Jacob Christensen

Over the years, I have voted on the European Monetary Union twice – or even three times, depending on how you count: The 1992 Maastricht referendum in Denmark, the 2003 EMU referendum in Sweden – and technically speaking the 1993 Danish referendum on the Edinburgh agreement also included the issue of Denmark’s relation to the future monetary union. Among us, I will admit to having voted “yes” both (all three) times even if I had become more critical of the project over the years.

The EMU raises a number of political and economic issues. Basically, there were two arguments for the monetary union: First, it should facilitate trade in the EU; second, it should help create a common identity. The question here is if the EMU and the single currency were and are necessary conditions for reaching either goal – even if we should also be critical of developments on the financial markets, they have come up with a number of instruments designed to lower the costs of currency fluctuations during the past thirty years and as for bank notes as a means of creating identity, well, yes and no. The Deutschmark-nationalism is a well-known fact.

Back in the early 1990s, I found the technicalities of the entire adventure hard to grasp even if I actually attended a lecture where Niels Thygesen explained the process and the institutional set-up. Maybe I was theoretically challenged, maybe Thygesen wasn’t a master of didactics or maybe there was some kind of flaw in the political set-up. Still, all things considered I thought the Maastricht package was better than letting what was then the EC go sideways.

In 2003, I had some more specific issues with the EMU. In 2000 the Danish Economic Council had more or less destroyed the basis of the “yes”-campaign by pointing out that joining the EMU had no economic benefits for Denmark – an important part of the reason was that the Danish currency had been pegged to the D-Mark and later the proto-Euro since 1982 – and that membership was a purely political question. We would have expected Danish politicians to receive this conclusion enthusiastically but the problem is that Danish EU-politics in general has relied on de-politicising issues related to Europe. Similarly, monetary policy has been depoliticised in most Western countries since the 1980s by handing over competences to the national reserve banks.

The situation in Sweden was – and is – slightly different, as the Swedish currency has been floating since the mid-1990s so technically Sweden has some degrees of freedom with regard to monetary policy which Denmark do not have.

In any case voters are a curious bunch: They do not like “politics” but on the other hand they do not like the idea of not having any actual influence on central political issues – such as economic growth and employment.

And this was one major problem with the EMU: It is copied on the (West-)German post-war tradition of fiscal and monetary policy which basically states that employment and economic growth are subordinate to price stability, so if you adopt the EMU, you also make a political choice which not everybody would agree in.

Another problem is that EMU assumes that economic development in all member countries follows the same economic cycle. This raises the question what happens when some countries are going through an economic slump while others are in a boom. The EMU does not have the instruments to deal with this situation, except banning countries with weak growth from boosting their economies. There are more problems, but this will illustrate the political-economic-institutional corner the EMU countries risked painting themselves into.

Finally there was the question about governance in the EMU. Having guidelines is all very well, but problems arise when they are not followed. A more thorough examination of Greece’s political and economic institutions would probably have kept the country out of the EMU to the benefit of both Greece and the EMU. Similarly, France and Germany forced the EMU to bend its rules with regard to deficits and debt in the early 2000s.

Add a major global economic slump and the EMU vehicle is very likely to hit the wall in a violent matter. We are now in a situation where four or five EMU countries are facing a choice between a decade of severe austerity and slow (if any) growth on the one hand or leaving the EMU suffering the penalties of the financial markets. This is a recipe for severe social disorder: 2012 may not be 1932 but politicians and bureaucrats would still do well to remember the name “Heinrich Brüning”, the German chancellor whose technocratic austerity policies led Germany to the brink of civil war.

At the same time, politicians are slowly recognising that the existing political-economic institutions are inadequate and have to be amended. But, first, passing institutional reforms in the multi-level EU system is notoriously tricky, and, second, the process has already revealed the cracks in the relationships between EU countries. It is not outlandish to consider the possibility of the UK leaving the EU or the Eurozone breaking up into two or more parts.

So to conclude: What the EU needs now is not another patchwork agreement (even if the Union has to muddle through in the short and medium term) but a reassessment of the raison d’être of a political and monetary union and the adequacy of its institutions.

In many ways, David Cameron has been an interesting acquaintance as British Prime Minister. I suspect that a lot of observers assumed that he would end the Thatcherite era on the British right and lead the Conservatives to the centre of British politics but instead the coalition with the Liberal Democrats now in almost every respect looks like one of the most right-wing governments the UK has had for ages – something which also raises the question of the strategies and political efficacy of the LibDems. But we will leave that for later.

The relationship between the UK and Europe is an equally intriguing issue. To an outsider, it has long seemed obvious that the Tory right (supported by the Daily Mail and the Daily Telegraph) would prefer to leave the EU and better yesterday than today. The breakdown of the latest round of negotiations over EMU rescue packages actually makes a British exit from the de facto EU a likely prospect, even if I would expect Britain to formally stay in some kind of zombie-EU.

