Opportunity or threat #2 – Will Cameron’s EU opportunity arise at all?

Is europe to be saved from ever-deeper union by the German constitutional court, at the expense of Cameron’s pledges about removing the UK from various EU competences? Events are afoot, from the previous article it was assumed that a move to economic union would rapidly be tabled in order to save the Euro, however, this failed to consider the impact of a ruling given by Germany’s constitutional court which asserted the sovereignty of the German Parliament which stated the following:

The Court has ruled the Bundestag and the Bundesrat need to have a full vote before the government agrees to extension of powers of the EU, for example a shift from unanimity to qualified majority voting. Furthermore, and this is probably the most sensational aspect of the ruling, the Court ruled explicitly on the question of the finality of European integration, by stating that ultimate sovereignty must rest with the member states.

This would not normally be a problem as Germany has always had a pro-EU electorate, so the German Parliament would have had no problem reflecting the benign indifference towards ever-deeper-union that has been the default attitude to date. Not so now; Germany as a nation is utterly indignant that the warning of malfeasance laid against the Mediterranean nations has come true, worse than that they will be asked to bail-out this fiscal incontinence, and most objectionable of all that Euro nations have the cheek to complain that Germany bears the blame by maintaining too competitive an economy.

So, there will be no European Monetary fund in the short term, instead Greece will be sent packing to the IMF and whilst this is a little embarrassing for the Federalists it extricates Chancellor Merkel from the need to seek the German parliaments ratification of an act that will put economic governance in the hands of the EU.

What this means for David Cameron is that he won’t in the next year be faced with an exhausting period of showdown with the EU, instead he will get to concentrate on the economy which is what he wants to do anyway.

However, the solution of the IMF is the equivalent of giving a band-aid to a haemophilia sufferer, because as the down-rating of Portugal is making clear the Eurozone will never function adequately until monetary union is backed up by economic union, and even that is only a treatment rather than a cure because there is still no solution to the problem of harmonising national economies against the will of their respective electorates, a point ironically emphasised by Bini Smaghi of the ECB:

Speaking to Die Zeit, ECB board member Bini Smaghi warned that Europeans do not represent the majority within the IMF, and that the “US and the Asians are increasingly influential.”

However, even if the treatment does not cure it must still be administered in order to control the condition, so there will indeed be a growing economic union in the years ahead. This glacial process will begin when the crisis has passed, when the German electorate have finally forgotten the sins of their neighbours, and possibly not before the federal German election in 2013 which would put it towards the end of Cameron’s first term in office should the Conservatives win the May election (an event which is far from certain).

At this point, the referendum-lock on Europe will force Cameron’s hand, and then it once again becomes a question of whether the EU chooses to play it the easy way and restrict economic convergence to the Eurozone, or whether they do things the hard way……..

Update – 26/03/2010

It is confirmed; Greece will go the IMF, the Eurozone nations remain nebulous on their responsibility for the currency, but most interesting of all is that China has ‘told’ europe it is time to seriously consider economic union:

“We don’t see decisive action that tells the market, ‘We can solve it, we can close it,’ so the market is very volatile,” he said. Beijing has repeatedly questioned the safety of dollar assets. This is the first time it has questioned the euro in such terms.

“China is really the big story of the day for Europe,” said Simon Derrick, currency chief at the Bank of New York Mellon. “Nobody at China’s central bank gives a speech like this without clearance from the highest level. They are saying, ‘We have a lot of money invested in your debt and we think it is time for you to get your house in order’,” he said.

Update #2 – 27/03/2010

It is hard to see how this will dodge either the referendum lock or the German constitutional court:

“We consider that the European Council should become the economic government of the EU,” said the Franco-German text.

To get around the G-word, “ideologically unacceptable” to Britain, but insisted on by Nicolas Sarkozy, the French President, Mr Van Rompuy came up with a novel solution to keep everyone happy.

As a result, the French version of the binding summit text, agreed on Thursday, used the original words “le gouvernement économique”.

To spare Mr Brown’s feelings, the English text used the more innocuous and less controversial term “economic governance”.

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