EUCO: Winners and losers

EU summit ends without budget deal.

Question:

1. It seems that at this moment no one in Europe agreeing on anything. Would you say that the situation is really so serious or not and why?

2. Is it anybody you would consider as a winner after the last summit are they were only losers as we failed to agree on a budget?

Answers:

Christian SchweigerLecturer in Government, Department of Politics, Durham University

1. I think the EU is currently suffering from a clear lack of direction. This is the result of a failure of leadership, particularly from the three biggest member states: Germany, France and the UK. Merkel seems to be very narrowly focused on sorting out the crisis in the Eurozone, particularly the deepening Greek budgetary crisis. Hollande has so far not tried to set the agenda on major policy issues and he seems to be preoccupied with worsening economic conditions in France. Cameron on the other hand is clearly not interested to engage in the EU and instead concentrates on limiting British financial contributions (the current debate about the budget). Cameron has also moved the UK closer to the exit, even though he keeps publicly insisting that he is committed to keeping the UK in the EU. It is clear however that a large section within his party and also a growing majority of the British people would like to have a referendum on British membership and would opt for leaving.

Moreover there is obviously a lack of agreement between Merkel and Hollande on the future direction of the EU. Merkel seems to want to move towards deeper political union for the Eurozone without considering the consequences for national sovereignty. Hollande has been very quiet on these proposals and it seems that he would rather want more consequences for the EU in the area of social policies (traditionally a desire of the French Socialists). I would therefore agree with your notion that the EU cannot agree on anything at the moment, not even on the budget or the scope and the detail of the rescue package for Greece. If we consider other major areas such as future enlargement (particularly towards Turkey) and the deepening of defence and security policies there is so much disagreement that the leading countries do not even want to address these issues at the moment.

2. I would suggest that nobody really gained anything from the failure to agree a budget at this week’s summit. Cameron is of course trying to portray himself as the big defender of the British rebate and of taxpayers in Europe but in the end he has not yet answered the question of what would happen if the EU could not pass a budget. This would have unforeseeable consequences for many areas where the EU provides crucial funds to member states, particularly in the area of regional development and research. UK universities benefit enormously from the latter but this is an issue Cameron does not like to admit in public.

Overall I would say that Merkel and Hollande have definitely emerged politically weakened from the summit. Their failure to provide leadership to reach an acceptable consensus for all 27 member states is noticeable. Especially Hollande now looks anti-reformist as he continues to block any notion of reforming the costly Common Agricultural Policy. This may win him political points in France but could isolate him in the EU in the long run if he sticks with this position.

Pavlos EfthymiouPhD Candidate in Politics and International Studies, St. Edmund’s College, University of Cambridge

The key issue here is the question of domestic public opinion in the ‘healthiest’ EU economies where the govts are rightly to an extent worried over forcing their taxpayers paying from their pockets to ensure the sustainability of the Greek debt. So the govts in question are trying to find a compromise solution where, at least on appearences no-one really loses. This is what prolongs the crisis and unsettles the markets for now. And we are likely to see such an unstable EU until the German elections.  One should expect this: the EU as a project, has always been a political project, with economics as the engine of integration (effectively, the method); therefore, as it was built through a series of political decisions, it can proceed successfully only with bold political decisions. This will incur some cost. But this is not impossible. It happened very recently over the Gaza crisis, where the Israeli govt, at a high political cost, gave in to external political pressures and global public opinion and did not proceed with a (mobilization of reserves) new invasion of Gaza (and now receives extensive criticism by the opposition, facing elections in a couple of months). What I am trying to say is that major political developments require political will, and leadership. Leadership often requires to take costly political decisions for a greater good – say the maintainance of the Eurozone, the success of the EU project, stability in Europe, stability and peace in a member state. I do not think that any m-S currently on a tough stance on the Greek issue would be prepared to accept to see Nazism and Racism resurging in Greece, with democracy, stability, security and so forth at stake. Similarly, none of these ‘tough’ negotiators are prepared to sink the EU project as we are entering this new phase of multipolarity and global uncertainty. If anything, they want to strengthen it. They just want to do it with the best terms for their people/electorate (i.e. political cost/gain at stake). This is natural. The risk of an accident is in my view minimal. Technical expertise in Europe is tremendous. Resources and economic firepower are still a solid guarantee that in the cases of small m-S at least, Europe can avert the worst at a very short notice – and it will keep doing so as long as the countries in crisis seem to be making an effort (some suggest that they would do so anyway). But the markets do not understand the EU, nor are they political beasts, hence the instability. On the other hand, markets are also selective – i.e. the same time they ‘worry’ over the Eurogroup’s outcome, the value of the Greek bonds is going up. Hence, it is not perhaps easy to make short-run calculations about the markets. Therefore, it might be best to solve Europe’s/Eurozone’s issues first, and then, if market instability persists and Credit Rating Agencies continue to move to incomprehensible decisions, then deal with the issue of the markets. (In a weird way, doing these in the opposite order would be ‘undemocratic’ – though this opens the debate of who is to judge for the public optimum – free markets or states – with the interesting twist of the Credit Rating Agency Market not being really free, rather operating as a cartel).

