can be negatively impacted by events beyond their control, or by the lack of decisive and comprehensive long-term response". You have to love his scriptwriters: "negatively impacted by events". There are less delicate ways of putting it, but they would lack the style: "We must recognise that we have a systemic problem and we need to articulate the vision of where we need to go, and a very concrete path for how to get there". By now, the undertakers are moving in to clear out the dead and the dying, and we suddenly discover that there is some value in getting the rest off the BBC, who have staff specially immunised in order to deal with this stuff. So, when it is all translated, Barroso is saying that European governments need to agree urgently on steps to forge a closer union because of the eurozone's "systemic problem". But, says the man: "I am not sure whether the urgency of this is fully understood in all the capitals". Further integration of the eurozone was "indispensable", he says, but "under no circumstances must this be seen as an alternative to the integrity of the single market, or indeed the integrity of the union as a whole". "Fragmentation is not an option," he adds. The EU must continue allowing for opt-outs, such as the refusal of the UK and Denmark to join the euro, but "they remain the exception, not the rule", he said. This is all platitudes though. We are not getting anything substantive – as in a response to the Bundesbank, but then the speech was probably written a few days ago. AFP via the Failygraph and others, therefore, plucks a single phrase out of the speech. The EU is in a "social emergency", we are told. But, actually, what Barroso said was: "I will continue to urge them at the European Council to take the social emergency situation very seriously. In some of our countries we have worrying developments in terms of the rise of poverty and social exclusion". Anyway, he says: "It is always easier to talk about the problems of others, thus distracting from one's own. But in the end, we all have challenges. Ultimately, these are common challenges. We need to address them together, also on the global scale". Then, you will seriously love this: "Europe's contribution must be far-reaching reforms. We need reforms in Europe. Europe's contribution must be a big step for an ever closer, ever stronger Union of stability and growth. I believe we have the right case to make", he says. He then concludes: "Thank you for your attention”, leaving Guy Verhofstadt, leader of the liberal group ALDE, to say: "the problem is not Europe - the problem is not enough Europe! … Federal Europe is the solution". We would never have guessed. COMMENT THREAD
Well, what a surprise! Monday 2 July 2012  "It (the deal) is just spending more money from donor countries and receiving more money from debt-ridden countries. This will lead to political friction and is not a long-term solution", says Lutz Karpowitz, FX strategist at Commerzbank. It took him long enough, but he got there in the end. COMMENT THREAD Richard North 02/07/2012 |
Referendum: those negotiations Monday 2 July 2012 From sources close to the EU Referendum time machine, we can now reveal the text of the discussions between the Foreign Office and the EU commission about a new relationship between Britain and the EU. For the very first time, then, here is the exclusive future transcript: The Brits: we want to negotiate a new relationship. The "colleagues": foxtrot oscar - nous sommes occupés. The Brits: we want to negotiate a new relationship. The "colleagues": merd! The Brits: we want to negotiate a new relationship. The "colleagues": Faire chier! Lire les traités. The Brits: You what? The "colleagues": L'article 50, fou! The Brits: Sod that! We're gonna have a referendum. Eighteen months and £200 million later … The Brits: We wanna leave! The "colleagues": L'article 50, fou! The Brits: Oh! Alright then. Let's negotiate a new relationship. The "colleagues": imbéciles. Richard North 02/07/2012 |
Referendum: domestic politics prevail Monday 2 July 2012  A good measure of the relative level of interest is the number of comments on Booker's analytical piece made 182 (covering three subjects), while those on the Failygraph lead on "New Tory battle lines drawn" reached 2112 comments, and counting. And then, from sporadic and ill-informed pieces about the European Council, and no post-even analysis of any significance, the Daily Wail blossoms into print this morning with major news coverage of the referendum and no less than two comment pieces – one from Melanie Phillips and the other from Simon Richards. Equally, the Tory Boy Blog is wetting itself with excitement over the issue, having nothing by way of analysis of the European Council itself. The irony of this is that the two are intimately related. British politicians have at last woken up to the fact that there is something going in "Europe", by way of a treaty in the offing, and are refusing to commit to a referendum until the dust has settled and we know the future shape of the eurozone. If it was truly the case that the prospects of a treaty were high, then there would be some merit in holding off, to assess the state of play. A referendum asking the electorate to choose between an outer ring and exit would be a very different animal from a straight in/out contest. On the other hand, if - as Booker and I aver – the Union wrote its suicide note during the European Council and all we have to look forward to is a continuation of uninterrupted