Save Europe Day

[Tamas]

"The question about whether a referendum is necessary...that's a matter that a lot of countries have to consider" Irish PM on EU pact

trololol

[Richard Hakluyt]

In other words, I fail to see how this meeting is not a big letdown right now.

More importantly I'm not convinced by the deal. 

The element requiring constitutional amendments limiting structural deficits to 0.5% is probably pretty robust.  The timetable's to be set by the Commission in theory, but in practice amending 17 constitutions is just going to take a long time.

They're not introducing a new stronger Stability and Growth Pact.  From what I can see the current one is being 'strengthened' - the Commission will produce proposals soon - but it doesn't look automatic but subject to QMV within the EZ.  I don't see how that's any different from what we had before, if France and Germany and Italy run deficits there's nothing anyone can do about it, if Slovakia do they'll rain holy hell on them.

They're going to rapidly develop the ESM - but it still won't be ready over the next year, probably - so we're stuck with the EFSF.  The ESM will operate on QMV at least.  Of the EFSF's €500 billion current fund will be 're-assessed'.

On the upside it looks like they're going to follow IMF procedure on private sector involvement. 

Combined with Draghi's comments yesterday, though, this simply doesn't look enough to me.  It seems very much like a reheated Stability and Growth Pact.

Edit:  Also does anyone else think that the proposal to give money to the IMF who will then put it in the EFSF/ESM just kind of looks like money laundering to avoid German voters noticing what their government's doing?

It looks like just words to me 

So European countries will limit their structural deficits to 0.5%? When and how? Or will they conform to this requirement in the same way that Belgian firms pay their corporation taxes?

[MadImmortalMan]

Haven't you been watching the markets? Save Europe Day happens twice a week.

[Sheilbh]

So European countries will limit their structural deficits to 0.5%? When and how? Or will they conform to this requirement in the same way that Belgian firms pay their corporation taxes?

The FT's got the summit document on their website.  It's 16 paragraphs long.  Three of them are about planning biannual summits and one is congratulating Greece and Italy on their new governments.  But this is the basis of the plan to end the crisis and the starting point of treaty negotiations.

Having read through it doesn't look sufficient or terribly plausible to me, though hopefully it is.  In particular it looks like a shadow of what was being briefed earlier in the week.

Edit:  On the 0.5% thing they basically say these should be legally binding in domestic law at constitutional level and that the Court of Justice will have jurisdiction to decide if they've accurately transposed that into domestic law.  The actual implementation is at a national level, though the Commission will propose suggestions on how to do so and member states will converge their budget deficits to balance or surplus on a timetable proposed by the Commission.

If they break that then they get sent into 'Excessive Deficit Procedure' which is what's in the article that justifies the Stability and Growth Pact (and is being 'reinforced').  At that stage countries get a list of structural reforms to pass from the Commission and Council and their budgets will have to be supported by the Commission and Council.  But there's no mention of automatic sanction or any sense of how this'll be managed by the Commission and Council.  So it could be as ineffective as the SGP.

That survives, but will be 'reinforced'.  Countries that break the rules of, I think, debt greater than 60% of GDP and a defict over 3% of GDP (this is presumably to allow for cyclical deficits, otherwise I don't see the point of the constitutional amendment route) will automatically be put in 'Excessive Deficit Procedure' unless there's a QMV vote (of the Eurozone) not to apply it.  There'll be new treaty provision on this.

Then there's this bit (their highlighting):

We will examine swiftly the new rules proposed by the Commission on 23 November 2011 on (i) the monitoring and assessment of draft budgetary plans and the correction of excessive deficit in euro area Member States and (ii) the  strengthening of economic and budgetary surveillance of Member States experiencing or threatened with serious difficulties with respect to their financial stability in the euro area. We call on the Council and the European Parliament to rapidly examine these regulations so that they will be in force for the next budget cycle. Under this new legal framework, the Commission will in particular examine the key parameters of the fiscal stance in the draft budgetary plans and will, if needed, adopt an opinion on these plans. If the Commission identifies particularly serious non-compliance with the Stability and Growth Pact, it will request a revised draft budgetary plan.

That's followed by a paragraph that begins 'for the longer term...' and you realise that that there is apparently the immediate, short-term proposed solution.  And then, if you're me at least, you begin to worry.

Edit:  Given the build up to this summit - in terms of what we was getting briefed and the urgency that the markets seemed to be inspiring - this really seems like a 'crisis, what crisis?' moment for Sarko and Merkel especially.

