How Americans see it

I avoided my colleague’s agony this morning by ignoring all British newspapers. Instead, I read the Wall Street Journal Europe and the International Herald Tribune. Both these American newspapers carried articles on the ECJ decision on their front pages, with a follow-up analysis inside the paper and, in the case of the WSJE, an editorial.

These are, one could argue, European American newspapers, aimed at a European audience. But they are English language newspapers, aimed at Anglophone readers and cover news from all over the world. The ECJ decision would be of interest to their readers but not of vital importance as it is for all member states of the European Union. (And that, ladies and gentlemen of the press, who are soooo bored with Europe, means the United Kingdom as well.)

The International Herald Tribune (the Trib, as it is known by its many readers) struggles to explain the decision that gives a little bit of something to everyone and gets the EU no closer to a solution of how to impose fiscal discipline on the member states, though they, too, seem to be under the illusion that the Pact applies only to the euro countries.

There is only one conclusion the newspaper can come to and to reinforce it , they quote the chief strategist at Invesco, an asset management firm in Frankfurt:

This is a political process. People in the market know that the stability pact is, de facto, dead.

As is the growth pact, presumably.

The Trib’s prediction is that the Pact will be kept but watered down considerably. In any case, as they rightly point out:

As a practical matter, the French and German cases will be considered under the existing rules.
That sets up the likelihood of another meeting of finance ministers, at which they will be asked to vote on whether to impose sanctions on Paris and Berlin for failing to meet deficit targets.
As the court noted, the ministers could rebuff the commission by failing to muster a majority vote. What the court objected to was that the ministers supplanted Brussesl with their own recommendations.

The article ends with a quote from Paul De Grauwe, an economics professor at the Catholic University of Leuven in Belgium:

We should have a little more confidence in our political system. We’ve been living in Europe for more than 50 years since the war, as we haven’t has a catastrophic debt crisis yet.

Clearly Professor De Grauwe’s understanding of the political process that underpins the drive to a single economic system is not as good as his economic knowledge.

The Wall Street Journal Europe describes the ruling and, indeed, the Pact itself as “unlikely to have any teeth”. (As a matter of some interest, where did the British media led by the BBC get the idea that this was a victory for the Commission?)

Indeed, the editorial of the WSJE seems to agree with some of our assessment both of the decision and of the media coverage:

Outside of Paris and Berlin, most of the reactions to the decision focus on the fact that the court annulled one narrow aspect of the decision made in November 2003 to hold the excessive-deficit procedure against France and Germany in abeyance.

In other words, the Court agreed that the Council has every right to reject the Commission’s demands (and, given that it is on QMV, probably will). What it has no right to do is change the actual rules.

For some reason, however, the editorial comes to the conclusion that

In the event, the decision was Solomonic, and reconfirms what should have beenb clear from reading the treaties in the first place: the EU is composed of sovereign member states that still possess the right, in many areas, to call the shots.

We recommend the editorial writers of the Wall Street Journal Europe that they read the treaties yet again. Though, actually, when one thinks about it, perhaps they should simply think a little more clearly what “sovereign states” means. If they have the right to call the shots in “many” areas, not “all” or even “most”, the definition starts slipping a little.