crises leading to eventual collapse, the most obvious response is to cut the shackles and free ourselves from the corpse. We should elect for withdrawal without even waiting for a referendum. The trouble is that British political strategy is not being conducted from an informed perspective, but as the Guardian so rightly observed yesterday, for short-term domestic political advantage. Exactly the same dynamic got us into the 1975 referendum, a contest fought for the wrong reasons, on a false prospectus after a faux renegotiation. It was lost for reasons which had very little to do with the merits of the issue. And now we are heading in the same direction, eyes wide shut. In a sense, though, the very fact that this is happening makes the case for withdrawal. The British people are never going to get excited over European politics. It is hard enough to get them interested in the domestic variety. And if they do not thus engage, there is never going to be a healthy demos, nor a sensible debate, the very essence of democracy. So it is that we are seeing today a tarnished politician, seeking to restart a stalled career by leaping on a passing bandwagon – attracting huge publicity for his thoughts on an issue he barely understands, a failed man offering tactics that are bound to fail. But what really matters is how it plays to the domestic audience – and so far the call for immediate but impossible "negotiations on a new relationship" is hitting the right buttons. Domestic politics will thus prevail. What is actually happening in "Europe", what is and is not possible, is of very little concern. COMMENT THREAD Richard North 02/07/2012 |
Auctioning phoney referendums Monday 2 July 2012  However, there are few more important political issues at the moment and, I suspect, nothing is going to have a greater impact on the political scene than the treatment of the issue. So I'm stuck with it for a little while longer, I guess. What is interesting, though – with the focus moving to the domestic scene – is the manoeuvrings of all three establishment parties, confronted with the thorny issue of a referendum. None of them actually wants an EU referendum – all that differs is how they deal with avoiding one. For the Tories, this is most difficult, as they must try to give the appearance of responding to public (and their own party) demand, thus pretending they might give us a poll – without promising one. Predictably, this tactic is beginning to wear a little thin, and the Tories are unlikely to get any electoral traction from it. With Ed Miliband at the helm of the Labour Party, no one was going to expect any less equivocation from him, so he fronts Rachel Reeves (who she?) to tell us that we shouldn't really be debating this issue and, in any case, we can't have a referendum until we know whether they are going to have a treaty. This is a variation on the Hague theme, with the fair Reeves telling us: "Once we know what the eurozone looks like, we can have a discussion about whether it is appropriate to have a referendum". At least there is no equivocation from the Lib-Dim biz-sek, Vince Cable. For him, a referendum on Britain's membership of the European Union is "horribly irrelevant" at a time of upheaval. This is sort of what Rachel Reeves was trying to say, but she missed out on the "horribly" and thus dropped out of the headlines unregarded. Cable adds that a debate would cause "unhelpful uncertainty", thus cementing his place in the history books, despite not specifying what constitutes helpful uncertainty. Tory backbenchers, meanwhile, have accused the Cameron of offering "jam tomorrow" and "aluminium guarantees", the latter being a new one on me. I suppose I should know what it means, but I don't. Perhaps is means lightweight? The man who gets closest to anything resembling the truth in all this is Douglas Alexander, playing at shadow foreign secretary. He "suggests" that Cameron is doing more to manage his own eurosceptic backbenchers than act in the interest of the UK. That is most certainly true, but it also has to be said that he isn't managing very well. All Cameron seems to have achieved from his latest initiative is to wind up most of his MPs and attract contempt and derision from the bulk of the eurosceptic community. Hearts he isn't winning – mines he has a plenty. But then, Cameron is probably playing a different game from the rest of us, and can afford to ignore his voters for the time being. After all, he is not going to get any hassle from the rest of the establishment for not holding a referendum, and it is few years yet before he has to meet UKIP in a sizeable electoral challenge. Nevertheless, this is going to run and run, especially as the financial news from the eurozonecontinues to be bad, and there is a distinct possibility that the markets are about to vent their displeasure at being "had" during the European Council. In the meantime, just for a bit of fun, we'll leave the last word to the Guardian. "There is a great need in many countries, including ours, for fresh, wise thinking on Europe", it pontificates, then adding: "Auctioning phoney referendums on the never-never may not be the best way to encourage it but the worst". It could be right on that last bit. COMMENT THREAD Richard North 02/07/2012 |