[Cerr]

Sarkozy wants to bully us into increasing our corporate tax rate.

Is that necessary?  I thought the problem in Ireland was not related to Soveriegn debt but to a bank crisis.

Yeah it was the bank crisis but there was also an overreliance on income derived from the property market/bubble.

Sarkozy seems to be obsessed with our tax rate. Increasing it was one of the conditions he wanted to impose on us before we got an interest rate cut on the bailout loan.

Here's an article related to it:

http://www.irishtimes.com/newspaper/world/2011/1208/1224308743569.html

Paris and Berlin revisit tax base plan

ARTHUR BEESLEY and RUADHÁN Mac CORMAIC

EURO ZONE DEBT CRISIS: FRANCE AND Germany have revived their clamour for the alignment of Europe's corporate tax systems, an initiative long resisted by Dublin.


In a joint proposal for a toughening of Europe's budget rules, the two countries called for the escalation of efforts to forge a common corporate tax base and other measures to deepen economic co-ordination among single currency countries.

The development comes months after the conclusion of a contentious stand-off between Taoiseach Enda Kenny and French president Nicolas Sarkozy over Ireland's business tax policy.

The push in a Franco-German paper for more economic co-ordination is one of the prime differences, with a parallel proposal produced by European Council president Herman Van Rompuy and European Commission chief José Manuel Barroso.

While many elements of the papers are similar, there are concerns in Dublin that Franco-German proposals on tax, pensions and labour market co-ordination go well beyond the scope of current EU law. In Irish circles, the view is that such moves require a "great deal more teasing out" before they could be pursued in any formal way.

As a difficult summit debate looms over EU treaty change with the consequent risk of an Irish referendum, the Government has been insisting it will not be making any concessions on corporate tax in talks on a new crisis response.

For many months Mr Sarkozy blocked an interest rate cut on Ireland's bailout by insisting that Mr Kenny dilute the Irish tax regime.

The dispute was finally settled in July when the rate was cut in return for Mr Kenny's pledge to constructively engage in discussions on adoption of a common consolidated corporate tax base.

The common tax base would not harmonise corporate tax rates but it would lessen scope for multinational investors to maximise the profit they record in Ireland to benefit more from the low 12.5 per cent Irish tax rate.

Although Mr Kenny had criticised the tax base plan as the creation of a "back door" to a harmonised tax rate, his agreement to engage constructively in talks on the base came not long after the initiation of draft legislation from the European Commission to create a common consolidated corporate tax base.

While the political negotiation on the legislation is likely to take many years before any part of it is enacted, France and Germany are pushing again for rapid progress.

They listed the corporate tax base as one of three priority areas earmarked to intensify development of Europe's single market.

To reinforce growth through competitiveness and convergence of economic policy, they called for the creation of a common judicial framework "to allow for faster progress in certain specific areas" such as "the convergence and harmonisation of the base for corporate tax and the introduction of a tax on financial transactions".

Also mentioned were financial regulation and labour market reforms. According to France and Germany, such initiatives must be compatible with the single market.

Paris and Berlin want automatic sanctions for countries that break EU budget rules, which would require a fully fledged amendment to the Lisbon Treaty.

"When the European Commission establishes that a member has a budget deficit exceeding 3 per cent of GDP, automatic sanctions will be triggered, unless a qualified majority of the euro group decides otherwise," they said.

The member state would be obliged to conclude with the commission and have approved by the euro group a "European reform partnership" outlining budgetary and structural measures.

[Richard Hakluyt]

It's not advisable to be slow and measured when a crisis of confidence is taking place.

A link to the text of the accord :

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126658.pdf

[szmik]

I find all the fuss funny.
When you spend more than you earn you're going to be in trouble one day. This day is more or less now.   

But we are told it's the fault of capitalism. Hell yeah. 

[Valmy]

But we are told it's the fault of capitalism. Hell yeah. 

How is soveriegn debt the fault of Capitalism?  Perhaps that the capitalists failed to make enough money for the governments to tax?

[Tamas]

But we are told it's the fault of capitalism. Hell yeah. 

How is soveriegn debt the fault of Capitalism?  Perhaps that the capitalists failed to make enough money for the governments to tax?

check your sarcasm meter, he is not agreeing with that

But he is right, in leftist Europe (ie. almost all of Europe) this crisis is the clear failure of the free market. Which is funny and infuriating at the same time.

