Wednesday 13 November 2019

Brendan Keenan: Democracy in the Eurozone -- now you see it, now you don't

Brendan Keenan

Brendan Keenan

EUROPE is being re-made before our eyes. Except, of course, that it is not happening before our eyes. The process is largely invisible.

Politics, like justice, ought to happen in public, although one must not be naïve. We all know that much of the political process takes place in secret. Ministers, civil servants and the competing vested interests deal with each other out of sight, before presenting their actions and decisions to the public arena.

Even so, in a democratic state, there is a public arena. It can be far from satisfactory. People have become disenchanted with the political theatre, especially in Ireland, because more and more, it seems to be just theatre.

There is a pervasive belief that the bubble swelled to such gargantuan dimensions because policy was really made, not by the Oireachtas, not even by the Cabinet, but by a Fianna Fail cabal interfacing with developers, builders and their financiers. No compelling evidence to the contrary has ever been produced.

The Coalition's programme contains all kinds of proposals to allow real scrutiny and analysis of government decisions. I hope they stick with it, and I hope it succeeds.

Social order

Like many others, I am not sure that the social and political order we take for granted could survive failure -- especially if the failure was due to an outbreak of self-serving cynicism on the part of the new government as well.

Another reason why there is an urgent need to inject some genuine substance into Irish democracy is the difficulty with Europe.

The Irish failure shows that democratic systems can be abused and sidestepped. The recent EU summit showed the inherent flaws in the European system itself.

The summit was not all about Ireland, of course, but Enda Kenny's difficulties over corporation tax are a prime example of those flaws. These vital national interests were haggled over -- vigorously by all accounts -- in secret between the heads of government.

This week, the opaque process resumes in a summit which is expected to set out the terms for a very different Euro zone, and possibly a very different EU.

Unlike the years of debate and analysis which preceded monetary union, this is an approach cobbled together in a fire-fighting exercise to quell the financial crisis.

The public are not just spectators at this great event; they are not even spectators. Citizens will see the final result, but not how it came about. Mr Kenny will be held to account for his decisions, critical though they are, in only the most perfunctory way.

The betting is that he will agree to "constructive engagement" with the idea of a common method of calculating tax on profits in different countries, and in return the sacrosanct 12.5pc rate will be left alone.

Is this approach the best for Ireland's long-term interests? At what point was a decision taken that agreeing to an increase in the corporation tax rate is a worse option? Perhaps it is, but where is the evidence? Where and when was the public discussion and scrutiny of that choice?

I suspect many people are not even aware of the main business of this weekend's European Council, to give it its proper name.

They think -- quite understandably given the media coverage -- that it is about corporation tax, Ireland's bailout terms, and, perhaps, the re-organisation of the banks.

Not so. The essence of the summit is the proposal for much stricter surveillance of fiscal policy in euro states. It is not only surveillance -- clearly if there are rules, there should be a mechanism for ensuring that they are obeyed.

An elaborate system of fines for errant states is also proposed, which would be automatic unless a qualified majority of member states voted against them.

The rules themselves would also be quite different from what we had before. In fact, new arrangements for elaborate scrutiny of national Budgets have already begun, although they are not yet formalised in EU law.

Next month, member states are supposed to submit programmes on economic and budgetary policy.

In July, the heads of other governments -- a strange bench of judges to put it mildly, will issue policy guidelines on each country through the Council, to be taken into account in preparing 2012 budgets, national growth strategies and Commission actions.

This has nothing to do with the bailout agreements with the EU/IMF, although these do put Ireland and Greece in a different, even more constrained, position.

They apply to all euro states and are intended as a permanent mechanism.

One strange thing is that, intrusive though they are on national fiscal sovereignty, they may still be inadequate to deal with imbalances in the private sector, which is what brought Ireland down.

Europe is still obsessed by the fiscal side. Like the person with a hammer who wants everything to be a nail, the Eurozone leaders want everything to be a budgetary problem, because that is where they think they have the remedies.

The main cause for concern, though, is the rough and ready way in which these radical remedies were devised.

The most onerous may turn out in the end to be the debt reduction plan, which would require states with debt of more than 60pc of GDP to reduce that debt by a significant amount each year, until they reach the 60pc figure.

It would be onerous because it requires a surplus, not just to meet the interest on debt, as Belgium and Italy currently do, but an extra surplus to pay back 5pc of the excess debt each year.

The plan has many caveats, and may never be implemented, but it might be; by which time it would be too late to ask, "How did that come about?"

The concerns are recognised in Europe. MEP Sylvie Goulard, who is rapporteur on the enforcement of budgetary surveillance proposals, says "high stakes" are involved.

"Lurking behind a technical reform lies one of the key questions concerning European integration: the sharing of powers between the European level and the national authorities on budgetary, economic and social matters."

Parliament, the only directly elected European institution, is miffed that it has been largely excluded from the new plans.

So too are many in Irish circles, who see the major institutions, the Commission and the Parliament, excluded in favour of statutory horse-trading between governments.

Our leaders do not like to talk about such things, with the sword of future referendums always hanging over their heads.

One result is that fear of the sterile debate on loss of sovereignty creates a genuine loss of sovereignty from our unwillingness to engage seriously and publicly with processes which, to a large extent, will determine how we are governed.

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