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Momentous EU Summit This Week

Marc To Market's picture




 

There are two big issues for the EU heads of state meeting at the end of this week: A review of the fiscal plans and structural reforms of member countries and the appointment of the EC President, following the recent EU parliamentary elections. To the chagrin of many observers, especially in Berlin, the attempt some countries, like France and Italy to link the two issues is troubling, to say the least.

French and Italian officials seek greater flexibility over the EU's fiscal demands in exchange for supporting Juncker as the EC President. In principle, this is controversial, and the controversy is evident in the very language used to refer to the key relevant agreement. In Germany, and in much of the Anglo-American press, it is commonly referred to as the Stability and Growth Pact. However, in Italy, France and other countries, it is known as the Growth and Stability Pact.

Merkel quickly responded to calls for a change in the agreement, which would permanently ease the fiscal restraints by noting that Pact already has flexibility build into it. France, which has been granted several reprieves surely recognizes. Despite the extensions granted, on its current trajectory it will still overshoot the next year's 3% deficit target.

The recent EU parliamentary election and the strong anti-EU vote have reinvigorated efforts to rebuild the political middle by emphasizing jobs and growth. The EU parliamentary election was also important because the two leading factions named their own presidential candidate (dubbed spitzenkandidat). The operating treaty agreement signs the power of picking the EC President to the Council of Ministers, the heads of state. The Lisbon Treaty requires that the Council of Ministers takes into account the election results.

Therein lies a thorniest of issues. The democratic roots of the European Union appear terribly fragile, and the European Parliament is a key democratic institution. Yet, its powers have been carefully circumscribed to preserve the power of the nation-state and as a check on creeping federalism. There are some voices, not just the UK, that does not want "an ever closer union", or a United States of Europe as Churchill called for in 1946. There is a (healthy?) tension between retaining power on the national level and the federalist urge.

There is another wrinkle to the story. To help facilitate greater decision making efficiency, especially in the context of the increase in members since the fall of the Soviet Union, there has been agreements, endorsed by UK Tory Prime Ministers, including Thatcher, that allow greater use of qualified majority decision-making as opposed to unanimity. This weakens the power of dissenters and the minority, where the UK often finds itself in the EU.

Domestic politics are also important constraints on the behavior of members on the EU level. The strong showing of the UKIP in local and EU parliament elections has encouraged Prime Minister Cameron to take a stronger stance against the drift toward federalism embodied in the encroachment of the prerogatives of the Council of Ministers and Juncker himself. Cameron has promised a referendum on the EU after the next national elections, and a defeat this week could antagonize the anti-EU sentiment.

While the UK economy is poised to be the fastest growing economy in the G7 this year, Cameron’s foreign policy efforts do not show the same success. Cameron has antagonized many. His anti-immigration stance and proposal to cut the benefits going to EU immigrants has incurred the rather of central and eastern Europe, with Polish officials the most vocal. Cameron has pulled the Tories out of the EU Parliament center-right faction (EPP) and recently entered an alliance with the AfD, the anti-EU German party (Merkel’s CDU is an important member of the EPP). He seems not to have taken the Scotish referendum seriously enough, allowing, for example, the decision to be decided by a simple majority that excludes the roughly 800,000 Scots that live in England.

From another perspective, the antagonism toward the UK is also a veiled effort to push against Germany. Germany’s ordo-liberalism and the Tory’s austerity (which may have helped secure a majority for the Scottish National Party in the 2011 election, and in turn, insisted on a referendum) have much common ground. A UK exit from the EU (“Bexit”), would leave Germany more isolated within Europe. The biggest winners of a UK exit could very well be the periphery of Europe and the debtors.

If played a bit differently and had he protected his flanks better, Cameron’s opposition to Juncker may have drawn greater support from the Council of Ministers. They could have been persuaded to defend their perogoative over the power grab by the EU parliament. He could have cited the German Constitutional Court’s recent misgivings about the EU Parliamentary election process. It had argued that the election rules violated the one-person one-vote foundation of representative government. In fact, the German Constitutional Court was so adamant that it forced the dropping of the 3% electoral threshold for representation.

 

In effect, the rules of the EU parliament election weight votes by size fo the country, with smaller countries at a distinct advantage. The center-left faction (S&D) actually won more popular votes that the center-righ faction (EPP), but due to the rules, the EPP won seats in the European parliament. Here is one example, cited in the press, that illustrates this point. In Luxembourg, where Juncker hails from, the EPP garnered 52k more votes than the S&D faction. That was worth 2 more seats for the EPP (or 1 seat = 26k votes). In Italy, where the S&D drew about 5 mln more votes than the EPP, it received only 14 more seats (1 seat = 370 votes).