Referendum: wasting our time Sunday 1 July 2012  Hannan, supposedly near the heart of evil as a Brussels MEP, postulates that the UK can have jolly negotiations with the EU and then – and only then – do the Tories present an in/out referendum to the British public, arguing for withdrawal if the negotiations have deemed to have failed. Assuming that such a referendum then conveys a desire on the part of the public to withdraw, one wonders what Hannan would have Cameron do. Presumably, he would not opt for abrogating the treaties, and would argue for a more measured process. That, of course, would have us – perforce – invoking Article 50, not least because the "colleagues" wouldn't have it any other way. Thus, the effect of what Hannan is proposing is that the UK attempts to negotiate with the EU about a new relationship, following which he advocates a referendum which, if it then produces a majority for withdrawal, involves negotiating with the EU … about a new relationship. It is this sort of incoherence from the Tories that has us scratching heads in amazement, groaning inwardly as how – yet again – they can mess up such a simple proposition. Obviously, Hannan claims, "I understand why so many UKIP supporters are cynical", but clearly he does not. His incoherence is part of the problem that induces the cynicism. That much is well evident in the latest post from Witterings from Witney, who expresses only too clearly the incoherence of the Tory position. Autonomous Mind, back in harness, is distinctly underwhelmed, and the Boiling Frog was too tired to bother fully taking apart this latest referendum wheeze. Not least, we have the bizarre situation where, no sooner has Cameron decided he might, possibly, give us a referendum – if the moon is in the right quarter – then up pops William Hague to tell us that Britain "will not be able to have a referendum on Europe until the debt crisis has been sorted out". Despite the fact that the EU has written its own suicide note, its death may be somewhat protracted – the timespan uncertain. Hague's dictum effectively kicks the referendum into the long grass. Already, the wuzzies on the Tory Boy Blog are disturbed by the rapid shifts in mood from their leader, and this latest push-me, pull-you episode can do nothing for their collective blood pressures. Neither are the fun and games from Liam Fox helping. He is another one who wants to renegotiate Britain's relationship, although he does recognise the EU. Fox, who has been damaged goods ever since he had to resign under a cloud from his treasured post as defence secretary, is seeking to rehabilitate himself and believes that calling for an immediate renegotiation will put him in good odour with his pals. One doesn't actually disagree with his call for speed but, like so many of his colleagues, Fox has only the slenderest grasp of how we might extricate ourselves from EU. Sooner or later he and the others must learn that up-front renegotiation is not a credible option and, to enter any form of negotiations about a relationship with the EU, they are first going to have to invoke Article 50. Until they understand this basic point, they are all wasting our time. COMMENT: "REFERENDUM" THREAD Richard North 01/07/2012 |
Referendum: Cameron's cynical gamesmanship Sunday 1 July 2012  It is a terrible sign of intellectual poverty that Cameron and his advisers continue to talk in terms of "changing Britain's relationship with Europe". Therein lie two of the most fundamental errors in our approach to the alien form of government with which we are so unhappily involved. Firstly, of course, it is not "Europe" but the European Union that exercises our minds. The former is a continent and the latter is a supranational government. But no matter how many times this is pointed out, the faulty labelling persists, becoming thus a symbol of the inability of the Conservative Party – and especially its hierarchy – to deal with reality. Secondly, we cannot have a "relationship" with an organisation of which we are an integral part. The UK is an active member of the EU – when we address the EU, we address ourselves. EU laws are made with the approval of our government, which takes part in making them, and our membership of the Union continues only because Parliament permits it. Would that they realise it, these lovers of "Europe" will find this acknowledged in the very treaties they support. Article 8 of the TEU, for instance, talks of the Union shall developing "a special relationship" with neighbouring countries, aiming to establish "an area of prosperity and good neighbourliness". The treaty also talks of "a special relationship with the Republic of Iceland and the Kingdom of Norway" and, in Article 50, on withdrawal from the EU, the Union is obliged to negotiate with the state that has declared its intention to leave, "setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union". It takes little intelligence to deduce from this that the only way the UK can develop a relationship with the EU is to leave it. One thus ventures to suggests that it is not lack of intelligence that prevents Cameron and his minions from acknowledging the obvious. Of the many barriers to its acknowledgement, one is undoubtedly the same that prevents the EU being given its proper label – the inability to deal with reality. But there is also a strong element of dishonesty. To concede the point is to admit that the current (and past) claims to renegotiate with the EU are simply fraudulent. So it is again that we have to suffer the tedious circumlocutions of Cameron as he tells us that he will consider a referendum on Britain's future relationship with Europe, but only when the time is right. As the statement lacks intellectual