But the process and the outcome raise a lot of questions which I am not really competent to answer. Still, here goes:

1. How much of the breakdown was due to Cameron (and Downing Street, etc) being an incompetent negotiator? This report from the Economist more than suggest that Cameron s****d up in an epic way in presenting the British position – and if Cameron wasn’t incompetent in a technical sense, he surely miscalculated Britain’s influence completely.

2. While the Tory backbenchers will surely celebrate a breakdown of UK-EU relations in a very loud way, the question is if the UK financial sector (“The City”) will be equally happy over losing influence in the EMU. Will yesterday’s events undermine an alliance which has otherwise been fundamental to the strength of the Conservative Party?

3. The institutional design of the Euro17 or whatever the new arrangement will be named also raises some interesting questions. On the one hand, the Euro17 agreement will strengthen the supranational element in economic and fiscal policy compared with the present arrangements, but on the other hand the institutional setting will – at least de jure – be more intergovernmental than today’s EU, eg. with the European Commission being sidelined. This is very weird, given that Britain has always favoured an intergovernmental EU while France and Germany traditionally have pushed for more supranational government in the EU. But then again: EU politics always had a slightly absurd element to it.

As I say: I have no good answers so far, only questions.

A guide for lazy journalists, provided by Kosmopolito.

Any similarity with real existing journalism is … oh, well…

Compared to the latest strange twists in the Euro-crisis, Rufus T. Firefly almost comes out as a competent and reliable leader. So, can we find any political logic in all of this?

First, experts tell us that the Euro-zone problems caused by Greece and Italy are different by those caused by Spain, Portugal and Ireland. The economic crises in the latter three countries are basically due to the effects of the EMU creating low rates not only in Germany but in the entire Euro-zone. Low rates mean cheap money and that has meant property bubbles. Once they burst, the economies of Spain, Portugal and Ireland were thrown into a deep recession.

So the question here is if creating a European monetary zone was a good idea if the national economies are not (or cannot be brought) in tune.

Greece and Italy are different creatures altogether. Here the fundamental problem is that the countries lack good economic governance. This is putting it mildly: We could also say that the political economy in both countries rest on clientilism and that neither country has a functioning tax system. There are degrees of Hell here: Greece is probably in a worse state than Italy while the Italian economy for obvious reasons are much larger than the Greek.

So the question here is why the two countries were admitted to the EMU in the first place? Political prestige – both on the side of the EU and the individual countries – has a lot to do with it.

Second, what do you do when you find yourself in quicksand up to the neck? The issue here is that the creation of the EMU and the adoption of the Euro in PolSci lingo is path dependent: Getting in may be difficult and expensive but the costs of leaving may be almost prohibitive both politically and economically. Which goes a long way towards explaining why European leaders face some major problems in finding a solution to the Greek (and Italian) mess.

But wait: It gets worse. Remember that political leaders operate on multiple levels – the European and the national. So long as political leaders can and will deliver on the agreements made on the European level, negotiations are complicated. European leaders know and accept that agreements may be due to national votes (or in some cases referendums) and this is more or less elegantly taken into account at negotiations.

But what happens when a national political leader throws a bomb and announces a referendum after an agreement has been reached? This is changing the rules during the middle of the game and more than likely to make other EU leaders angry, disillusioned or both. There may – theoretically – be a rationale on the national level: Papandreou is effectively facing a vote of no-confidence in parliament and could react by taking his case to the nation.

The problem here is that referendums are usually extra veto points, especially when we are dealing with measures that are unpopular with the electorate (We will leave aside that the Greek economic policy has been unsustainable in the long run: The Greek electorate are not exactly used to having to relate to responsible economic policies). If – as we expect – he loses the referendum, he will be dead politically and the hope of Greece gaining a stronger position at a renegotiation (which I would suspect will motivate a lot of Greek voters) looks rather unrealistic. And even if he wins the referendum, Papandreou is likely to be met with suspicion in Brussels – after all, he was the man who changed the rules of the game during the previous match. How can we be sure that he will not engage in another round of match-fixing the next time?

And in the meantime, time flies and if there is anything the Eurozone does not have then it is time. If Papandreou sticks with his plan, we should expect speculative attacks against the Euro – and to be perfectly honest, I would also expect rounds of shenanigans from the Italian government. All stuff designed to undermine economic stability in the Eurozone.

Very bad news indeed. We may need the Marx Brothers for relief.

The question here is: Does the Danish government really believe that the European Commission will not be using and referring to (its own translation of) the original text in Danish about the border controls when it decides about its compliance with the Schengen Agreement?