2. The winner in terms of domestic public opinion is Merkel, as her voters, that are now giving her a clear lead in the polls, favour a strong line on Greece. The loser is the already under-severe-pressure Greek coalition govt, that has done everything required and seems helpless, weak and dependent to the eyes of the Greek people the longer it does not receive the bail out agreed. One can twist this and say that in a way there is the positive dimension that the IMF&Eurozone are working on a full deal including one on the sustainability of the Greek debt. So a positive outcome on this might be a significant gain on the effort of overcoming the European/Greek crisis. Clearly however, the longer Europe procrastinates, fail to reach agreements, and central political parties across the continent lose influence – the whole of the EU and the m-S lose. Who wins in this greater picture? Those groups who have ‘invested’ or gambled better on the failure of the Euro.

Simon Usherwood, Senior Lecturer, Department of Politics, University of Surrey

1. The negotiations for previous multiannual financial frameworks (MFFs) have also been like this: the MFF sets out general targets and limits on spending for a 7 year period, so all member states have a big interest in getting a deal that works for them. It’s also the point where they can challenge the arrangements for funding, which also has the potential for big impacts.

In this light, last week’s European Council wasn’t so surprising. There was some progress and no one came out looking like they were totally marginalised. There are two main downsides. One is that a deal is unlikely until early next year, which means that the current budget is rolled over, but has happened before (although not for a long time) and won’t cause too many problems.

The other is that EU is still facing the eurozone crisis and this is an unwelcome distraction, especially with the discussions about a banking union that also need lots of attention from leaders. There is a risk that financial markets will see this as a bad sign, but it’s not happened yet, so one would hope that they have already pricing this delay in.

2. It’s hard to see anyone who’s come out of this looking good. Commission and van Rompuy didn’t obviously make a big effort to prepare for this: the Commission almost certainly missed an opportunity when it didn’t offer to cut staff costs at all. The French didn’t seem too bothered by it all, beyond getting some movement on CAP. The British acted rather typically, but with a coalition of other states, so in that sense they did alright, especially since they won the media debate about cutting costs. And the Germans seemed happy to let things slide for now.

So we’re left without a MFF, and without an immediately obvious solution. Most worrying is that most of the talk was about the size of the budget, rather than what the money does. Hopefully, that will shift over Christmas, but I wouldn’t expect too much to change.

Frank HägeLecturer in Politics, Department of Politics and Public Administration, University of Limerick

1. No, this is nothing terribly unusual. There have been disagreements in the past. Of course, the increased number of member states after enlargement make reaching agreement more difficult than before, but this has happened loads of times before in the history of the EU. Some compromise will be found in the end, even if it takes a while.

2. In the absence of any agreement, it is difficult to talk about winners or losers. Nobody is terribly hurt yet by the lack of agreement (which might be one of the reasons for the deadlock).

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