credibility, the natural tendency is to switch off – to go no further. If the man wants to reach out to a new audience and to draw eurosceptics into the fold, he is going to have to change his rhetoric – learn a new set of words. But the man is also going to have to learn to stop treating us as fools. He tells us that, "the single market is at the heart of the case for staying in the EU", yet those with knowledge of this issue know full well that membership of the single market can be achieved though membership of the EEA, without being members of the EU. Norway, Iceland and Liechtenstein are members of the single market. Should the single market be the only issue, therefore, Cameron has just made the case for leaving the EU. But he adds that, "it also makes sense to co-operate with our neighbours to maximise our influence in the world and project our values of freedom and democracy". Were we a member of a buoyant, self-confident and outwardly successful Union, that assertion might make some sense. Embroiled in its deepening economic crisis, however, the EU is the antithesis of success and, in failing to deal with the issues at last week's European Council, the "colleagues" wrote the text of their own suicide pact. The EU is no longer a platform for maximising our influence - if it ever was. In any case, for Cameron now to be talking of referendums in the terms that he does, is too late. The EU is going to collapse anyway. If he leaves it too late, his problem will be one of finding someone left with whom to negotiate. What we are actually seeing, therefore, is not some new resolution on the part of Cameron. For the real explanation of his behaviour, we must draw on history, there being certain parallels with the Russian Revolution. On this, Orlando Figes writes: How are we to explain the dynasty's collapse? Collapse is certainly the right word to use. For the Romanov regime fell under the weight of its own internal contradictions. It was not overthrown. As in all modern revolutions, the first cracks appeared at the top.So it is with the European Union, led by weak, frightened – and irresolute – men. Cameron, a man with a reputation as a bully, would have a fine nose to scent the fear and, only days after the suicide note, has made his move. As the centre fractures, the periphery seeks to fill the power vacuum. It would be a mistake, therefore, to take Cameron as a born-again democrat. This is a bully sensing weakness, a man exploiting it for political gain. And a message about referendums, without actually offering one to his people, hits a nerve in the couloirs of Brussels and the chancelleries of Europe. With us, the people, Cameron is simply playing games. We, like the wannabe Europeans, are a resource to be exploited for a greater game – whatever that may be. But the promises of a referendum are not honestly meant. They are not genuine. They are part of the game play. When it comes down to it though, any such referendum is an irrelevance. If Cameron ever does approach the "colleagues" with a demand that they negotiate a new relationship with the UK, they will call his bluff and wearily point to Article 50. Cameron could, right now, invoke that article, without needing a referendum, then putting the negotiated settlement to the people. When he does, we will know that he is genuine. Until then, it is all cynical gamesmanship, of no value to us whatsoever. COMMENT THREAD Richard North 01/07/2012 |
The EU has opted to do nothing and die Sunday 1 July 2012  That is the title of the Booker column this week, the sub-editor adding the strap on the online version: "The real drama of the latest EU summit was not what happened, but what didn't happen".What didn't happen, Booker explains, was the one thing which had any possibility of dragging the EU out of its mess – the incredibly high-risk strategy of going for a new treaty, finally completing the political union that always was necessary for the euro to survive. Booker is the only commentator in the legacy media to have made such a point, basing his piece on my work and putting himself out on a limb. For myself, I have been wondering if I imagined the whole thing, or somehow got it wrong, misunderstanding the signs. Thus, I have been back through my own posts, looking at the reports on which I based my case that a new treaty was in the offing. I suppose it would appeal to his vanity if I marked him down as starting the rush towards a treaty that was only aborted a few days ago. Sadly for him though, Robert Peston will never know, as the likes of the Great Man would never think of reaching down to read a lowly independent blog. Neverthless, it was his programme, which I reviewed on 17 May, which "revealed" that the single currency was a political project, then calling on Gerhard Schröder to tell us that, in order to make EMU work, political union was required. "The crisis makes at least one thing obvious and that is we need more of Europe, we need the political union as the only way to save the stability of the euro", Schröder said. Looking further back, you might prefer to take the start of the treaty rush from the December European Council when the "colleagues" went for a new treaty, only to have it blocked by David Cameron and his fabled "veto" that never was. The mood music at the time, though, was for a modest treaty to make limited changes in the rules to facilitate certain budgetary controls. There was no hint of anything more ambitious. Perhaps though, it was a realisation that the "fiscal