Also, I read that the Finns are threatening to pull out unless the simple-majority requirement stuff in the draft gets into real majority requirement. They must be shooting for Liberum Veto

[Tamas]

Haven't you been watching the markets? Save Europe Day happens twice a week.

too true

[Martinus]

What, no thread on the big meeting going on?

To summarize what you already know: Thursday night, an agreement was drafted to have more rigid fiscal rules in the EU, in exchange of the ECB printing money.

Everyone seem to accept that, except European political giants UK and Hungary, who flat-out declined, according to early reports. Sweden and the Czech Republic asked for more time to ask their Parlaiment. (funny that your excuse is asking guys you usually tell which buttons to push).

Early morning today, Hungarian officials and the PM indicated that Hungary's answer was not a denial, but a definitive maybe. Latest reports seem to indicate we might change that to "probably".

But latest is that Bulgarians, Danes, and Poles also seem to be leaning toward stalling the thing, so a scenario where only the euro-zone members get to agree on having responsible fiscal policies seem closer at hand. Except of course that Ireland is a member of that and they are reportedly not too keen on having to feel responsible for their own budget.

Poland seemed rather enthusiastic about the new thing so not sure where the stalling comes from. Are you sure it's not just your silly media saying that so Hungary doesn't look like a fool again?

[Martinus]

There would be only one downside to the UK leaving the EU, as far as I am concerned: they would probably roll back English as one of the three core languages of the EU. Other than that, I say get ouf, limeys.

I can't wait for all the stupid expats in Poland to be deported. 

[Grey Fox]

But we are told it's the fault of capitalism. Hell yeah. 

How is soveriegn debt the fault of Capitalism?  Perhaps that the capitalists failed to make enough money for the governments to tax?

check your sarcasm meter, he is not agreeing with that

But he is right, in leftist Europe (ie. almost all of Europe) this crisis is the clear failure of the free market. Which is funny and infuriating at the same time.

Also, I read that the Finns are threatening to pull out unless the simple-majority requirement stuff in the draft gets into real majority requirement. They must be shooting for Liberum Veto

That's because it is. It's all the fault of Lobbying.

[Zanza]

Interesting take by The Economist:

Britain and the EU

Britain, not leaving but falling out of the EU

Dec 9th 2011, 10:29 by Bagehot

BRITAIN did not walk out of the EU last night. But let there be no doubt about it: we have started falling out.

David Cameron finally did what British prime ministers have threatened in Europe so many times, and used his veto last night in Brussels, my BBC radio told me at dawn this morning. This is an astonishingly dramatic moment, the BBC added: the British prime minister has refused to sign up to a new EU treaty involving all 27 members, because the rest, led by France and Germany, would not grant him the safeguards he sought giving Britain powers to block unwelcome regulation of the City of London.

As a result of Mr Cameron's veto, the BBC said, 23 other countries have now agreed to seek their own fiscal pact involving deep integration around the tax and spending powers of member governments. Standing on its rights as a member of the current EU treaties, Britain argues that such a pact within a union should not be allowed to use the institutions that legally belong to the 27, such as the European Commission, the European Council or the European Court of Justice. At one point, an EU diplomat informed me in an overnight email, Mr Cameron could be heard arguing with his fellow-leaders that when members of the new club of 23 hold their planned monthly summits, they should not be allowed to use the buildings and meeting rooms of the European Council.

The BBC's exceedingly well-informed political editor Nick Robinson predicts this will lead to a long series of legal battles and rows with other EU countries, and to calls from gleeful British Eurosceptics to press on and seek a wholesale renegotiation of British relations with Europe (which they will then want put to a referendum, threatening to split the Conservative-Liberal Democrat coalition).

That stuff about drama and rows is clearly right. But I fear I do not see where Mr Cameron used his veto.

In my version of the English language, when one member of a club uses his veto, he blocks something from happening. Mr Cameron did not stop France, Germany and the other 15 members of the euro zone from going ahead with what they are proposing. He asked for safeguards for financial services and—as had been well trailed in advance—France and Germany said no. That's not wielding a veto, that's called losing.
Now, the EU is proposing quite a range of damaging and stupid new rules for financial markets. Anthony Browne, a chief policy aide to the Mayor of London (and key Cameron rival) Boris Johnson has a point when he writes this morning on ConservativeHome that:

"Faced with a choice between an EU treaty to save the euro and retaining control of regulation of the City, President Sarkozy decided to retain regulation of the City"

But nobody can say they were surprised. The French government has been saying for weeks that it would not allow Britain to have a sweeping opt-out from financial services rules. Only last week, I quoted a pair of French government sources in my column, writing:

"France sees a strong Europe as a lever of influence. Disliking the enlarged EU of 27 countries (in which its clout is diluted), France wants to use the euro crisis to deepen integration around a core of countries that use the euro, under the political control of a handful of big national leaders. To comfort French voters, Mr Sarkozy has started talking up euro-zone integration as a shield against globalisation and bullying by financial markets.