There are other criticisms of the process that Cameron could have used to seek to forge allies within the Council of Ministers to reject a fait accompli over Juncker. The turnout of the EU parliament election did not surpass 50%, making it hardly representative. Moreover, no one voted for Juncker. Taken together, these criticisms blunt arguments over the democratic forces behind Juncker. Finally, the acceptance of Juncker is part and parcel of backroom deals that allow the Schultz (the S&D Spitzenkandidat) to continue to be the President of the EU Parliament, and it looks like Germany will have the vice president of the European Commission.

 

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Wed, 06/25/2014 - 14:21 | 4894365 hbjork1
hbjork1's picture

"At Last",  posters who understands the problem.  Eric Hoffer wrote little book titled "The True Beliver" and "The Ordeal of Change" about the role of the frustrated individual, having lost faith in himself, taking refuge in "mass movements".  As strange as his story and his little books are, they are are worth reading - timeless.  And they won't take very long. 

The times we ar in are times of radical change.  Molecular processes in organic growth and life are increasingly accessable.  Fewer and fewer people are required to generate the substance of life for the population.  What is the rest of the population going to do to justify their place in society? 

Do we need more emphasis on real education?

 

 

Tue, 06/24/2014 - 17:17 | 4890833 ebworthen
ebworthen's picture

Kill the Euro, a failed experiment.

Tue, 06/24/2014 - 18:25 | 4891053 Ghordius
Ghordius's picture

that's the position of Alternative für Deutschland, AdF (Alternative_for_Germany). 7 Members of the European Parliament. Member of the EU parliamentary group called European_Conservatives_and_Reformists, 70 MEPs, among them also the British Torys (Conservative_Party_(UK)), 19 MEPS

note, though, that the United Kingdom of Great Britain and Northern Ireland doesn't use the EUR in it's territory. it trades it "only" (or should I write most of it?)

further, the EUR is based on treaties among the 18 member countries that have nearly nothing to do with the EU as "org". the UK insisted on that

what is the criteria for failed? price stability? honest question, can the ECB be blamed on following the one task it has been set to? blaming it of not been following this task would be a different thing

China, Japan, the FED, Russia... follow all more goals at the same time. they all set their central banks to follow more goals

Tue, 06/24/2014 - 17:02 | 4890772 kurt
kurt's picture

Europa Europa let down thy hair that I may climb upon it...

What's that smell?

Tue, 06/24/2014 - 17:06 | 4890788 Ghordius
Ghordius's picture

+1 the Bull? we called him Zeus, Father of the Gods...

Tue, 06/24/2014 - 17:00 | 4890765 Fíréan
Fíréan's picture

TTIP, TAFTA, GMT, PTCI or APT !   

There goes the last vestages of any national sovereignty  or democratic union of Europe. Well, not quite yet  . . . 

Tue, 06/24/2014 - 15:46 | 4890444 Ghordius
Ghordius's picture

"no one voted for Juncker"

because you could not vote for him... directly? there are 221 EPP candidates that did win. while campaigning for Juncker. and the S&D campaigned for Schulz, and did win 192 seats while doing so and promising to vote for the one "lead candidate" of the one group that got the most votes. that's 333 EU Parliamentarians out of 751, where a majority starts with 376

I'd correct the sentence with: "no one voted for Juncker... in England". yet this has also something to do with Cameron taking the British Torys out of the EPP

-----

put it in a different way: how many voted for David Cameron? he was elected in Witney_(UK_Parliament_constituency)

how many voters can he get there? they are, all in all, 78'220. so how many voted directly for Cameron as PM?

Tue, 06/24/2014 - 15:17 | 4890326 QQQBall
QQQBall's picture

How is NATIONALISM "old" when nations are breaking free. Listen to yourself.

Tue, 06/24/2014 - 16:52 | 4890379 Ghordius
Ghordius's picture

yes, nationalism in europe is old. take Scotland. when did Scotland stop being independent? 1707

that's two hundred and seven years. I call that old. for a national feeling to resurge. which just shows how much older Scotland is

further, our nationalism is often also about culture and language. See Flanders. See Catalonia

Tue, 06/24/2014 - 14:58 | 4890224 Ghordius
Ghordius's picture

let's use Bastiat's approach of The Seen and Unseen to the EU

what did we have before the EU? 28 different regulatory environments. what did we do - aka EU - with that? we made a common one. for a common market

why did we do that? to foster intra-european trade. to have free trade inside europe

for what was it - up to now - handy? to have a common border for trade. why is it handy? because many of our trade partners are big. size matters, in trade talks

did anybody ever believe we would decrease our regulatory environment? only the most globalization-pushing of us, mostly in the Netherlands and in England

forget it. we are europeans. we believe in regulations. we believe that you can make sound regulations