pact" which emerged was simply not going to do the job, and that a grand gesture was needed, that set us off on the current path. However, even on 14 May, Aditya Chakrabortty in The Guardian was reminding us that Angela Merkel had said that, if the euro fails, Europe fails. But while it is still alive, said Chakrabortty, the euro must be counted a failure. Because the single currency was always about a political project as well as a printing press, and faced with their first major crisis, eurozone politicians didn't even try to combine the two. So it was that, only a few days later, that the treaty meme began to surface. At first it was low key – just a few words in the Peston programme – but that very same day Wolfgang Schäuble, German finance minister, told us that "must learn from its sovereign debt crisis by forging a more closely integrated financial policy". He added: "I would be for the further development of the European Commission into a government". It has to be said, though, that Schäuble's stance was not particularly new. On 19 September 2011,Spiegel had reported that he and influential politicians within the CDU/CSU parliamentary leadership had been developing the next major integration step for some time. "The lesson to be learned from the crisis is that we need more of Europe, not less," said CDU politician Peter Altmaier, a close ally of Merkel. Schäuble then had wanted to amend the European Treaties to promote greater integration among all 27 countries in the EU, and not just the 17 eurozone members. Otherwise, he said, an organisation competing with the commission will develop without sufficient democratic control. Now, the Sunday Times must have picked up something of this for, on 20 May, it was talking openly of a "United States of Europe", declaring that the best solution to the euro crisis was an orderly Greek exit, radical reform and a federal Europe. The same edition of the paper had Niall Ferguson in full spate, asserting that the currency would survive and the euro-crisis would leave Berlin heading a federal Europe. Shortly afterwards, on 22 May, we saw Germany's former deputy finance minister and German ECB board member, Jörg Asmussen, join the fray. He called for a politically integrated eurozone that would split the EU of 27 in two, with the hard core joined in a "banking union, fiscal union, and political union". This was a United States of Europe in all but name, but only for the hard core. The day following we were seeing Merkel under attack for resisting eurobonds – effectively the mutualisation of debt, with Germany expected to underwrite the debts of all the eurozone states. Barely noticed was the commission's view that "many of the implications [of eurobonds] went well beyond the technical domain and involved issues relating to national sovereignty and the process of economic and political integration". Eurobonds would require the full and final degree of economic and political integration. This was the day, 23 May, that the "colleagues" held their informal dinner in Brussels under the aegis of the European Council, with the issue of an anodyne statement – or so we thought – by Van Rompuy at the end. But tucked away in the statement was this brief passage: Our discussion also demonstrated that we need to take Economic Monetary Union to a new stage. There was general consensus that we need to strengthen the economic union to make it commensurate with the monetary union. I will report in June, in close cooperation with the President of the Commission, the President of the Euro Group and the President of the European Central Bank, on the main building blocks and on a working method to achieve this objective.With pressure still on Germany to agree to eurobonds, Nick Clegg was off to Berlin on 25 May to give Merkel what for, but once he arrived, he was strangely silent. And by then, we were dismissing the European Council dinner as coup de theatre, with its engineered spat to help Hollande with his electioneering. Now the crisis in Spain started to flare up to supernova level with reports on the last day of the month of fear gripping the market. Greece was bad enough but this was a "total emergency". Something had to be done. Pointing the way was ECB President Mario Draghi addressing the EU parliament. He told MEPs "to clarify their vision for the single currency quickly or risk disaster", warning that the central bank could not fill the policy vacuum. Then we got EU commissioner Olli Rehn, warning that "the eurozone could disintegrate without stronger crisis-fighting measures and tough fiscal discipline". On the edges, Italy's Mario Monti was saying that his country was threatened by "huge possibilities of contagion", even as the Irish referendum was being held. Their "yes" vote gave a few hours of relief but the next day Robert Zoellick, then head of the World Bank until the end of the month, was warning that financial markets faced a rerun of the Great Panic of 2008. Crisis fatigue was setting in by then, and the English media was obsessed with Jubilee celebrations. But, on Sunday 3 June, Booker was observing that the "beneficial crisis" was getting out of hand, with a somewhat prescient forecast that the "colleagues" were not going to get their new powers, their "eurobonds" or their fiscal union. But on that day, it looked very different. Courtesy of Welt online, we were to learn the true meaning of the Van Rompuy statement at the dinner of the 23 May. Merkel was trying to break free from the perpetual cycle of