Wednesday, October 17, 2012

Schäuble's new proposals for Europe: EU reform or Angiebot mischief?

German Finance Minister Wolfgang Schäuble came out with some new reform proposals for the EU this week:

Sven Böll, Zukunft der Währungsunion: Schäuble präsentiert Masterplan für den Euro Spiegel Online 16.10.2012

Reform der Währungsunion: Brüssel reagiert verhalten auf Schäubles Plan Spiegel Online 16.10.2012

Schäuble and his EU reform proposals: "Try less democracy!!"
They involve giving the EU currency commissioner greater direct powers of regulation; allowing the EU Commission to have a veto over individual national budgets; and, having portions of the European Parliament vote on things that concern only their countries, e.g., only eurozone countries would vote on policies on the euro. This latter point is supposed to address what is rightly the "democratic deficit" in the EU, in which ordinary voters feel little identification with or connection to the EU governing institutions.

The first two are pretty transparently proposals aimed at giving Germany more power over the other EU countries budgets and at institutionalizing austerity economics, which could also be described as outlawing Keynesian economic policies. Those fit with German Chancellor Angela Merkel fiscal suicide pact, aka, the Stability Pact, which is another tool to force EU countries to live under austerity economics even during - or rather, especially during, recessions and depressions.

The third one is interesting, not because it addresses the "democratic deficit." It would increase it by making the already confusing EU governance system even more opaque to ordinary citizens. If you're really trying to increase people's identification with "Europe" (the EU), you don't do it by establishing mini-Parliaments within the European Parliament.

Klaus Stuttmann's 10/16/2012 cartoon above express the less-democratic direction of Schäuble's proposals. The phrase "Weniger Demokratie wagen!!" ("Try less democracy!!") is a takeoff on a famous saying by Former Chancellor Willy Brandt, „Wir wollen mehr Demokratie wagen." ("We want to try more democracy.")

The reason this proposal is interesting, despite being in itself a bad idea, is that it's an indication that Germany is starting to recognize that any kind of functional European Union in the immediate future will have to exclude Britain. Britain has generally followed a nationalist-leaning course on EU matters, and especially so in the euro crisis. Britain is for all practical purposes subservient to the United States on foreign policy, and the US policy has been to promote European unity so far as it benefits NATO but to oppose a close political union that would operate with a consistent EU foreign policy toward the rest of the world. That's a logical and necessary part of the US foreign policy strategy of global dominance, which means that the US has to prevent the rise of potential "peer competitors", which a strong EU could become.

Why does that proposal reflect a recognition of Britain's wrecker role in the EU? Because it explicitly recognizes that eurozone countries have important interests that have to be addressed that non-eurozone members like Britain do not share. The changes suggested by Schäuble would require that each member country verify a new EU Constitution, and he writes:

[Wenn, ja wenn, das störrische Großbritannien mitspielt. Falls nicht, können die EU-Verträge nicht geändert werden. Dann müssten die Regierungen der Euro-Zone ein separates Abkommen schließen - so wie beim Fiskalvertrag.

If - yes, if - the ornery Great Britain plays along. If not, the EU treaties could not be altered. Then the governments of the eurozone would have to make a separate treaty - as with the fiscal treaty.]
French President François Hollande may be coming around to a similar conclusion in calling for a more distinct role for the eurozone countries. (Euro-Krise: Hollande will Kern-Europa Spiegel Online)

But in a major interview leading up to the next EU Summit - yes, there's yet another one coming this Thursday and Friday. In an English-language report for the Guardian, one of six newspapers participating, Angelique Chrisafis and Ian Traynor report (Hollande fires warning shot at Merkel over austerity on eve of EU summit Europa 10/17/2012) report his major points as follows:

Giving the Guardian his first British newspaper interview since becoming president in May, Hollande said there was light at the end of the eurozone tunnel, but he also:

  • suggested Merkel was too preoccupied with domestic politics in her response to the crisis
  • demanded Berlin reverse its opposition to decisions taken by eurozone leaders in June
  • called on the eurozone to act promptly to bring down the costs of borrowing for Spain and Italy
  • insisted Greece be assured of staying in the eurozone
  • gave short shrift to a German push for the creation of a federalised eurozone or political union
  • and dismissed as unfounded the strong German criticisms of the recent moves on the crisis by the European Central Bank.
Based on that, I would say Hollande's proposals are distinguished by their incoherence.

He's calling for Eurobonds, but he's also complaining about even Germany's as-little-as-we-can-get-away-with proposals toward greater European political and economic union. Without that happening fast, the Spanish bomb is going to explode between a couple of these summits and they will be scrambling to see just how many decades of the European unity process will be wiped away by the new phase of the crisis.

But at least he's recognizing what a problem Britain is in this whole mix:

He said the leaders of other countries intending to join the single currency could also take part in his proposed monthly summits of eurozone national leaders, but on less than equal terms, as "associates". But, in an implicit nod to David Cameron and other non-euro zone countries not to interfere if they were standing outside, he added: "Certain countries don't want to join [the eurozone]: that's their choice. But why should they come telling us how the eurozone should be run? It's a pretension I hear but that I don't think meets the need for coherence."

Asked if he would risk seeing Britain leave Europe, Hollande said: "I would like a UK fully engaged in Europe, but I can't decide in place of the British. I see that for the moment they want to be more in retreat. The British are tied by the accords they have signed up to. They can't detach from them. At least they have the merit of clarity. They aren't in the eurozone or budgetary union. I don't intend to force them."
Hollande is returning to some of his criticisms of Angie's austerity policies, but I find those very hard to take seriously after his cave-in on the fiscal suicide pact and after he proposed a notably austere budget for France in September.

Traynor reports in a separate piece for the Guardian (François Hollande's criticism is bold – and risky Europa 10/17/2012) that there is a more nationalistic goal behind Hollande's muddled criticisms:

But there is also a very French agenda, also pursued by Sarkozy, behind some of Hollande's proposals, notably on how to run the eurozone. He wants national leaders to take control through monthly summits of the 17 presidents, chancellors or prime ministers and the eurogroup of 17 finance ministers to be beefed up.

In other words, powers and decision-taking should be left to national leaders, inevitably producing stitch-ups of the kind that have failed in the past. It is about avoiding giving new powers to Brussels over national economic policymaking and tempering the German-led push for enforcing fiscal disciplines, including automatic penalties for recalcitrants, policed by the European commission.

Running the eurozone through a council of national leaders would also enhance French clout as France would be backed by the zone's third and fourth economies, Italy and Spain, while Germany's allies would be smaller.
There have been small improvements and ameliorative measures along the way the last three years. But the euro crisis is still on its same basic course, and it gets harder and harder to see how it ends well.

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