## Thursday, October 28, 2010

### Sarkozy and Merkel may be humiliated over Lisbon revision

Nicolas Sarkozy decided to press a button.

No, I don't mean this button. What I mean is that before an upcoming EU summit, he agreed with Angela Merkel that the Lisbon treaty should be updated in order to strengthen the fiscal responsibility in the EU.

An anti-federalist fiscal conservative such as myself inevitably has mixed feelings. ;-)

Apparently unaware that it took 10 years to approve the European Constitution slash Treaty of Lisbon - and it was pretty likely that the process would fail again and again - Monsieur Sarkozy thinks that it is now possible to modify such treaties within a few days.

But the days of Napoleon are over, Monsieur Sarkozy. ;-)

Difficulties to approve the treaty

The Finnish PM has endorsed the Franco-German plan, some countries are neutral, many others are strictly against the plan - especially because they don't think that France and Germany can or should dictate the rules in such a direct way. It's pretty clear that one can't get the unanimous support that is needed to revise the Lisbon Treaty. In particular, the country whose debt is high are unlikely to approve the plan.

Also, it has been more or less promised that a referendum would be needed in the Czech Republic to approve any additional modification of the Lisbon Treaty. A referendum could also be a "must" in Austria, Denmark, and maybe elsewhere across the EU (the U.K.?).

Germany and France are the two largest EU countries. But their politicians clearly overestimate their role. For example, in the European Parliament, 96+74 = 170 (DE+FR) deputies are French or German. That's just 170/736 = 23 percent of the deputies. The Franco-German proportion in other organs of the EU is even smaller. Their proportion on the EU population or GDP is just a bit higher but well below 50 percent.

They seem to think that just because the German and French politicians just happen to think similarly these days, they are in charge of the EU. But the EU is much larger than their failing knowledge of the European geography. ;-)

In this small conflict, we're starting to see how the individual organs of the EU are going to be polarized in further conflicts. For example, a priori paradoxically, the European Commission turns out to be a central player against the further centralization of the EU and against the increasing role of France and Germany.

For example, vice-chairman of the European Commission, Ms Viviane Reding of Luxembourg (the EU justice minister who has previously attacked France for its "Nazi" treatment of the gypsies), has gone ballistic over the plan. The French and German politicians correctly pointed out that Viviane Reding wasn't really elected by anybody so she shouldn't scream too much.

During this criticism, however, the Franco-German politicians forgot to mention that they too were only elected in small parts of Europe and they have no business to overly confidently scream across the continent, either. ;-)

This conflict is going to be just a ludicrous farce. Sarkozy and Merkel will almost certainly lose and everyone will be happy again. The two leaders will pretend that they're no painful sore losers and most of their voters will buy it. Nevertheless, the conflict is another explicit proof that democracy can't work at a supranational level. There are many ways to compute the "majorities" and "the strength of a political mandate" and each computational method is good for someone and bad for someone else.

Also, there are many kinds of laws that encourage you to look at various political issues differently. This ambiguity becomes extremely hard when the question is whether the rules and laws themselves should be modified and who has the "moral right" to lead this process.

The content of the revision

Merkel and Sarkozy want to prevent new copies of the Greek debt scenario. So they want the fiscal villains to be punished by the EU - and, in fact, strip them of voting rights if they violate some budget rules. This is a pretty strong cup of tea. Twenty years ago, I would find it natural for the voting rights to be correlated with the financial situation but I no longer think it's sensible or just.

By the way, this is one of the differences between Czechia and Slovakia whose new right-wing government otherwise agree about pretty much anything: the Slovak government finds it OK to strip nations of their voting rights if they overspend while this attitude is not endorsed by the Czech government.

It is not endorsed despite the possibility that the Czech Republic could become the only EU member that satisfies the rules around 2013. At that time, we would be the only nation to decide and we could turn the 26 other member countries into protectorates and their citizens into Helpful EU Citizens (formerly known as slaves). ;-)

Another technicality in which people had different opinions was whether the rules should be imposed automatically. Frau Merkel, a physical chemist, sensibly wanted the rules to be imposed automatically. That's a good choice - and it's no threat for Germany that is unlikely to be among the EU countries with the highest debt.

However, Monsieur Sarkozy not only wants to impose tougher financial rules. He also wants these rules to have no impact on the traditional allies of France - the PIGS - who are the most likely subjects to the new rules. That's why he disagreed with the automatic option. He preferred an agreement between the finance ministers of all the EU countries (there are so many types of ad hoc ensembles of people who may be proposed to decide about something!). Frau Merkel ultimately surrendered and agreed with Sarkozy.

These details are not too important because the revision of the Lisbon Treaty is unlikely to pass, at least not anytime soon.

The automatic option is clearly more just - because Germany and France would always use methods to circumvent the rules, by blackmailing other members, whenever they would need it. Everyone knows that: such rules are only be applied to the "smaller ones". On the other hand, the automatic prescription is so good that it's easier for politicians to say that it is "too cruel" and suspend the rule much more rapidly; similar suspensions have taken place many times in the EU. These are difficult practical considerations.

Moreover, the EU already has many rules that should have played a similar role but they were never enforced. For example, the EU laws don't allow a country to bail out another country. Clearly, most of these laws have already been transformed into dirty pieces of toilet paper - very often, the only countries that actually respected the rules were viciously attacked (e.g. Slovakia in the Greek case) - and there's no reason to think that any additional rules will be different in this respect.

For a law to be enforced, you always need some powerful enough parties who actually care about the enforcement and who have a sufficiently direct access to the organs to enforce the rules. Some of these conditions are always violated when it comes to fiscal irresponsibility in the EU. So I am skeptical that any rules of this kind will ever work in the eurozone.

Even with the eurozone, assuming that it won't break into small pieces, the countries have to learn that they still have independent budgets and that a bankruptcy of one country wouldn't immediately cause lethal problems everywhere - just like a country using gold as a reserve currency doesn't get destroyed just because another country using gold goes bankrupt.

But truth to be said, it's still safer not to be a part of the Eurozone that seems to combine and amplify all the irresponsibility of the individual member states and all the crazy attempts to deal with it that can never work but that cause lots of pernicious side effects. The people on the European continent don't have any common "national" identity, they don't think "in unison", so they can't create any genuine and functional democratic country.

And that's the memo.

#### 1 comment:

1. I'm not an European , so I can't understand exactly all the intricacy of an union with so many cultures.

but I understand that be in the unions is a gift not an obligation. to be acepted in the unions a new country need to fill some fiscal standards. As a fiscal deficit in control for an certain period of time.

A rule should be reciprocate, só if the country that already is in the EU do not fallow the rules it should be expelled.

that is more right than maintain a a country in the unions without vote.