short-term crisis management, and "to think about how we move forward over the next five to ten years". In the offing, therefore, was a secret "master plan" for the future of the EU, being hatched up by Van Rompuy, Barroso, Euro Group President Jean-Claude Juncker and the head of the ECB, Mario Draghi. The "quartet" had been given its instructions at the meeting on the 23rd and the plan was set to be unveiled at the European Council at the end of June. It was expected to be "a revolutionary document". Under conditions of great secrecy, four areas were being looked at: structural reforms, the banking union, a fiscal union and political union. And, whatever the actual content, all parties were agreed that a major treaty was needed. Monday 24 June had Ambrose Evans-Pritchard report that Spanish premier Mariano Rajoy was calling for an EU "fiscal authority" and the use of the European Stability Mechanism (ESM) to recapitalise banks. Ambrose also picked up the "master plan" for the future of the EU. Reuters followed through, also reporting on the "master plan", with a story headed: "Europe mulls major step toward 'fiscal union'". The previous June, it said, Jean-Claude Trichet – then still ECB president – had been arguing for "giving euro area authorities a much deeper and authoritative say" in the formation of economic policies. Said the 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. One year later, Germany was 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. Erik Neilsen, chief economist at Unicredit then told 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". By the 5 June, even the Guardian was picking this up, telling us that the EU was "edging towards a controversial new blueprint for a federalised eurozone". With every passing hour, the idea that we were in for another treaty round seemed to be firming up, even to the extent that it was being played down by the commission. Contradicting Welt, spokeswoman, Pia Ahrenkilde-Hansen said: "There is no master plan". The notion, we were 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. Elsewhere, though, Schäuble was calling for a "proper fiscal union". Before there was any discussion of debt policy, he said, a new level of integration was necessary. Barroso was in Berlin then, hearing Merkel encourage EU oversight of banking, paving the way to a more centralised oversight of the European financial sector. The commission president called for an economic union. The Financial Times on the anniversary of D-Day warned that the flames were licking closer to the eurozone's combustible core. It is no longer, the paper said, just the smaller countries that were in peril, but two of the currency bloc's largest members – Spain and Italy. Spain in particular faced a banking crisis that could – if unresolved – set off a full-blown banking panic around Europe's periphery. In response, the commission was to propose "far-reaching powers" for regulators to deal with failing banks. The proposal published that day in a 156-page draft set out supervisory powers to "bail in" or force losses onto bondholders of a failing bank. The idea was to keep taxpayers off the hook and to forge closer links between national back-up funds to wind up cross-border lenders. Although this move was said to be "a step towards the banking union" which the ECB hasd "demanded" to secure the euro's future – nothing was likely to take effect 2014. That, said Reuters, was a "baby step" - too late for Spain, which could be forced to seek a Greek-style bailout if it could not refinance its indebted lenders. Meanwhile, the Daily Mail had noticed something amiss and was complaining: "Leaders plotting EU superstate: 'Fiscal union' looms … with the Germans in charge". Mariano Rajoy, under "mounting international pressure", warned that Europe's single currency would unravel unless its leaders decided within weeks to centralise budget and tax policies in the eurozone and agreed on a strategy to pool responsibility for failing banks. Although not said explicitly, this could not be done without a new treaty. That day, 7 June, Merkel was on television telling the world, "We need more Europe". She supported a "two-speed Europe", with the "core group" in the eurozone pressing ahead with deeper integration. "We need more Europe, we need not only a monetary union, but we also need a so-called fiscal union, in other words more joint budget policy". She added: "And we need most of all a political union, that means we need to gradually give competencies to Europe and give Europe control". The next day had Cameron and Merkel meeting, with the pair agreeing that the EU's fiscal pact was not a sufficient step in itself to resolve the crippling eurozone debt crisis. Cameron was heard to say: "I have no doubt that the single currency countries will want to seek greater integration. That is clearly going to happen over the coming months and years". Back home, like the Mail before it, the Daily Express was complaining of "Germany's relentless march towards creating a European superstate", reporting that: "Fury erupted after German Chancellor Angela Merkel yesterday cranked up her plans for political union". With intervention in passing from Obama, Jörg Asmussen was in Riga outlining what "Europe" needed to do: We need a more integrated monetary union, because the monetary area that we have now is incomplete. And we have to complement it in a way to make it more stable. One point is a fiscal union. The second one is a financial market union with three