Governance of EU has evolved in a disturbing direction

 

The recent European Council on the Greek crisis showed that the Big Three now dominate proceedings, writes GARRET FitzGERALD

DESPITE WIDESPREAD concern that there might not have been agreement at last week’s European Council on action to assist Greece in its economic crisis, approval of such a scheme did emerge. This was based on a document devised by the German chancellor and the French president, and amended by the European Council during a two-hour pre-dinner discussion session last Thursday week.

Of course, this scheme could not involve a bailout for Greece, which is excluded by the terms of the Maastricht and Lisbon treaties. What Greece got was an arrangement under which, if necessary, it could be offered loans of €25 billion – two-thirds from other EU member states, and one-third from the International Monetary Fund. Any such loans would not be “soft” ones, but would be offered at market interest rates. This scheme was seen as an ultima ratio, or last resort. It is not clear how this arrangement will help Greece. Financial Times columnist Wolfgang Munchau has argued that such loans could provide only psychological support – which he described as a “dangerous confidence trick” that would backfire. Meanwhile, Standard Poor’s said that its rating of Greek public debt would be unaffected by the European Council decision.

The European Council also addressed the issue of how to ensure against any future repetition of the type of crisis that has affected Ireland and Greece – which has threatened not just the financial situation of these two countries but has also raised some doubts about the survival of the euro zone itself.

This European economic governance issue is now to be tackled by a task-force of “wise men”, one from each EU member state, together with Herman Van Rompuy, chairman of the European Council; Jean-Claude Juncker, president of the finance council; Jean-Claude Trichet, president of the European Central Bank; and the Spanish rotating president of the council. By June the European Commission is to produce proposals for consideration by this group, which is to report to the European Council by December.

It is now clear that the flagrant failure of quite a small country such as Ireland to maintain its tight pre-entry euro zone discipline, and of Greece ever to have achieved this discipline, has the capacity to destabilise the whole monetary area.

All one can say at this stage about this governance review is that it would be desirable that our Government appoint someone internationally respected for economic expertise. It will be important that the Irish member of this group would be someone who would carry weight in these discussions – in the course of which the Germans and/or French might be tempted to raise the thorny issue of harmonisation of corporate tax rates.

The proceedings of this recent meeting of heads of government have drawn attention to the fact that since the European Council was established at the Paris Summit in 1974, the governance of the European Union has greatly evolved – in what I regard as a disturbing direction.

In 1974, with the support of the Benelux countries and of a courageous French president of the commission, François Ortoli, I succeeded in blocking an attempt by the three large states to use this new body as a means of bypassing the commission’s role of legislative initiative, which has always provided protection for small states. For a long period thereafter the heads of government of the three larger states, unwilling to submit themselves to taking decisions exclusively on the basis of commission proposals, confined themselves at European Council meetings to broad “orientations”. This left actual decisions on implementing commission proposals to ministers attending different formations of the ministerial council – each of them supported by civil servants with their own specialised expertise. This has all changed, and there are now four formal councils each year, plus two informal ones – together with extra meetings for specific purposes.

Meetings of the European Council tend to be dominated by the Big Three, because, in contrast to the period when there were only nine member states, and five or six of them could easily combine to oppose undesirable developments, 27 states, some with divergent interests, are much more difficult to mobilise in defence of their common interests.

The last time such a combination of the small was attempted – with success – was at the convention that drew up the first draft of what became the Lisbon Treaty. Our minister for Europe, Dick Roche, organised and chaired weekly meetings of representatives of 16 smaller states. That informal committee kept an eye on the activities of the larger states, and in conjunction with John Bruton as an active member of the governing presidium of the convention, monitored particularly the manoeuvres at the convention of its strong-minded big-country president, Giscard d’Estaing.

While foreign ministers attend the actual meetings of the European Council, in the evening the heads of government and foreign ministers dine separately.

No doubt the informality of these occasions has its own merit, but the absence of any authoritative record of any decisions now effectively made at the heads of government level can cause problems – especially for foreign ministers who then have to implement whatever may have been decided. I recall that at a much earlier, and very messy, heads of government meeting in Copenhagen in late 1973, prior to the formal establishment of regular council meetings, we foreign ministers received no coherent account from our bosses of what they had agreed at their “fireside chat”. As a result we had to invent a fictitious account of what might have happened! This is what can happen when heads of government meet on their own, without even a notetaker!