Today's unprecedentedly Eurosceptic Conservative Party sees a strong Europe mostly as a threat to Britain's global leverage. Mr Cameron says he supports deeper integration within the euro zone, as long as Britain does not have to pay, loses no sovereignty and yet is not marginalised. That is not enough for Tory MPs. They want the prime minister to use changes in the EU's architecture to secure concessions, such as opt-outs from European employment law or EU rules that harm the City of London.

French sources call it "totally unacceptable" to allow British banks to set up in deregulated competition just across the Channel. Britain wants rights of oversight over the euro zone, it is said in Paris: well, the euro zone needs oversight over the City of London. If Britain seeks to "profit" from the crisis, then rule changes can be agreed by countries that use the euro, excluding Britain"

And a very big part of what happened last night was a reflection of Mr Cameron's weakness within his own party, following a rebellion over a Europe vote that saw 81 Tory MPs ignore a strict, three-line whip. What happened last night, in addition to a fight to protect the City of London, is that Mr Cameron failed to secure a deal that he felt able to sell to his deeply Eurosceptic party (with two cabinet ministers demanding a referendum on any new treaty in the last few days, and scores of MPs ready to rebel on any EU bill put through the House of Commons).

It is worth being clear about this. Mr Cameron says he refused to sign up because he was defending British national interests in the long-term. In the immediate term, he took the decision to reject a new EU treaty because he was not sure he could get it through the House of Commons.

Having failed, he walked away, empty-handed. Just three other countries walked with him—Hungary, Sweden and the Czech Republic—and one or all of them may yet end up joining the new pact. We are not very far away from a final division of the club with 26 countries on one side, and one on the other.

This moment was both predictable and predicted. Everything dates back to a first meeting between the newly-elected David Cameron and Angela Merkel in Berlin in May 2010. By chance, in my previous role as Charlemagne, I was in the chancellery that day as one of a small group of Brussels correspondents invited for briefings from the German government. Mrs Merkel badly wanted Britain to stay on the inside track of the EU, we learned, fearing that she would find herself alone in the room with France and the Club Med countries. She wanted Britain and others for balance, and was anxious not to push away allies such as Poland who in theory plan to join the euro one day and are desperate to avoid being in an outer core.

Thus Mrs Merkel wanted to push ahead with new treaties to save the euro at the level of all 27 countries. I stayed on to watch Mr Cameron's meeting and joint press conference, and heard the British prime minister explain that he wished the euro well, but could not commit Britain to any involvement in deeper integration. I wrote this:

"Mr Sarkozy dreams of building a new power structure round the 16 euro-zone countries. But Mrs Merkel wants economic policy to be decided by all 27 EU members, precisely because she likes to balance "Club Med" members of the euro zone with more liberal countries, including Britain, Sweden, Denmark, the Czech Republic and Poland. Yet David Cameron, the British prime minister, is adamant that deeper economic co-ordination in Europe must affect only the 16. That may be savvy British politics, but it risks pushing Mrs Merkel into France's arms."

A year and a half later, at some time around 4am last night in Brussels, Mr Cameron pushed Mrs Merkel into the arms of the French. She went along with this, and this was predictable too. In November I wrote a column from Berlin (sorry, last quotation from myself), setting out the German view:

there is frustration in Berlin at what are seen as British double-standards. Mr Cameron tells euro-zone members to do more to save their currency. Yet Britain does not offer to help and demands to be consulted on big decisions, for example on bank recapitalisation. In Brussels Mr Cameron tells the EU to beware of breaking up the single market, and stoutly defends free-trade rules that apply to all. Yet back in London, ministers talk of special opt-outs giving British business low-cost, deregulated membership of the common market. "

In Berlin the belief is that rewriting single-market rules would lead to many countries demanding more protections—the opposite of what Britain wants. Belgium, for instance, might push for more workers' rights. Facing a tough re-election fight, Mr Sarkozy last week declared that Europe should not be a "dupe" when it came to global trade, and proposed EU import taxes to help pay for European welfare systems.