key elements: A resolution regime; second element, a deposit guarantee insurance; and third, we need a centralised supervision for the large 25 banks in Europe.Asmussen then said: "We need a democratically legitimised political union", adding: "We need to start this speedily". George Osborne made an appearance on 12 June asserting that further "pooling of sovereignty" must be limited to the countries of the eurozone, acknowledging that "we are approaching a moment of truth for the eurozone". The "moment of truth", the Sunday Telegraph said, "is actually a very profound existential crisis". Hollande was now on track to a record-breaking win in the French parliament, while europhile Wolfgang Münchau in the Financial Times declared that, if the "colleagues" fudged the march to the banking union and then a wider fiscal and political union, he too "would conclude that it is time to prepare for the end of the eurozone". It was now 12 June and Sabine Lautenschläger, vice-president of the Bundesbank, declared that a banking union could only be implemented in tandem with fiscal union, otherwise it would be tantamount to a back-door pooling of sovereign debt. "In a banking union, a crisis in one country's banking system may require the use of taxpayer money from other countries," said the Bundesbank vice president. "Whoever is footing the bill must also have a right of control, particularly when it comes to the large sums that are seen in banking crises". The upshot was that, if the "colleagues" wanted their banking union, they were going to have to provide cover for it with a full-blown treaty. Then, Merkel (or her replacement) was going to have to go for a change in the German constitution. It was now the 13 June and Barroso was addressing MEPs in the EU parliament in Strasbourg, telling the MEPs: "We are now in a defining moment for European integration and the European Union". Further integration of the eurozone was "indispensable", he said, adding: "I am not sure whether the urgency of this is fully understood in all the capitals". Guy Verhofstadt, leader of the liberal group ALDE, responded by telling the commission president: "the problem is not Europe - the problem is not enough Europe! … Federal Europe is the solution". Coming through now was the idea that any mutualisation of debt would apply only to new debt – which would be very strictly controlled. Existing debt would be reformulated as "redemption bonds" and paid back over a fix period, at a low interest rate, the debt itself not appearing on the balance sheets. In a speech to parliament in Berlin, an exasperated Merkel bluntly told the rest of Europe to get real about the crisis. She dismissed calls for Berlin to share responsibility for other euro countries' debt, and rejected charges that Germany was not doing enough to stabilise the euro. "Germany's strength is not unlimited," she warned. "The way out of the crisis in the eurozone can only be successful if all countries are capable of recognising the reality and realistically assessing their strengths". On the 16 June with the repeat election in Greece imminent, and all eyes on Athens, Barroso declared that the euro would not be allowed to fail and the European Union project was "irreversible". And, as the Greek election went its weary way, the Telegraph leaked part of the roadmap, pointing to a banking union, pooling debt via some kind of eurobonds and political union via EU treaty change over the next 10 years. Hollande won his second round of the parliamentary elections, and the Greeks got a government. Now the decks were clear for serious EU politics. Rajoy described the news from Athens as "good news for Greece, very good news for the European Union, for the euro and also for Spain". I am totally convinced, he said, "that this strengthens the euro. The euro project is irreversible and we must continue to make progress on it". Now we can link up with the Booker piece as he recalls that the "Future Group" of ten EU foreign ministers decided that the only way to solve the mortal crisis threatening to bring down the euro was another giant leap forward in European integration. The European Commission had to be turned into "a real government". There should be a new bicameral parliament, with the existing EU Parliament given new powers as its lower house, and the Council of Ministers as its upper house, or Senate. At the head of it all should be a single President of Europe, elected by voters across the EU. Tellingly, says Booker, this echoed almost exactly what Jacques Delors proposed back in 1989 when the integrationist tide was at its full. As Thatcher put it on a famous occasion, Delors wanted "the European Parliament to be the democratic body", "the Commission to be the executive" and "the Council of Ministers to be the Senate". It was this triple proposal that prompted Thatcher's immortal reply on 30 October, 1990: "No. No. No". This time, though, it was Merkel who was saying, "nein, non, no!", but only to a proposal that there should be eurobonds and the mutualisation of debt that went with them, without greater controls over eurozone finances. She was not ill-disposed to the idea of further integration, telling the ARD "Morning Magazine" programme on 21 June that she wanted to give "more power and drive" to Europe at the European Council in late June. "We need not only a monetary union, but we also need a so-called fiscal union … And we need above all a political union", she said. Ambrose the next day used a top Italian official