Wednesday 26 October 2016

An ever more powerful Europe needs to be watched - but that's not easy

Published 29/10/2015 | 02:30

European Parliament will play a greater role in the short term during the push for greater economic unity. Photo: Getty Images
European Parliament will play a greater role in the short term during the push for greater economic unity. Photo: Getty Images

IT seems Henry Kissinger never did ask, "If I want to phone Europe, who do I call?" but your correspondent did once say, "If I want to report Europe, where do I point the camera?"

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There is now an answer to the first question and the answer is five. That's the number of presidents that the EU now has - of the Commission, the Parliament, the Council of Ministers, the ECB and group representing countries in the euro.

Which shows all too clearly the problem posed by the second question. How can one have any satisfactory media coverage of an entity so disparate, complex and, often, secretive? While recognising the valiant efforts of Brussels correspondents and many editors, no-one has come up with a satisfactory answer.

Years ago, it was really just a matter of professional concern that we in the media could not find a way to do the job as it ought to be done. It was not clear that the failure mattered all that much to the lives of ordinary citizens. That is no longer the case.

The EU is developing in ways which can impinge a great deal on its citizens. We saw a sign of that in the unexpected issue as to whether this month's Budget complied with new EU budgetary rules, and the realisation that Brussels had the power to reject it. Just to ensure that the new system gets off on the wrong foot, the discussions with Brussels on the budget parameters was done with so little publicity that the chairman of the Fiscal Advisory Council did not know about it.

On the other hand, the commission can be satisfied with the statement it put out last week about the next stage in proceedings. Those five presidents put their heads together after the last bout of euro jitters and produced a report as to how a "genuine economic union" might be created to accompany a monetary union complete with banking union, fiscal system and equipped with democratic accountability and legitimacy.

That's a tall order. Achieving it would change the economic and institutional background in which member states operate and, it is acknowledged, would inevitably involve sharing more sovereignty, which means, at some point, treaty change and a referendum.

The commission can take credit for language which was reasonably clear on subjects that are anything but, as well as a useful series of links on the website. If commissioners have any sense, they will also be pleased that the Irish Congress of Trade Unions came out with guns blazing on one of the proposals - the establishment of national competitiveness councils which would have a similar mandate in each member states.

Congress General Secretary Patricia King called for an urgent meeting with the Taoiseach. It brings the report into the political domain which is where it should be; even if it did not get there on its own and most people will think, wrongly, that it just came out of the blue. It did not, however, make the top ten in Google news searches, which shows the problem.

ICTU's concern is that the proposed boards would have a role in the process of wage bargaining, as well as less contentious areas like innovation and the climate for business. They would publish their analytical findings and provide independent policy advice on an annual basis.

That sounds little different from the existing National Competitiveness Council (NCC) but the unions have reason to be wary. Some oversight of wage developments is regarded in the creditor countries as an essential part of any debt sharing in the euro area. There is a certain irony in the fact that the commission document is full of admonitions that the role of social partners should be respected and extended in the development of economic policy. Indeed that threatened species, the Irish free marketeer, might jib at the emphasis given to social policy.

The Fiscal Council itself, which is already part of the eurozone architecture, is also have another layer of oversight. Brussels is to use its existing powers to set up an independent advisory European Fiscal Board. Five experts will evaluate implementation of the EU fiscal framework, advise on the fiscal stance appropriate for the euro area as a whole, and "cooperate" with the national fiscal councils.

An assessment of the fiscal stance of the Eurozone is welcome but this looks like another case of belt and braces to ensure fiscal probity. Given the tetchy relationship between the Irish council and the Government, who is to say that all those appurtenances to hold up budgetary trousers are not needed?

The really important stuff though, is the difficult stuff. The commission will propose a European Deposit Insurance Scheme to protect bank customers but, to work, it will have to be funded by the Eurozone as a whole. There is also the need for a similarly financed banking union and the creation of a single capital market. Those decisions rest with governments and still seem a long way off. Ireland faces penalties for failing to bring its own deposit scheme into line with existing EU rules.

There will have to be major political change if any of this is to happen. The endgame is the creation of a mechanism which would legally bind states to certain fiscal and economic criteria, paving the way for a Eurozone treasury and the the issue of eurozone debt backed by all member states.

There is no credible theory as to how states could be bound in this way, never mind practical proposals. States inside federal countries, such as the USA and even Germany, have legal borrowing limits but the real constraint is whether those who lend to such states risk losing their money. An end to bailouts will have to be part of any solution.

Next year the commission will establish an expert group to examine the legal, economic and political preconditions needed to move towards this new entity. That will be followed by a White Paper in spring 2017 outlining further steps, including legal measures.

It is recognised that the existing structures cannot provide sufficient democratic legitimacy and accountability for the creation of such an enormous entity, but no one knows what to do about that either. In the short term there will be more involvement by the European Parliament and the commission will try again to get recalcitrant governments like Ireland's to involve their parliaments in the existing oversight arrangements.

For 30 years we were bombarded by, usually exaggerated, warnings of what EU membership would mean. Now that serious things really are happening, hardly anyone has anything useful to say and there is nothing for the camera to see.

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