Germany's priority is rules establishing unprecedented oversight of euro-zone economies. If Britain asks too high a price for its consent, Germany will reluctantly agree to a new treaty outside the EU system. This, it is expected, would involve more than 17 countries but fewer than 27. Britain would lose its veto"

Berlin offered one more, very clear message: that British Eurosceptics were wrong to declare that Britain could become the leader of the 10 countries that do not use the euro, the ten "outs". There is no club of outs, I was told, and Mr Cameron had a bruising taste of this reality at an October summit when Mr Sarkozy angrily told some of the countries outside the euro that they had no interest in siding with Britain.

What happens now? Well, British Conservative Eurosceptics divide into two broad camps. A more moderate camp have convinced themselves that EU membership is blocking the sweeping supply side reforms that they believe would propel Britain to renewed growth. They think that if Mr Cameron can only shed the influence of hand-wringing Euro-Quislings in the Foreign Office and the Liberal Democrat party, he can play hardball and renegotiate a new, low-cost, low-regulation free-rider membership of the single market.

This moderate camp is guilty, mostly, of excessive optimism.

For a fine summary of this position, look at this week's Spectator magazine, and its main editorial, headlined: "Leadership, please."

Published on the summit eve, the leader says:

"British Europhiles have long scorned the concept of a 'two-speed Europe', but that is, by default, what is likely to emerge from the mess. We will have a first tier bound by fiscal as well as monetary union, smaller than the current eurozone, and second tier which will be increasingly divorced from the Franco-German power axis. Ideally, the second tier should impose minimal regulations and resemble the free trade area we signed up to in 1975.

David Cameron is losing an opportunity to assert himself as leader of a wider European alliance. It could be an appealing place: promoting the free movement of goods, people and capital, but with each country retaining sovereignty and the power to set its taxes, prepare its budgets and retain a veto over rules which will be harmful to its national interest."

"The Prime Minister is in a position of great strength, if only he would realise it. He is in the position that John Major was in the early 1990s, having lost a disastrous gamble to enter the Exchange Rate Mechanism (another bad idea which this magazine was alone in opposing). Then, it was all too easy to portray Britain as isolated in Europe. Now, there are already ten EU nations outside the eurozone who will play no part in any fiscal union. It is a constituency begging for direction—if only David Cameron would seize his opportunity"

This fantasy politics lasted all of 12 hours.

The other Eurosceptic camp are essentially pessimists. A big dose of their pessimism about the flawed initial structures of the single currency has been borne out by events: to have a grown-up debate, this needs admitting. But they are much too gloomy about the single market, which they believe is not worth the cost of Britain's EU membership. They are much too sanguine, I would add, about the costs of a break-up of the euro (one Tory MP yesterday called for the disorderly break-up of the euro, while John Redwood, a darling of the right and former cabinet minister, today urges an orderly break-up of the currency as soon as possible). This camp thinks that British influence in the EU of 27 is not worth a candle. One red-faced misanthrope, Edward Leigh, yesterday told Mr Cameron not to come back from Brussels waving a piece of paper like Neville Chamberlain. For such Tory MPs, it is always 1938.

They would like Britain, essentially, to be Switzerland with nuclear weapons. I think Britain is bigger, and better than that.

Nor do I think we would be granted the sort of Swiss deal that British Tories yearn for. Switzerland is allowed access to the single market for relatively low cost because it is small. Because Switzerland is small, its absence from the single market table does not fundamentally alter the nature of that market. A walk-out by Britain, the largest free-market minded power in Europe, would change the nature of the single market fundamentally.

I also think that Switzerland's deal with the EU is not as good as British Eurosceptics think. It is built around accepting large chunks of EU regulation without any say in order to protect Swiss bank secrecy.

Oh yes, the banks. The City of London is very important, and the EU has some bad ideas for regulating it. But I find it hard to cheer the idea that Mr Cameron took an extraordinarily big decision last night about our relations with Europe because he was so convinced he could not win arguments in Brussels about those regulations.

A final thought. If we do end up leaving the EU for the sake of the City of London (a big if) it would be ironic if some of those same banks and hedge funds then turned around and announced they were leaving Britain anyway because euro-zone rules made it impossible to work in London, and so they were off to a combination of Paris, Frankfurt, Zug and Singapore. So sorry old boy, nothing personal.

[Admiral Yi]

That's because it is. It's all the fault of Lobbying.