Monday, May 13, 2013

EU politics: one treaty to cover them all

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Members of the German government have been blowing hot and cold on treaty change for so long now that it is difficult to know what to make of the thrust of their statements – especially as they often contradict each other.

Another complicating factor is the general election in September, so everything has to be seen through the filter of domestic politics – further complicated by the emergence of the AFD.

This time, though, it's our old friend, Wolfgang Schäuble and he isn't even talking to his home audience. Rather, he is in the Financial Times, perhaps speaking to a British audience, but perhaps not. 

Schäuble, we are told, is warning that a single EU bailout agency and rescue fund for ailing banks is legally untenable until a new treaty is on the block. The timing is interesting as we are just weeks away from a European Commission plan for a single bank resolution agency and rescue fund. 

This will be the second pillar in the eurozone's much-vaunted "banking union", but there is now some confusion about whether it can go ahead on schedule. 

Nevertheless, Schäuble is making his pitch, complaining – if that is the right word – that, "The EU does not have coercive means to enforce decisions", sinister words for someone close to the centre of German power. "Its historical roots are young", says Schäuble, then admitting, "Its democratic legitimacy could be improved upon".

In a more elliptical reference to the status of the EU, the German finance minister then adds, "What it has are responsibilities and powers defined by its treaties. To take them lightly, as is sometimes suggested, is to tamper with the rule of law".

What this suggests is that the limit if "treaty stretch" has been reached, and Schäuble is getting nervous about faking it. It may also be something to do with rumblings from the Bundesbank, and the continued unease at Draghi and his ECB stirring the euro pot, with his possible purchase of corporate loans, in breach of state funding rules. 

What usually happens next is that Merkel steps in and tells her finance minister to cool it – although the rebuke is rarely public, or direct. And then we enter another round of blowing hot and cold. 

Meanwhile, the signal will not have escaped Mr Cameron – or those of his advisors who can count to eleven without taking their socks off. They are looking for signs of an early treaty to hijack, and this could be the answer to a Conservative's prayer. 

At least the water should be nicely muddied as Mr Cameron grabs this lifeline to divert attention from his own growing disarray. 

However, Cameron should not get too excited. Schäuble is still talking of a banking union of sorts that can be had without revising the treaties, including a single supervisor; harmonised rules on capital requirements, resolution and deposit guarantees, and other trimmings. 

Using nice homely analogies, Schäuble calls this "a timber-framed, not a steel-framed, banking union". Ominously, he says this would serve its purpose and "buy time" for the creation of a legal base for "our long-term goal: a truly European and supranational banking union, with strong, central authorities". 

Even more ominously, perhaps explaining why he is talking to a British audience, he says this "legal base", aka treaty, could "potentially cover the entire single market". If that is the case, the British "referendum lock" kicks in. Be it Cameron or Miliband in a couple of year's time, we could still be having a referendum, this one on a new treaty. 

Let no one say that EU politics is ever boring.