Marlene Wind (in Altinget.dk) appears to argue that DF is more Schein (or symbolism) than Sein (or content) when it comes to the effects of the political agreements which the party has entered with the Danish government. On the other hand we can read reports about Denmark being criticized and perhaps even isolated politically in the EU for its policies – something which presupposes that Danish policies have more than just symbolic effects.

The problem with DF’s influence on Danish politics is a tricky one. Generally, the trade-off between the Lib-Cons government and DF appears to have been DF support for the government’s economic politic in exchange for government concessions on immigration and law-and-order issues mixed with hand-outs on selected social policy items. And Inges Kattehjem, not to forget.

Needless to say, one complication is that the government (and the Liberal Party, in particular) has placed itself close to DF on the authoritarian-libertarian axis so concessions to DF are not necessarily very obvious in policy terms.

I was contacted by the French site Toute l’Europe regarding the border controls. Hope my profound thoughts make sense.

Considering that the Danish EU treaty opt-outs are considered to be politically important, the most interesting aspect of Lars Løkke Rasmussen’s discussion of the possibility of an all-or-nothing referendum in 2011 was the lack of reporting. The news ticked in on my computer at 3 am last night (yes, I have a rather warped sleep cycle) and I had expected Second Coming of Christ-style headlines on the Danish news-sites.

Instead – well, let’s discuss this later.

One reason for this could be that Løkke’s suggestion was aired in a meeting with Liberal MEPs; hardly the kind of setting which makes big waves in the Danish political pond. It’s in Brussels, you are supposed to be EU-positive, etc, etc.

Still, there might be four reasons for Løkke to push for a referendum before the summer break in June.

1. The Franco-German Euro-pact has created a window of opportunity. As the 2000 referendum showed, it is very hard to run an effective campaign if there is no visible reason to do so. The spectre of Denmark being marginalised in the EU following the adoption of the revised rules for economic cooperation could be used to motivate doubters to vote “yes” to the EMU.

2. Denmark will be taking over as EU chairman in 2012 and this could also work as a window of opportunity. As it is, Denmark’s role will be circumscribed by the opt-outs and while this is something which will be felt mostly by ministers and civil servants, it could be put to use as an argument for abolishing the opt-outs.

3. A recent poll showed a marginal majority for abolishing the opt-outs in an all-or-nothing referendum.

4. The opposition is split. In theory, the Social Democrats want to abolish all opt-outs while SF wants to keep the EMU opt-out. Obviously, this can be used by the government in a campaign.

On the other hand, there are also arguments against:

1. The government hasn’t done the ground work for a referendum. Instead, the strategy of first Anders Fogh Rasmussen and then Lars Løkke Rasmussen has been to postpone any discussions and decisions.

2. We are extremely close to the general election and the EU debate is likely to be drowned in the noise from the general political debate.

3. While the Liberals and the Conservatives may agree on abandoning the opt-outs, there are also disagreements among the centre-right parties. Both DF and Liberal Alliance oppose full Danish membership of the EMU.

4. The public opinion is fickle and polls have shown varying results, especially with regard to the EMU opt-out. If we have a serious campaign – either with each opt-out decided independently or in a all-or-nothing style – the EMU question and its implication for Danish economic policy may drown out the other two issues.

Lars Løkke Rasmussen is a curious politician who plays with high stakes and he could be the type of political leader who would hold the political agenda hostage. On the other hand, the prospect of a defeat in a referendum in the run-up to a general election will cause cooler heads to ask for restraint. Or to conclude: I would be surprised to see a referendum in 2011.

As if the world didn’t have more serious issues to consider – like, say Congo – LEGO� bricks are now all the rage in Brussels. Or perhaps not.

But I find the idea of Sweden as an IKEA package (holding JAS Gripen fighters) pretty funny.

Following S�ren Pind, the Liberal Party’s failed candidate for mayor of Copenhagen and now foreign policy spokesman and all-round noisemaker, can often be quite entertaining. But let me answer Pind’s latest question – “When did we ever vote on EC competences in immigration policy?” – and provocation – “Let’s just ignore the European Court of Justice!”.

Well, first of all I’ve taught European politics for a number of years and my first and most important piece of information when it comes to the ECJ is:

If there is any room for interpretation, the ECJ will decide in support for further integration under EC regulations.

So the lawyers in the Justice and Immigration Ministries really ought to have known about this, or else legal education in Denmark is a few decades behind the developments.

And the answer to Pind’s question wil be: October 1972.

Turning political questions into legal decisions may not always be a good idea, but the competences of the ECJ and the general line of its decisions are not exactly a secret. Courts are not pro-active so it takes a complaint before issues such as these hit the fan public agenda. And we will no doubt be seeing the government put quite a lot of effort into trying to salvage the Danish regulations during August and September.