Not as exciting as the World Cup

If anyone has the energy to think about the European Constitution at the moment, I’m afraid this entry will not encourage you to keep up the effort.

Last week, the Centre for European Policy Studies (CEPS) put on a show for those of us in Brussels who are interested: a lunchtime meeting, discussing the way forward after the “period of reflection” on the fate of the Constitutional Treaty. The speakers were the leaders of the three main pan-European political parties – for the European People’s Party, former Belgian prime minister Wilfried Martens; for the Party of European Socialists, former Danish prime minister Poul Nyrup Rasmussen; and for the Liberals, Belgian politician Annemie Neyts.

I found it a depressing meeting, depressing because of the complicit complacency of the three.
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Something Worries Me About Peter Bofinger

Really I realise I have been remiss in another important sense. I have long assumed that in fact the decision to reduce deficits was taken due to the coming fiscal pressure from ageing. This certainly was the background to the discussion. However now I look at the details of the SPG this area is not mentioned (as far as I can see) and the other – the free rider and associated – is the principal consideration.

So those who criticize the bureaucratic and infexible nature of the ECB are in the right to this extent. Of course the underlying demographics *should* be part of the pact, but that is another story.

I find myself in a tricky situation, since I am deeply sceptical that the euro can work, and now after the French vote even more so, but since it has been set in motion, the best thing is obviously to try and make it work (even while doubting). So I am thinking about all this. Obviously I should try and write a longer post making this clearer.

The SGP was adopted at the Amsterdam Council 1997. A history of the implementation of the pact, and a summary of the debate over the new pact can be found here. The Stability and Growth Pact was designed as a framework to prevent inflationary processes at the national level. For this purpose it obliges national governments to follow the simple rule of a balanced budget or a slight surplus.

Now if we go back to the origins of the pact, to the communication of the European Commission on 3 September 2004, you will find the following:

“As regards the debt criterion, the revised Stability and Growth Pact could clarify the basis for assessing the “satisfactory pace” of debt reduction provided for in Article 104(2)(b) of the Treaty. In defining this “satisfactory pace”, account should be taken of the need to bring debt levels back down to prudent levels before demographic ageing has an impact on economic and social developments in Member States. Member States’ initial debt levels and their potential growth levels should also be considered. Annual assessments could be made relative to this reference pace of reduction, taking into account country-specific growth conditions.”

Now curiously I have found nothing in Bofingers argument which seems even to vaguely recognise this background.

A good starting point for this topic would be the conference “Economic and Budgetary Implications of Global Ageing held by the Commission in March 2003.

The European Council in Stockholm of March 2001
agreed that ?the Council should regularly review the
long-term sustainability of public finances, including the
expected strains caused by the demographic changes
ahead. This should be done both under the guidelines
(BEPGs) and in the context of the stability and
convergence programmes.?

This document on the history of EU thinking on ageing and sustainability is incredible.
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EU Enthusiasm Study

According to a new study released today by the commission, the EU’s image amongst its citizens is deteriorating and confidence in EU institutions is decreasing:

The EU’s image is worst amongst British (28%), Finnish (30%) and Austrian (30%) citizens but best amongst the Irish (68%), Italians (63%) and Luxembourgers (58%).

Support for the thorny issue of further enlargement lies at 50% in the EU – a slight decrease since 2004 (53%) – but the figures show a large discrepancy between old and new member states.

Forty-eight percent of EU citizens from old member states support Croatia’s membership of the bloc with the number reaching 72% amongst the new member states.

Croatia is followed by acceding countries Bulgaria (46% support among old member states and 70% amongst the ten new members) and Romania (43%, and 58% respectively).

Turkey has gathered the least support particularly amongst the old member states (32%) and picking up 48% support from new member state citizens.

Subsidiarity To The Rescue?

The wrangling continues. To the world this must present a pretty unedifying spectacle of day-to-day political life here in the EU.

Italy has now threatened to use the veto, Peter Mandelson (taking time out from advising the US on how to handle China) asks Blair to think again, Blair himself is on a whilstlestop, and the whole question of how to handle Turkey admission is – like the proverbial hot potatoe – rapidly moving from one hand to the next.

Yesterday the euro – reeling from the referendum and the ECB rate crisis, went bobbing up and down like a yo-yo, and all in all we’re having a ‘very happy time of it’.

What the EU needs now is some short term success, some visible signs that things actually work, some ‘baby steps’ even.

