Friday, November 18, 2016

EU: From Maastricht to Brexit

Twenty five years ago, in December 1991 during a Dutch presidency of the Council of the EU (EC back then) there was a European Summit and an Intergovernmental Conference (IGC) to decide on a new Treaty. It was finally signed in February 1992.

Spearheaded by Jacques Delors, Helmut Kohl anf Francois Mitterand the EC12 back then wanted to move things forward. The European Union created as an evolution of the three European Communities. The Treaty also established the process towards Economic and Monetary Union (EMU) part of which is the Euro, as well as new provisions in Social Policy.

The UK, led by John Major, vetoed both the EMU and the Social Policy articles. The latter were agreed by the eleven and were attached to the Treaty as a Social Protocol. The UK as well as Denmark got a formal opt out of EMU.

Europe moved forward via Maastricht (the Single Market had been decided in the 1980s and started on 1/1/1993) in spite of a very narrow adoption by the referendum in France and initial rejection by the Danish voters.

A year earlier, in December 1990, on a train from Brussels to Paris, one could read the feature about the EC in the Economist, pondering whether Europe would become fortress. It did not. The EU has maintained a free trade stance and signed many agreements on top of the WTO (Uruguay Round). It has not used the muscle provided by its 540 mio consumers to defend its industries. Next year, Donald Trump may do that for the US. May's UK wants the Single Market without free movement using its market as a card. The Italian minister for the Economt reminded Boris Johnson that if Italy and the other 26 lose the UK market, the UK will lose 27. Of course if there is no agreement, there will still be trade based on WTO rules (average tariffs of 4%).

What has been gained in 25 years, what has been lost?

In 1990, one could also read in the Economist about the break of the USSR into separate countries with separate currencies. People in eg Georgia lost their bank deposits in Rubles. Some Eurosceptics call the UK a "USSR". Has Pandora's Box been opened via Brexit? Will others follow down the UK's path? Will Front National's Marine Le Pen be elected president in 2017? Will AfD gain much to even force Angela Merkel out?

In the aftermath of the Trump victory many have elevated Angela Merkel to a defender role for Liberalism in the West and in Europe of course.

Delors, Mitterand and Kohl and others at Maastricht had vision. Many they should have gone further than they did. Even without the UK.

In previous posts I have argued that maybe new EU Treaties should be on a "take it or leave (the EU)" basis. Of course not easy to put forward. but maybe necessary, since the EU stands in between the US and Russia (geographically).

Are EU citizens going to elect EuroTrumps? Trump after all promised lower taxes. And a stop of business moving to Asia. The migration issue of course played a role, but so did the fact that many could not afford to pay Obamacare's fees. In the EU27, many are anti-migration, unemployment varies, it is low in Germany but still high in France and Italy. In the Netherlands, the eurosceptic PVV brought the government down in 2012 as an anti-austerity stance, note that.

For many years now, the EU28 comprised on mostly conservative national governments, pro trade, pro budget discipline, pro EU, pro Euro.

Hungary is lowering its corporate tax to 9% and does not plan to enter the Euro. The Visigrad 4 want more sovereignty. The governments that will be called upon to agree on a new Treaty will have to worry not only about rejection in referendums but also national and local elections' backlash. We may not have EU wide TV and radio but we are in the era of social media.

One of problems of entity as large as the EU is how do you understand what is going on sur-le-terrain across the entity. In other words, who understands the economy and society in all 27 states? Many in the European Commission, how many in the European Parliament? Of course members of the ECOFIN and the Eurogroup know the macroeconomic date outside their national economies. But how do they understand these economies. Of course you also have the permanent delegations to the Council and the COREPERs, But is that enough to understand what "Europe" needs, what the EU citizens will accept, what they will reject? Brexit showed us that the ground is good for populism, so did Trump's election. But what is the real solution to populism?

So who understands the people of the WU27 or at least the Eurozone19 to express them? Does Angela Merkel do? She may or may not, but she seems the only viable option.

Why? Because with 27 or 19 it is difficult to decide together. It is. When you do, you can reach weird agreements and the EU history is full of such. In Athens, Barack Obama gave monumental speeches about democracy and citizenship. That is maybe the kind of leadership the EU needs. But do not forget that the EU speaks not in one but 24+ languages.

Bonne chance Angela!

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