to tell us: "Monti is desperate. Reform fatigue has breached breaking point", and: "There is a feeling here that the euro is basically dead already. Unless Germany offers a roadmap out of this crisis, Monti is not going to be able to hold it together much longer". That brought us to the four power meeting where Monti told us how vital the European Council meeting was, then in one week's time. The Council was "expected to tackle long-term plans for closer fiscal and banking union" in a bid to strengthen the euro's foundations. Although "political union" was not mentioned, it could easily be inferred that this was high up the list. By the Sunday before the meeting, AFP was calling it "a mother-of-all-summits". What Europe needed, said Rompuy, was "not only to make recommendations and then anyone can do what he wants, but to make them mandatory". There was no equivocation here. The Council president was talking about a new phase of European integration, with the meeting set to discuss what integration steps can be tackled. That weekend, Schäuble was interviewed at length by Spiegel. Totally confident of himself, he declared: "the more people see what's at stake, the more they are willing to draw the right consequences". And those consequences are: "We need more and not less Europe". Tuesday, 26 June, just before the European Council, there was a worrying development. A "poisonous struggle" had been festering between Berlin and Karlsruhe. Merkel had jokingly compared Andreas Voßkuhle, the youngest ever president of the Federal Constitutional Court, with a dangerous scorpion – along with the other fifteen members. And nobody was laughing. Handelsblatt remarked that, in order to save the euro, democracy was being corrupted. Barroso's ambitions were beginning to attract hostility from politicians in Germany, while the idea of a referendum for the German people was taking root. Despite that, Merkel said that there was far too much talk on possible ways to share debt, and too little on improving controls and structural measures – almost exactly what Jens Weidmann, the Federal Reserve Chairman, was saying. He too rejected the idea of a speedy introduction of a banking union, without a "profound reform of the euro area, including a fiscal union". Schäuble weighed in, affirming that there should be a referendum, with Schröder intervening again, declaring that "Europe needs a bold reform". To save the EU, he said, there must be a European government - even at the expense of the nation state. That day, the "quartet" produced their report. It had been stripped of any proposals for introducing eurobonds and there was no commitment on an immediate treaty. Instead, it offered merely a "coherent and complete architecture" that will have to be put in place "over the next decade". The proposals will, we were told, "require a lot of further work, including possible changes to the EU treaties at some point in time". With panic signals flying, the next day, and allusions to the Titanic being made, Merkel was said to have told her coalition MPs that she was against the idea of eurobonds, and the pooling of debt, "for as long as I live". In fact, what she had condemned was the "current proposal" of eurobonds without additional [treaty] controls. "Eurobonds are the wrong way", she later said, qualifying this by adding: "I am against putting the pooling first". "Too much is being spoken about joint liability - and not enough on better controls". Berlin was making European integration a condition of agreeing to joint liability. "Merkel reiterates opposition to euro bonds", Handelsblatt reported, but added the all-important qualification: "but not always". Merkel wants deeper economic integration first. To force eurobonds now, "would be the wrong lesson from the past". Crucially, though, "now" was not forever. Merkel had a legal argument: they were incompatible with the Basic Law and the EU Treaty in its current form. But bonds were "not yet categorically excluded for all days". She wanted to know whether her conditions would first be met. "We need more rights of intervention, when fiscal rules are violated", she said. But despite all this, the next day - last Thursday - the brave talk of a "new Europe" and political union wasn't even on the table at the European Coucnil. To bring the vision about would have required a major new treaty, taking the best part of two years, and up to a dozen national referendums (several of which would probably have been lost), before it could have been ratified. That was probably the breaking point. When it came to the test as to whether Europe was to take that further leap forward to the goal Delors and Jean Monnet dreamt of, today's politicians, led by presidents Van Rompuy and Barroso, just flunked it. The result, concludes Booker, was not a victory for anyone – it was a defeat for everyone. The great European project had put itself in the predicament the battleship Bismarck faced in 1941 – its steering gear disabled, forced to limp round in circles until it met an inevitable doom. Gazing into the bottomless pit of debt, the EU's leaders can neither move forward into the future nor escape from the prison they have made for themselves by their errors of the past. They must hang there in the wind, until the inexorable logic of the markets brings them to a real crunch point, more fateful for all our futures than anything they have yet dared imagine. COMMENT THREAD Richard North 01/07/2012 |
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