Well one possible area where things could advance, and to everyones pleasure, might be related to the so-called ‘early warning system’ contained in the Consitution Treaty. Ian Cooper explains:
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Back to the Roots.

Today, the IHT reprinted post referendum reflections about Europe by former German Chancellor Helmut Schmidt that were first published last Thursday in the German weekly Die Zeit.

I’m sure some will call it elitism in light of the recent constitutional referanda, but Schmidt still believes that real political leadership is now more important than ever in Europe, for

[b]ecause Europeans can look back on more than a millennium of national development, the Union cannot be brought to completion in just a few decades by ministers and diplomats: The EU needs the consent and will of its citizens. The coming experience of increasing helplessness of smaller and medium-sized nations acting alone will increasingly convince their citizens of the need for the Union, but that will take time and perseverance.

Jean Monnet, Robert Schuman, Val?ry Giscard d’Estaing, Jacques Delors, many of the old guard knew: We can repress the historically created egocentric nationalism of Europeans only gradually. Today’s statesmen and the overzealous Brussels commissioners should follow this example.

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No Fire Without Smoke

First a bit of ‘breaking news’ for German readers: the main factor which has lead to the massive round of cost cutting and staff reductions in Germany has not been the activity of a small group of hedge funds, the main culprit, let’s get it out of the cupboard, has been the high euro.

Whilst the contents of G7 meetings are never formally disclosed, it has been a more or less open secret that for some time now that the focus of recent meetings has been on how to overcome perceived imbalances in the global economy, and in particular how to force through ‘structural reforms’ in countries like Germany and Japan where such reforms are enormously politically unpopular. So the structural reforms have been pushed via the indirect route: making them virually inevitable due to cost pressures in export dependent economies.
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We don’t have a Plan B.

Because no one has one. Well, no one has a public plan about how to handle one or more rejections of the European consitution in upcoming national referenda. But as the French referendum is approaching and the numbers do not look too good for the “yes” camp, unofficial Plan Bs are suddenly everywhere, if only to scare the naysaying Gauls into becoming responsible citizens. I know it’s common knowledge by now, but let me repeat it once more – a French “non” would be the worst case, and have possibly nuclear consequences for the EU as we know it. So scaring the voters a little seems like a reasonable approach to me.

In this vein, Bettina Thalmeyer of the Munich based Center for Applied Policy Research has put together a list of possibilities for the day after (and has published a paper about it (in German)) – hoping that it will not be May 30 (the translation and slight modifications are mine, table in the extended).

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Agenda 2020.


New Europe?
Late Thursday night, the European Council approved, as widely expected, the Commission’s recommendation to open membership negotiations with Turkey, largely without imposing additional conditions to be met prior to the beginning of the talks on October 3, 2005. “The time to start negotiations with Turkey has come,” Commission President Jos? Manuel Barroso said. Council President, Dutch Prime Minister Jan Peter Balkenende, will discuss the EU proposals Recep Tayyip Erdogan, the Turkish Prime Minister, over breakfast on Friday.
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Ever Closer Union.

Over on Crooked Timber, Henry Farrell comments on the istitutional implications of the Buttiglione affair. While we are shocked to learn that The Economist does not like the recent self-confident behavior of the European Parliament with respect to the Commission hearings, Kieran Healy – duly apologetic – makes a fair point in the comments thread – “sorry to lower the tone of the discussion, but if he doesn?t get the job he should move to the San Fernando Valley: ?Rocco Buttiglione? is a Porn-Star Name, par execellence.” The producers of “Oral Office” will probably read this with pleasure…
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In Search of A Lost Time

I don’t know if one day when historians come to examine what exactly happened (or should I say what went wrong) with the EU they will be able to identify that defining moment, the decisive hour, when everything went sailing down the river. If they are so able I wouldn’t mind a quick bet that it might be sometime about now. The ideal of the EU, it seems to me, is being blown away before our very eyes. Maybe the fault is with the politicians, maybe it is with the institutions, maybe it is with all of us: but this cannot be like this. Failure to advance a consensus on reform and the constitution cannot (or at least should not) let us fall back into our old ways of cynical cutting up the cake, power politics and triple alliances. We have, as I have been trying to suggest, a Euro which is about to fall apart between the competing pressures of Northern stringency (the Netherlands) and Southern laxity (Italy), while what is being proposed here will do nothing to help whatsoever.
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