Fiskalunion? Nein Danke!
The long-running drive to give Brussels greater power over EU member states is anti-growth and anti-democratic.
As leaders of EU member states prepare to attend a crucial summit this Thursday and Friday with a view to, once again, averting the apocalyptic breakdown of the Eurozone, the precise outcome remains unclear. The direction of travel, however, is certain, as evidenced by Monday’s joint announcement by the leaders now widely dubbed ‘Merkozy’ – the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy. The aim now is a ‘forced march’ towards fiskalunion.
It is telling that such an alarmingly authoritarian-sounding term (marche forcée, lest anyone think something was gained in translation) is now used with a view to re-establishing confidence in the Euro project. A major aim of the proposed ‘fiscal compact’ – alongside addressing more specific issues, such as German concerns about financial instability – is to satisfy the markets that debts will definitely be paid, which in turn would keep precious ‘AAA’ credit ratings intact. Providing stronger guarantees of debt repayment would then, it is assumed, allow the European Central Bank (ECB) to loosen its purse strings when it comes to bailing out failing Eurozone economies, something seen as essential to ending the current instability.
Missing from this deal-making has been the European public, which has been held in complete disregard; whether such a ‘forced march’ is acceptable to the European populace is deemed utterly irrelevant, a triviality, in the face of impending doom. After all, as Merkel reminded us recently, ‘nobody should take for granted another 50 years of peace and prosperity in Europe’. The need for such fundamental changes to Europe’s government and economic system are deemed to be beyond debate.
Even when raising the importance of the national sovereignty of their countries, European leaders do so by pointing out too much economic and fiscal integration would get in the way of solving the short-term crisis. There is little discussion of sovereignty as a matter of principle, as the basis upon which voters can hold politicians and technocrats to account. Actually asking the people directly what they want, through national referenda on any new treaty, is regarded as an unnecessary distraction from the urgent task of saving the Euro, to be avoided at all costs.
All of this merely papers over the real differences of interest among the Eurozone countries. In the absence of genuine agreement, the appearance of consensus will have to do. So, the Franco-German agreement on Monday was, despite suggestions of a historic deal, actually a messy fudge: Sarkozy would prefer the establishment of Eurobonds that would mutualise debts across Europe in order to aid financially weaker countries. Merkel, on the other hand, wants the EU to have greater powers to enforce automatic ‘fiscal discipline’ on countries that don’t play by the rules. The Maastricht Treaty in the early 1990s, for example, laid down an annual budget-deficit ceiling of three per cent and a maximum debt-to-GDP ratio of 60 per cent. In the past, the sanctions or fines that should have followed breaches of these rules have easily been avoided. Now Merkel wants to make it much more difficult to do so. As she put it in a speech last week: ‘The lessons from the debt crisis are simple: rules must be adhered to in the future, compliance must be controlled and for non-compliance there must be consequences.’
Once again demonstrating who is actually wearing the trousers in the partnership between the two wealthiest Eurozone countries, Merkel largely got her way. Only last week, Sarkozy was calling for a return to greater democracy in the European Monetary Union: ‘The reform of Europe is not a march towards supra-nationality’, he said. However, Merkel also had to water down her desire to haul naughty countries before a supra-national authority such as the European Court of Justice or a ‘super commissioner’ in Brussels. Instead, sanctions for breaches of the new Eurozone rules would be enforced internally within countries, who would adopt new laws promising they will obey EU rules.
Despite this, as is evident by a leaked document being circulated by EU Council president Herman Van Rompuy and to be discussed by senior EU officials today, the full arsenal of punitive measures for rule-breaking Eurozone members remains on the table. Van Rompuy suggests that bailed-out countries could be temporarily deprived of political voting rights in EU councils; pension reforms, social security systems, labour-market policy and financial regulations could be ‘harmonised’ across EU countries; and there could be ‘more intrusive control of national budgetary policies by the EU’. Development aid for poorer EU countries could be cut, too.
Moreover, despite the deal on Monday, Eurobonds will still be discussed. After all, as Canada’s Globe and Mail points out, while the Germans may find them unpalatable, ‘without joint liability for Eurobonds, the prudent governments will not be in a position to actively intervene in the financial affairs of their neighbours’.
Whatever gets decided at this week’s summit, and whether the fiscal rules are accepted by all 27 EU nations or just by the 17 Eurozone members, it’s clear that greater intrusion into member countries’ national sovereignty by EU officials is the way the wind is blowing. Should countries overspend and breach EU rules, they may no longer be allowed to decide how they set their taxes, how much they can borrow, even the make-up of their budgets. Such decisions, fundamental to a country’s sovereignty, get ripped from the hands of the people living in the countries and their elected representatives, with decisions instead being forcibly guided by European technocrats in Brussels.
While some are only now starting to balk at the anti-democratic nature of the ever-greater fiscal and economic union of the Eurozone, it is important to remember that the ‘forced march’ actually began years ago: for at least 10 years, from the Nice Treaty in 2001 onwards via the European constitution referenda in 2005 and the Irish referendum on the Lisbon Treaty in 2009, the aim has been to separate the business of policymaking from the populace.
This on-going bureaucratic obsession with fiscal and economic rule-making not only marginalises the European electorate, but it ignores the need for economic growth, too. This could well prove to be a major stumbling block to resolving the current crisis. Countries’ predicted ability to repay debts is premised on growth that may well be choked out of existence by spending constraints from Brussels. Plans to reduce Greek debt, for example, are premised on GDP growth rates of two per cent per year; in reality, Greece’s GDP is currently shrinking at 5.9 per cent per year. As one commentator on the EU rightly puts it, ‘Attention is focused on how to organise these constraints, not on what they will achieve. The result is actually based on very shaky assumptions, namely that via tighter fiscal policy and some key reforms (eg, the raising of the retirement age) Europe can return to growth… Few are convinced by this argument but they agree with the focus on rules.’ Writing for the FT, Wolfgang Münchau argues that Merkel is proposing an ‘austerity club, a stability pact on steroids. The goal is to enforce life-long austerity, with balanced budget rules enshrined in every national constitution.’
This forced march of EU countries by the European political class towards ever-greater fiscal union, in an attempt to stave off the unthinkable end of the Euro, is a march away from national sovereignty, from democratic accountability and even from economic growth. It’s high time to think the unthinkable and call this long march off.
Patrick Hayes is a reporter for spiked. Visit his personal website here. Follow him on Twitter @p_hayes. He also works for the Institute of Ideas, which holds its Christmas lecture on the Eurozone crisis next Thursday 15 December.