Saturday 19 October 2019

Brendan Keenan: 'Politicians and public foolish to ignore EU governance'

Flags of European countries at the Louise Weiss building of the European Parliament in Strasbourg, France. Stock image
Flags of European countries at the Louise Weiss building of the European Parliament in Strasbourg, France. Stock image
Brendan Keenan

Brendan Keenan

The 'Hotel California' quandary which has bedevilled Brexit - you can check out but you can't leave - was an eye-opening reminder of just how much of a union the European Union has become.

From aircraft to racehorses, by way of medicines, a bewildering number of things we take for granted turn out to depend on the workings of the EU. And that is before we get to services and rights; such as insurance, pensions and residency.

Not all the Brexiters are irrational, although they may be unwise. It is probably irrational to believe that Britain can prosper better outside the union than inside, but it is just as irrational not to maintain that living in a EU member state is little different from living in a stand-alone sovereign one.

It may even be rational to accept lower living standards in order to restore the appurtenances of a single state. It is of course reprehensible in the highest degree to try to fool people into thinking that no such choice needs to be made.

Fooling most of the people most of the time has been made easier because the British avoided facing these choices for all of their 40 years of membership.

All that is fairly obvious but what about us - the happiest and most loyal member state, according to the surveys?

We have been able to shelter in the lee of the other island in more than just tax matters. The English are Eurosceptic, we are not, and that's enough. There is no need to think much about the union, what it is and what it ought to be.

As it happens, right now we are in the middle of the central bit of EU governance. It is, in that wonderful EU nomenclature, the European Semester.

I have tried a couple of times to think of a proper English word for the process but without success. So much of the EU is without parallel anywhere else that existing words do not fit.

The semester was a response to the crash. Officially, its purpose is to coordinate the economic policies of the member states, but in reality it is to keep them in order.

Put briefly, it is a rolling annual process which starts in November with a commission survey of the situation and ends in October when governments present draft budgets to Brussels and the commission gives its opinion on whether they are up to scratch.

In view of all the fuss that is made over the October Budget, one might think that the fact that this is now an EU procedure might be the subject of a lot of attention, but not so. Some might say that this is because it does not matter very much in the end.

Far from co-ordination, member state economies have drifted further apart since the crash. Around half of them are still judged to have economic imbalances, although only one, Spain, is seen as running an "excessive" deficit.

Nor is there any obvious weapon to bring recalcitrant governments into line. There is no equivalent to the ability of a central bank to raise interest rates if it thinks its government is getting out of line.

The ECB can apply only one rate to all and, paradoxically, the more faith financial markets have in the ECB, the less they will pick off national governments with higher rates on their debt.

On the other hand, recalcitrant governments (from a Brussels point of view) in Greece and Italy have found that the soft power of the EU, and the ECB in particular, is considerable. With the markets poised on the sidelines, and the banking system dependent on Frankfurt, attempts to simply defy the system petered out.

Most of the time, things are much more subtle than that. At this stage of the semester we have the commission's country reports on member states, as mentioned last week.

Reading them is not very different from reading those from the OECD or the IMF. What is different is that the commission report is not just advice to the government but part of the process of policy formation.

No doubt wary of jibes about Brussels diktats, the commission is keen to stress that the final decision involve the member governments themselves telling each other what they should do, while Brussels merely provides data and suggestions.

It may all be a bit more effective than it looks at first glance. In that case, one can see the dangers in the lack of involvement of the Irish political class and public in the process. Lack of interest can turn quite suddenly to hostility if people decide things are happening behind their backs.

To be fair, Irish governments did not try to scapegoat the EU over austerity after the crash. Many individuals did, and many economists are scathing about the role of the ECB. In Brussels they will be well aware of the depths to which support for the EU fell in the bailout countries during the Great Recession, and even in some creditor countries.

These are murky waters. The more attention that is paid to the EU dimension in economic policy, the more it may be blamed when things go wrong. History and tradition permit governments and oppositions to hurl all manner of insults at each other: doing the same in the EU would constitute a crisis.

The other argument is that there is no need for open dispute. Better all round if things are agreed by consensus, based on serious evidence and consideration of all stakeholders. That is what the EU is supposed to be about. "Policies without politics," they call it.

It certainly seems better than jettisoning all the evidence about things like water charges, property taxes and carbon costs in favour of politics without policies, amid sound and fury which signifies very little.

In pursuit of understanding, the commission makes presentations on the country reports to interested parties. This week senior EU officials will be in town. This time there will be plenty of insider interest in their visit since they have a role in the allocation of funds in the next EU budget for 2021-27.

That's senior hurling. But nearly all of this will be done in private, just as final inter-government decisions on country recommendations, along with so much else, are taken in the strictest secrecy. It is hard to see how it could work otherwise, but equally hard to see how it can remain like that for ever.

Fiscal policy is the key element but it is one of the easier areas to deal with in the peculiar European way. There is a broad consensus that governments should pay their way, even if interspersed with significant pockets of opinion that there is a better way.

There is much less agreement when it comes to social policy, and the waters of EU decision-making become murkier. Social policy is the very stuff of politics in advanced economies which are rich enough to provide the basic needs of their citizens. After that, the arguments start in earnest.

The commission hears them all in the course of its research and it is a fair bet that no-one is completely happy with its conclusions. But it is nonsensical to say that it can be an entirely neutral referee in things which are a matter of political opinion.

In most EU-15 countries, including Ireland, the centre is broad enough to accommodate the differences. In those where left and right are more sharply divided, such as Britain is becoming and Greece, even France, have always been, there is an ever-present danger that the EU system will be seen as politicised.

It can arise anywhere though. One of the areas which receives the most fulsome praise in the Ireland country report is active labour market policies (ALMP), which is modern jargon for finding jobs for the unemployed.

The report sees the last five years as a great success. Officials were particularly impressed by the JobPath programme. Yet the Dáil has just voted to end the scheme, with contradictory statistics being flung across the floor between government and opposition.

It is a non-binding motion but, as the opposition said, it is the will of the House. Should that prevail, dubious though it may be in this particular case, or should it be the supposedly rational, technocratic findings of the semester?

We can be pretty sure that this will not become a major issue, but perhaps it ought to be a minor one at least.

Indo Business

Also in Business