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Let's have a prize for guessing what EU leaders actually mean

THEY gave the Charlemagne prize to the German finance minister Wolfgang Schaeuble last week. In current circumstances, this celebration of European unity seemed as strange a ritual as those of the 8th Century monarch himself.

The Charlemagne cult is the bane of the euro sceptics. Even Europhiles in the UK and Ireland are wary of him. His rule did not extend here and the idea of his empire as a precursor of the European Union sends out a mixed message, to say the least.

As markets openly bet on not just the breakdown of the eurozone but, as a consequence, of the EU itself, this annual ceremony to celebrate the European Union seemed distinctly inappropriate.

The presentation by Christine Lagarde was, as one would expect, brilliant, but as head of the IMF, she now personifies all kinds of mixed messages as well.

Mr Schaeuble, however, was having nothing to do with mixed messages. We must create a political union now, he said.

It would not be a European superstate (like Charlemagne's perhaps?), or a "United States of Europe", but the financial crisis proved that a much greater pooling of important parts of economic and financial policy was needed.

But does he really mean it? More and more, the European question is coming down to what politicians really mean.

What are they actually prepared to do -- as distinct from what they say -- and, most of all, how much are they prepared to pay?


Mr Schaeuble is regarded as among the most pro-European of German politicians. Even allowing for that, and the fact that the Charlemagne prize is a place for European rhetoric, the suggestions in his speech were startling.

It was time for European political union to be given a face, with a directly elected EU president in Brussels, he said. He even has ideas on how that could be done quickly.

All the political parties in the European parliament should put forward their candidate for EU Commission president in the elections of 2014.

The winning candidate would take the job, with governments nominating the rest of the commission in the normal way.

This is no longer just empty rhetoric. There will have to be a trade-off between the closer integration which almost every analyst now believes is essential to stabilise the European currency, and political accountability for those bodies and individuals who will have such sway over the economies of the euro states.

I would like to think that Mr Schaeuble's other comments about the need to retain the principle of "subsidiarity" (where states are supposed to do anything that is not done better at union level) imply a recognition that more integration at the fiscal, monetary and banking levels should be matched by greater subsidiarity at other levels; including employment conditions and taxation.

But I doubt it. The difficulty with the trade-offs, which must be made to bring a permanent solution to this crisis, is that they are nearly all different for each member state. It is hard to find one which would unambiguously be good for all.

Several could be ambiguously good for all, and we will have to see if European politicians can yet rise to the occasion for selling these complex benefits to their electorates.

The key one, whether Greece stays or goes, is that there will have to be some greater level of transfers from the more competitive economies to the less.

I write that with a heavy heart, since all experience, from southern Italy to northern Ireland, suggests that free money makes uncompetitive economies worse, not better.

Even so, some support for incomes from richer to poorer seems an essential counter to the Darwinian culling which comes from a single currency and single market.

The amounts would be smaller than the automatic welfare transfer inside nation states, which is why economies must be allowed more room to compete; if necessary through lower wages, longer hours, less taxation and even different environmental standards in the less productive ones.

It is evident that this is the kind of idea which most upsets the richer states.

It was truly depressing to see the Polish plumber make a re-appearance during the French presidential election.

How come we never hear of the Greek or Portuguese plumber? Presumably they are around, like the Irish builders, but everyone knows that, as EU-15 citizens, they cannot be stopped. It is high time everyone knew that about all 27.

Trade-offs like these will be particularly difficult for France, but also for the most elaborate social market economies further north.

Like any highly complex construction, they are particularly vulnerable to shocks, such as immigration from countries where people have no experience of the kind of trade-offs between individual and state which make such systems work.

That is one example of how the eurozone crisis could threaten the whole EU.

The rise of extremist parties shows the mechanism by which it could happen.

Mr Schaeuble is correct that Europe needs more democratic legitimacy, but for that to work, citizens need finally to be told what Europe, and especially the eurozone, is meant to be.

They are then entitled to make up their own minds about whether they want it.

This will be an acute question for Ireland, because it is such an unusual economic entity in European terms. Until now, debate has been a fairly dishonest affair between those who are against the European project, but pretend not to be, and those who are in favour, who pretend there is nothing to debate.

The fiscal treaty itself is a fairly modest trade-off. There will be more external surveillance, and less national freedom, while the budget rules look deflationary for periods of below-trend growth.

But the rules are eminently sensible for periods of trend growth, while the admittedly dubious structural deficit rule at least recognises that excess growth is difficult to identify and politically tricky to curb.

More awkward trade-offs are still to come. Ireland's very small, very open economy still means, as it did in 1979, that a national currency is of doubtful benefit.

A genuinely federal eurozone, which recognised the enormous differences between the economies of Finland and Portugal, would hold great attractions for Ireland.

But will we ever be made such an offer? Any attempt to turn the eurozone into a gigantic Italy, where rich, productive regions are tied in a single administrative system with poor, less productive ones, should be rejected.

Better that it should not be attempted at all. As the European rescue funds prepare to invest in Spanish banks, it is not at all too soon for even crisis measures to be applied with realistic final objectives in mind.

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