I, for example, don't want any GMO food imported to europe. that simple. I am myself an entrepreneur that believes in free trade - yet not in everything. some stuff should not have the quality of the "caveat emptor" kind, of the "consumer knows better" kind, particularly when lobbyists push for "no labeling"

Cameron is doing a lot of things in this discussion around who should become the Commission's chairman, some I approve of, others I don't. Yet I can't hide my feeling that he is only thinking about his next elections, and that Britons are still completely missing a serious discussion about the EU

Tue, 06/24/2014 - 14:35 | 4890151 MrSteve
MrSteve's picture

the old Neanderthals vs. Homo Sapiens and the Stone Age Wars continue....as if human history had advanced one iota.

Tue, 06/24/2014 - 14:38 | 4890166 doctor10
doctor10's picture

Sad thing is-if it weren't for the currency and the ECB- the whole economic and trade union-albeit in their own currencies-probably coulda worked out.

Tue, 06/24/2014 - 15:35 | 4890412 KingTut
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In order to unify trade and regulations, you didn't require the draconian solution of a Union.

For example, a doctor or nurse trained France could not move to germany and practice.  He/she would have to retake courses and tests to get a german license.  Most didn't bother.  In the EU the tests and course work have been unified, so this is possible.  Multiply this by thousands of professions, industries, products, industrial regualtions etc. and you have a real benefit for eveybody. All the ISO standards are part of this, many of which have been adopted in the US.  But this can be done with simple cooperation within each industry in the different countires.  That some countries parst of this, is evidnce that one-size-fits-all industrial policy won't work in such diverse cultures.

However, the political union with its redundant government and unelected officals that have no interest in democracy was not required to accomplish this.  

The EU was really about ideology, with the trade and regulation issues being used to support the greater 'dream', as Angela Merkel calls it. They certainly didn't want yet another eurpoean war, which are too numerous to count.  But if you want to stop two people hell bent on killing eachother, handcuffing them together is probably not the best solution.

The greater ideology is hard to really understand.  Certainly, the EU is a trial run for world government, but why are people so naive to want this?  Can you inagine a world goverment with Hitler, Stalin or even Napoleon in charge.  Christ, what a disaster.  And given the history of these things, like how many really awful Roman Emperors were there? (I lost count.)  It also presupposes that all cultural differences will slowly be eradicated in favor of a uniformly bland and docile population.  The whole thing is based on the leftist and infantile belief in the infalability of goverments.  There is absoltuely no evidence of that at anytime in history, so why eliminate competition between various power centers which is the only way to create stability?

 

 

Tue, 06/24/2014 - 16:16 | 4890517 Ghordius
Ghordius's picture

first, what do you understand by "Union"? a common army? we don't have it. a common navy**? we don't have it. a common police? like the FBI? a common intelligence service*? we don't have it. a common debt? we don't have it. we have nothing besides embrionic shells-of-coordination which have no power at all. careful with that word "union". particularly with "political union"

second, what unelected officials? we just had elections, remember?

third, what ideology? in this discussion we have federalists on one side and nationalists on the other. and a lot of others in between. including me, a moderate confederationalist which does maintain bonds with regionalists. just two of the many "ideologies" between England's UKIP and the German SPD way of looking at europe. don't forget that we have 28 sovereigns with, all in all, 100+ political parties, here, with government coalitions being the norm. if we have any one ideology on the continent, then it's consensus. or, better, the search for consensus

fourth, what frigging world government? we put an E before everything, remember? like Apple with the i. the e stands for Europe

fifthe, what docile population? did you ever see how we demonstrate, for example?

---

(*) ok, ok, the British intelligence service spies on everybody, here. but that's a different story

(**) recently, the Dutch fielded a new brigade which will function with German logistical support. and there are a few coastgard ships. that's all

Tue, 06/24/2014 - 16:26 | 4890619 localspaced
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We elected officials to a neutered parliament that has no lawmaking powers. They can rubber stamp, or not rubber stamp. 

European citizens are fundamentally not being questioned about important and fundamental decisions being made today that will affect the continent for a long time to come. 

Yes, Europeans have a loose way of dealing with treaties. Which why european treaties are treated as a class of law separately from the rest of international law and given precedence over national laws. A guideline from europe will often trump national law in court. The incessant power-bickering between France, Germany and the UK has been codified into the treaties themselves, rendering the EU institutions ineffective in the areas that would matter most.

Thats why there's no coordinated defense or police force, court system, etc..the real instruments of power and democracy. And why the EU excels at issuing directives on consumer safety (as lobbyed for by big business)

Also...you may want to look how the current union came to be...say the era leading up the treaty of Maastricht. Its basically designed by a group of major industrialists and not the good ones that are inventive..the old and creaky ones desperate to make their old ideas work a bit longer.

