Wednesday, September 7, 2011

EU: Who kicked the can down the road? (mach 2)

This is a follow up (part or is it mach 2) of my September 5 post:
EU: Who kicked the can down the road? Merkel and Sarkozy or their predecessors?

First of all, one clarification. According to an article (September 7) in emirates247.com "Battle under way for soul of 'United States of Europe" it is not that clear after all if the German Minister of can be counted among the fans of a United States of Europe. According to the last 3 paragraphs of the article, he wrote a column in the Financial Times, in which he "laid bare "my unease when some politicians and economists call on the eurozone to take a sudden leap into fiscal union and joint liability."" According to the same article "... and that the answer to the crisis, despite it being politically painful, is for states to live within their means.".

In the meantime, the Council for the Future of Europe of The Berggruen Institute issued (September 6) a Statement by the Council for the Future of Europe: EUROPE IS THE SOLUTION, NOT THE PROBLEM" (PDF) The conclusions include:

"Supporting European integration is not a matter of solidarity but of enlightened self-interest. It is time to address the big questions in order to preserve the unique European balance of individual freedoms, market economy and systems of social protection. For us, Europe is the only solution."

"Them" includes Tony Blair, Jacques Delors, Felipe González, Mario Monti, Gerhard Schröder,
Matti Vanhanen, Guy Verhofstadt, Nicolas Berggruen, Mohamed El Erian, Niall Ferguson, Anthony Giddens (father of the "Third Way"), Alain Minc, Robert Mundell, Nouriel Roubini and Joseph Stiglitz (Nobel in Economics).

Yet as emirate247.com reports, "former prime minister Matti Vanhanen broke from the group's agreed statement and admitted: "I'm not so fond of federalism as such.""

Here is my POV. What Europe, the EU, the EU Single Market ie not only the Euro need is a single political entity, in federal form (eg like the US of America or the Federal Republic of Germany). The fiscal vs transfer union is IMO a pseudo-dilemma because political union means the creation of a federal budget financed mostly by a federal income tax (US style) on persons and companies, administered by a federal (IRS like) authority.

As I have argued before, in tweets mostly, it is actually the cheapest solution out of the crisis, for the average German, Finn, Dutch etc taxpayer. in that via a federal tax by a federal "Euro IRS" the burden will not be falling on "paymaster" countries and their taxpayers anymore but n=on high income earning persons and companies inside the federal union irrespective of nationality or state of residence within the federal union!

IMO Eurobonds alone are not the solution. Or fiscal or transfer union. Only full union. Clear and straight, to be understood by the citizens, without any of the traditional EU or member states' fuzz! For more on this, see my May 9, 2011, post "The EU's No. 1 problem is .....".

Now, we come to maybe the most interesting bit:

While Cameron supports closer integration if the Eurozone becauses he thinks that the needed EU Treaty changes will give him a chance to negotiate in return for allowing the Eurozone to move ahead, repatriation of certain "competemces" back to the UK (from "Brussels"), it seems, according at least to my reading of the 09/05/2011 "Divide and Rescue: Berlin Lays Groundwork for a Two-Speed Europe" report in Spiegel Online International that the Treaty that will move the Eurozone towards political union (uniform labour laws, budgetary "unification" (to what extent we shall see), etc etc) will not be an EU one, but. like Schengen (when it was set up), "hors EU"! That means that the UK, unless it joins this 1st speed union (ultra highly unlikely), will not have a say in it or get to vote on it! Any referendums will be by the participating states! Bazinga?!

That also raises the issue of the role of the European Commission, the ECJ, the European Parliament, the Council of the EU, etc, as well as the European Council in the operation of the "EU Mach 2". It seems that the Eurogroup plus other, new, bodies, probably lean, will be set up to do the "job". The EU institutions will continue to operate the affairs of the EU27 but the "EU Mach 2" will have its own institutions. Can there be another way considering that:

a) Cameron wants to use an EU27 IGC to get his way, thus a change in the EU Treaties must be avoided by the rest.
b) Not all members of the EU27 will be participating in this "closer union"?

To be continued!

PS. That would also mean that the "hors EU" Treaty of the core union cannot change the EMU/Euro aspects of the EU Treaty, ie exit from the Eurozone/Euro will continue to be not an option. That IMO means that all 17 of the existing EZ members will participate in the core union, unless they figure out a way of having a Euro member not be part of the core union and still have the who thing work! Does not look likely!

PS2. Times are beyond interesting. But at least there is a reversal of direction, from backwards to forward. Unless of course Angela Merkel and/or the CDU change their minds, yet again!

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Nick

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