Archive for May, 2010

Extraordinary times these. It is hard to know where to begin. Everything is in a state of flux. Solutions by panic. EU rule-books distorted well beyond original intention. Money thrown at the surface of a problem. ECB U-turns. A bit of premature back-patting. And now grumblings to the effect that the underlying (structural) problem has not gone away. And in the middle of it all, the waxing and waning EU fortunes of Nicolas Sarkozy and Angela Merkel.

(Given their cool personal relationship, it seems that either one is politically up in Europe and the other down, or vice versa. ‘Madame Non’ has had her time. Monsieur Le President of the “Eurozone Council” believes he is having his. A toe-curling piece in Le Figaro certainly thinks so, in any case.)

But to my mind – going above and beyond the EU’s torturous response to the Greek and now eurozone crisis and the equally torturous debate on further economic governance that is set to come – a striking element of these last days has been the role of the White House.

US president Barack Obama has leapt into the Brussels power vacuum – that yawning gap where necessary political action fails to meet political will/leadership. And he hasn’t been quiet about it either.

A New York Times piece on Monday was an indictment of the EU’s own lack of leadership and its apparent inability to think beyond fire-fighting mode.

According to the article, Obama got on the phone to Merkel on Sunday to tell her that Europe ‘needed to try something big.’ He also phoned Sarkozy. It was only after these conversations that the impetus came for the “shock and awe” agreement that has brought Europe some time.

And again on Tuesday, the US president was on the phone to Spanish leader Jose Luis Rodriguez Zapatero to tell him that he needs to undertake “resolute action” to stem the country’s widening deficit and help boost market confidence in the eurozone.

Obama’s spokesman Robert Gibbs said Spain was “one of the countries that … because of some of their problems, need to undertake reforms that the prime minister is starting to work through,” reports Reuters.

And later: “We continue to play a role in encouraging the Europeans … to do what’s necessary to ensure that this problem is dealt with and doesn’t spread.”

This morning, Zapatero announced new austerity measures.

Obama’s move highlights a few issues. One, obviously, is the fear that the eurozone’s problems could cause a global crisis of confidence. The other is that while Obama can ring up and tell one member state what to do, this is a political taboo among member states themselves. Nor is it possible for the European Commission to exercise this role. It can say the same things as Obama but it simply doesn’t have the clout when it comes down to it.

Which brings us to today’s announcements by the commission to further increase budgetary surveillance and tighten up the rules of the eurozone’s stability and growth pact. According to commission president Jose Manuel Barroso:

“Europe has been dealing with [the economic crisis] with urgency. We must show we are serious about more fundamental reforms… We must now get to the root of the problems. At times like this, Europe can make serious progress.

Today, the Commission is seizing the moment to reinforce the economic policy coordination and fiscal discipline in Europe.”

Like a sulky teenager, the EU has been pushed to this point. Willingness and a longterm vision had little to do with it. So while the EU is likely to change its economic governance rules, I am not sure Obama will have to stop working the phones in the near future.

I rather like it when VIPs come to the European Parliament. On such occasions it is really quite possible to believe that the EU assembly contains 736 deputies.

And it was certainly worth MEPs turning out for US vice-president Joe Biden’s speech to the chamber this morning.

They heard a 25-minute talk that ticked all the right schmooze boxes. It was a paean to MEPs’ status in the global democratic world suggesting Brussels, alongside Washington, has claim to the title of capital of the free world.

MEPs will also be feeling gratified because the speech, generous about the state of EU-US relations, only served to underline that Washington has woken up to the power of the European Parliament in the EU’s legislative process.

The turning point occurred in February when data privacy-conscious MEPs rejected a deal allowing US authorities to access European citizens’ banking data in Swift (a company that handles banking transactions) in order to track terrorists.

Parliament’s move came despite huge pressure by Washington. It reflects a strong ideological divide between the two sides on where to put the marker when it comes to security and data protection. And Biden devoted much of his speech to stressing that the US understood parliament’s concerns. Although there was also a pointed reference to using power responsibly.

It will not be the only transatlantic dispute in this area. MEPs have also expressed privacy concerns over the anti-counterfeiting treaty, ACTA, that the EU, US, and others are negotiating.

EP chief Jerzy Buzek was in the Washington last week to open a parliament office. Its staff will be busy, I imagine. A congressional office in Brussels would be a good idea too. In that way, both sides could track legislation in its very early stages, work on relations and perhaps anticipate future ‘Swift-like’ problems.

—–
There was one part of  the speech that will likely strike an off note for European ears.

“Climate change – one of the greatest threats our planet faces – the US and Europe are working to ensure that all countries, especially the major economies are contributing to a global solution. We all look to and we did take a major step forward in Copenhagen,” said Biden.

Whatever the climate change summit in the Danish capital may have been, it certainly was not a major step forward.

For the European Union it was a rude awakening to its ranking in the world, and a rather brutal lesson that good intentions and the moral high ground are not sufficient if you don’t have something the other side wants.

European eyes regarding Barack Obama were opened too. US domestic policy clearly ranked above climate change. A high-ranking (and disillusioned) EU official in January remarked that Obama’s tactic on climate change during the summit were not that different to his predecessor George W. Bush.

For a rather different view of the talks, I urge you to read this account on Spiegel Online which has managed to get a recording of the last sorry stages.

Eurozone leaders are gathering in Brussels on Friday evening to sign off the deal agreed by their finance ministers on Sunday to rescue Greece.

But there are grumbles among some EU diplomats at the wisdom of getting the 16 leaders around the table at all. (Finance ministers could equally have been designated to give the go-ahead to the package).

“It shouldn’t take place. Everyone knows that it was on the insistence of Germany that this summit should take place,” remarked one senior diplomat, continuing: “I have heard some very nasty words about this summit.” The implication is that Sunday’s agreement will be undermined.

The broader worry is that the meeting, even assuming the 110bn euro deal (80bn euro from the other 15 members of the eurozone and 30bn euro from the IMF over three years) is given the political nod, will only serve to highlight the EU’s disunity over what to do next and its lack of leadership.

Among the most dispiriting aspects of the Greek problem – aside from the actual facts of the case – is that since October last year when the new Socialist government in Athens more than doubled its previous estimate for the country’s 2009 public deficit, the EU has dithered and prevaricated by way of an answer. Politicians have not shown the way. Instead, the markets have led the EU response, scenting the weakness behind the commitments made in both the February and March summits on Greece even as the ink was drying.

And Germany’s Angela Merkel, while perfectly entitled to push for stronger reform commitments from Athens, has contributed to the impression of  an EU in free-fall. To those outside Germany, it appeared that the debate on Greece was being led by the  Bild newspaper – the country’s best-selling tabloid. Berlin’s drawn-out finger-wagging on Greece created a void and a lack of confidence. Merkel could have helped fill it by tempering her tough rhetoric with speeches making the case for helping out Greece to a largely hostile German population.

And now with the foot-dragging having raised the prospect of the crisis spreading and the limits of a monetary union without the backing of a political and fiscal union thoroughly exposed, the question is whether member states have the political appetite for dealing with other such crises. It would seem not.

According to another EU diplomat, who dismissed the notion that the summit was a purely German idea, the meeting will focus on whether “everyone has the parliamentary requirements at home” for approving national loans to Greece and on the “future of the eurozone.”

Van Rompuy’s invitation letter suggests that there should be “an exchange of views on the lessons to be learned for the Euro area.”

Given what’s a stake, the very least the summit needs to do is to demonstrate a clear sense of political leadership and direction. And that would appear to be a very tall order at the moment.