03 October 2013

EIM Political September 2013

The European political class is preparing to move on from 'pre-German election' paralysis. However, the next excuse for paralysis is already looming – the May 2014 EP elections, followed in the autumn by horse-trading for influence in the next European Commission.

The European political class is preparing to move on from 'pre-German election' paralysis – once the CDU's coalition partner is settled. From a European perspective, replacing the increasingly ‘anti’ FDP with either of the more ‘pro’ partners should be good news in the medium term. However, the next excuse for paralysis is already looming – the May 2014 European Parliament elections, followed in the autumn by horse-trading for influence in the next European Commission. Italian premier Letta survived the Berlusconi attack but still has to find a way to produce real reform so that perhaps Italy can lead during its EU Presidency in 2H 2014 towards his goal of “risk-sharing and financial solidarity” within the EMU. Meanwhile, UK premier Cameron announced a “radical” re-negotiation of Britain’s relationship in Europe to remove the concept of “ever closer union” via a Treaty change – but even the Dutch have now made clear they do not support that approach. 

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Bruegel/Merler: Is there a path to political union? Ahead of much anticipated European elections in May 2014, there has been a growing debate about the scope for further integration and leaps towards a form of "political union".  Advocates point to the hard constraints that an incomplete political integration has imposed on the management and the resolution of the euro crisis, while sceptics argue instead that steps towards greater political integration are elusive, because the confidence of European citizens in Europe and in European institutions is waning. Merler questions the appetite and scope for further political integration by looking at data from the European Commission’s Eurobarometer – which surveys Europeans among other things about their “trust” in European and National Institutions.

Four years into the euro crisis, Europeans on balance still trust Europe and the European institutions more than the national ones. The projection of such trends could make a discussion about political integration ever more difficult in Northern Europe if trust in European institutions is irremediably lost. In the South, the problem could be different. There is indeed probably a tipping point below which trust in national institutions prevents any form of discussion about further political integration too, hence the window of opportunity for further political integration is small and getting smaller. Others like the UK and Italy, for different reasons, could manage to impose this debate. For the latter, it would allow promoting a clearly federalist agenda for the euro area while recognising that non-euro area countries may never take part in this more politically integrated ensemble. For the former, it would avoid a purely bilateral repatriation negotiation, which has little chance of succeeding.

EPC: The European Parliament elections 2014 - Watershed or, again, washed out? The rumour mill has already kicked into overdrive, suggesting that the EP elections will be a game-changer for European democracy. Against the backdrop of the ongoing crisis and taking into account the fact that EU-level political parties will enter the 2014 campaign with ‘top candidates’ for President of the European Commission, turnout could increase and support for Eurosceptic political options may rise. They argue that if the upcoming European elections are to herald significant change and avert latent risks, European and national political actors need to choose meaningful electoral messages and credible nominees for the Presidency of the Commission when going up against the anti-EU/euro parties.

Reform the EU or repatriate its powers? In the aftermath of the German elections, several interested parties have started to debate a possible renegotiation of powers between the Member States and the EU. The Telegraph reports that David Cameron knows that his plan to negotiate a new deal between Britain and Europe depends almost entirely on Germany’s approval. So Angela Merkel’s crushing victory will have been a cause for both celebration and trepidation in London. To gain trust and support in Berlin, Cameron needs not just to show that he is in charge, but to begin putting specific reform ideas to Berlin, first to slow and then to reverse the drive to ever closer union. Open Europe Director Mats Persson also argues in the Telegraph that following Angela Merkel’s election victory "Cameron retains a hugely powerful centre-Right counterpart with whom he can definitely do business. Merkel won’t pay any price to keep the UK in the EU, but she has dropped hints in public and private that she’s willing to grant concessions – including a reduction in the EU’s power."

Commissioner Andor: Reconstruction in Europe: ”For me, the conclusion is that the strategy of muddling through the eurozone crisis has run its course. It is not enough to speak about various elements of a systemic solution to the eurozone crisis. The systemic solution must urgently begin to be implemented in practice. This means that EMU 2.0 must replace the flawed Maastricht model that had originally been designed by central bankers….The reconstruction of the monetary union means strengthening governance but also solidarity, developing regulation but also a fiscal capacity. Any system can only be as strong as its weakest link….The only options are reconstruction or deconstruction…The Banking Union is almost a consensual element of the new EMU 2.0… When it comes to the Fiscal Union, the key elements have been identified, providing options to deal with past as well as future debts. This is a make-or-break period for European reconstruction. It is about the reform of the EMU and also about the future of Social Europe.”

Italian PM Letta: Sketching the contours of the new world economy: Political issues concerning the future of the EMU and the future of Europe... “The new arrangements have marked a break with the past but we do not see yet a fully-fledged architecture emerging. At the same time political tensions are emerging, disenchantment with or even rejection of the European integration process is growing. As we move forward from crisis management to more structural issues, things become more difficult… I want the Italian Presidency in 2014 to be a connecting point, a time during which we conclude the adoption of important measures we launched in 2013, from Banking Union to economic and fiscal union and we reflect on broader steps needed to have a stable functioning of the EMU and a stronger European Union… my third issue is the role of risk sharing and financial solidarity within the Economic and monetary union. I believe that a genuine EMU will require some degree of risk-sharing.”

Jean Pisani-Ferry: Whose economic reform? The design of a reform strategy requires solving two problems. The first is one of purpose. Successful societies are a diverse lot. Some are unequal, and others are egalitarian. Some cherish large welfare states, and others starve them. Some rely on extensive collective agreements, and others exclude them altogether. Some are based on arm’s-length transactions, and others rely on recurring relationships. Scholars refer to “varieties of capitalism” to highlight the absence of a single template for success. Considerable political energy may be consumed in pushing through measures that deliver very little. Instead, reform should start with the most binding constraint to performance (which one that is depends on the whole set of hindrances that confront the economy). At some point, hard choices about priorities and sequencing must be made. This is not to say that international organisations and the EU are of no help. On the contrary, these bodies can be very valuable insofar as they carry out international comparisons and point out deficiencies. But there is a line in the sand beyond which only governments can set priorities and act. That, after all, is what voters elect them to do.  

ALDE/Duff: Why the Dutch version of the balance of competence review will not please the Brits: Duff looks at the Dutch government's policies on European integration and the outcome of the country's recent 'subsidiarity review', published in June. Despite containing some useful advice, the review does not rise to the occasion. The British Tories are sad to see no specific attack on their hated Working Time Directive. Above all, the Tory Brits deplore the conclusion drawn by the Dutch that there is no case for treaty change: 'The Netherlands is not aiming at treaty change or opt-outs, but at an inclusive process to revise existing legislation and reach political agreement on future priorities for legislation'. The firm rejection of opt-outs pitches the Dutch against the Tory plan for British disengagement from the EU. Here they will have the support of the Germans. The European Commission and European Parliament, rightly concerned to enhance the democratic legitimacy of the governance of the Union, will push for a general revision of the Treaty of Lisbon by way of a Convention opening in spring 2015.

© Graham Bishop