Thanks for not going along with the usual one world governmentz nonsense on here, but you paint a very rosy picture. Maybe seen from the UK you could look at it like that...

Tue, 06/24/2014 - 17:05 | 4890782 Ghordius
Ghordius's picture

no lawmaking powers? UKIP would disagree, too. yes, the EU Parliament cannot propose legislation. yet everybody else can

citizens not questioned? how about the EU elections? how about the national elections? in multi-party voting systems, on the continent?

yes, treaties are at the same level of laws. because it's the same body that makes both laws and treaties. the national parliaments

this is different in the US, where treaties aren't ratificated by the same body

do we need a common police force? why? police/army are the real instrument of power and democracy, yes. why shouldn't the national governments keep them? there is one consensus which many might miss, in Europe: whatever does not make sense to centralize, should not be centralized

I'm a continental, btw

Tue, 06/24/2014 - 14:56 | 4890244 Ghordius
Ghordius's picture

and since they are two different clubs, one with 18 members and the other with 28, why are you treating as if it was one package? one of them can fail and the other one can still go on, or viceversa

Tue, 06/24/2014 - 14:15 | 4890026 Bemused Observer
Bemused Observer's picture

"United States of Europe" indeed. These folks are so out of touch with reality it boggles the mind. Haven't they learned anything from their Euro experience? How has uniting Europe under a common currency worked out for everyone? Pretty good for some, not so good for many others.

We made a United States over here, but we weren't dealing with sovereign nations with hundreds of years of history. Getting New York and Mississippi to give up independence and become parts of a greater whole is NOT going to be as easy to pull off with Germany and France, or the UK and Greece, etc. They may agree to cooperate on some things, but will never give up their national identities. A New Yorker and a Mississippian will both call themselves Americans. But no German, when asked, will call himself a European...he is a German, period. And that is repeated in every nation in Europe.

They have failed to unite Europe under the Euro. A Euro in Greece is not the same as a Euro in Germany, despite the claim that a Euro is a Euro. These countries never formed the fiscal union necessary for a single currency to work. Forcing it anyway only had the effect of throwing a laid-back tourist economy like Greece into the ring with economic Goliath Germany...how's THAT fight going to end?

Any attempts to further 'unite' Europe will proceed in similar ham-handed fashion, until you end up with fascist, nationalist movements forming all over the place, fueled by long-held resentments and prejudices. They will beat back the unification movement, and we'll have wars breaking out as nations seek to re-establish old borders, re-take old territories, and settle old scores. Nationalism is gonna come back with a vengeance.

Tue, 06/24/2014 - 15:12 | 4890167 Ghordius
Ghordius's picture

first, we are far, far away from a "United States of Europe". Particularly if you take the United States of America as a comparison. which you shouldn't, because the situation here is vastly different. If you want to make a comparison to America, then we are on the way to what the Confederates wanted

second, we haven't united Europe under the EUR. so we can't be called having failed at it. 18 countries share a common currency, 10 countries don't. and nobody would even dream of forcing anybody to do that. all those "yes, but the treaty says..." misunderstand how we europeans handle treaties in the most fundamental manner. see all the "opt-outs" of the last years

third, what does it mean a Euro in Greece is not the same as in Germany? You mean Cyprus, I presume. Where Cyprus is exterting it's sovereignty in it's way it's handling the capital barriers, btw. btw, does any majority of Greeks want to go back to the Drachma? no. what does this tell you?

fourth, nationalism never left. yet nationalism in europe is old. and this you can see by all the nations that would like to break free from their current national unions, and become independent. Scotland. Catalunya. Flanders. Venice. the list is long. oh, and btw, you know what they all want to join, practically immediately? the EU. why? because the EU is quite a nice thing to have, for small nations

Churchill gave us a legacy with this "United States of Europe". A legacy of... misunderstanding. Of wrong comparisons. Particularly today

Tue, 06/24/2014 - 18:35 | 4891084 Bemused Observer
Bemused Observer's picture

I can appreciate the desire by some for the union, and it is generally those who stand to benefit from it. The same dynamic is at work here, where big business and global players WANT trade agreements like NAFTA, etc, because they CAN take advantage of global marketplaces.
The problem is all those folks who don't benefit, and there are too many of them for a global marketplace to work.
Those people will end up forming the base for movements that appeal to xenophobic feelings, and promise to 'take on' the foreign elements making their lives miserable. If the global marketplace folks don't figure out how to deal with THAT problem, your union is doomed, and people are going to start being tattooed and loaded into boxcars again.

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