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Don’t let your slightly racist gran be the only one to take on Europe’s silent coup

In the biggest shift of powers to the EU in 50 years, under Europe’s new system of ‘economic governance’, Brussels gets a veto over all wage, public spending, and taxation decisions

April 8, 2011
12 min read

Leigh PhillipsLeigh Phillips is a regular Red Pepper writer and was previously a Brussels-based journalist and Red Pepper's Europe correspondent.

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She’s lovely really.

She has a painting of her you did when you were six framed in the kitchen, and however old you may be now, she still keeps Mars bar ice creams in the bottom freezer-bit of her little fridge for when you pop over. And the baby-blue and lemon-yellow Marks & Spencer’s golf shirt with three sailboats on the pocket that she sent you in the post last year for your birthday is now just quaint and endearing instead of the mortifying sartorial disaster similar gifts had been when you were thirteen (mainly because now as you live in your own flat, your mum can’t force you to wear it in public).

It’s just those slightly racist comments your gran makes from time to time that irk. All right, completely racist comments.

‘It’s terrible! Did you hear? Romanian gypsies are eating our donkeys! I tell you, ever since we joined the common market, waffle, waffle, nativist ignorant waffle, Churchill would never have waffle, waffle…’ But you’re only there for the weekend, so you zone out from most of it or politely disagree, but you try not to make too much of a fuss.

Aaaand they’re banning eggs by the dozen! I read it in the paper last week. It’s because it’s not metric, those men in Brussels say,’ and you reply that you really don’t think that’s the case, but thank her for the 240 millilitres of sugary tea she brings you and, as a distraction, exclaim: ‘Ooh, look, nan! Countdown’s on in a minute!’

But she’s in full flow now and immune to the seductions of soporifically unchallenging televisual word-puzzle shows: ‘Aaand they’re going to write our own national budget before our own parliament gets to see it! I said to Beryl next door, “It’s just not democratic.” And she said we should set up a table outside the co-op with a petition, and –’

If she had been playing the Mantovani on the record player it would now do a comedy scratch and go silent at this point as you interrupt: ‘Sorry, nan, what did you say?’

You drop your copy of your gran’s Radio Times because, well, yes, for once that could be true. That is indeed something the EU might just do. You’ve heard about the austerity Brussels and the IMF are imposing in Ireland and Greece and other countries that have been bailed out. But you’re confused. You’ve not seen much about this what your gran’s on about on Newsnight or in the papers that you read but your gran never has. ‘You just mean Greece, right, nan? It’s not all of the EU. Where did you hear that?’

‘No, no. It is all of the EU. It’s this ‘European Semester’ or ‘economic governance’ something. It’s all very complicated. But it’s just not right. Surely we should have a say about what we get to spend our own money on before those eurocrats?’

And she fishes out a copy of the Daily Express or the Mail from a few days ago and you have a read, and attempt to glean the essence of what the story is about while ignoring the worst of the blimplish prose. Struck, you go online, do a bit more research and you think: ‘Heavens to murgatroid – for once she might be on to something here. This is huge! They’re not just writing our budgets for us – in effect, Brussels is giving itself a veto over all wage, public spending, borrowing and taxation policies in every member state! This is the biggest shift in powers in the EU in 50 years! Why haven’t I heard about this before?’

‘You’re right, nan! We’ve got to stop this! Let’s go and speak to Beryl…’

Europe’s Silent Coup d’etat

It is remarkable how little coverage there has been in the UK of an utterly revolutionary, multifaceted package of moves recently unveiled by the EU as a response to the eurozone crisis that fall under the rubric of what Brussels bods call ‘economic governance’.

There have been a couple of articles in the tabloid press, but even there, they are buried underneath the heaving mound of porkies about how the EU allegedly wants to harmonise condom sizes, ban smoky bacon crisps because the woodsmoke seasoning may cause cancer, and rename chocolate ‘vegelate’.

According to a source close to the German Finance Ministry, the UK ambassador to the EU, Kim Darroch, told him that it was a good thing that Ukip and the tabloids obsessed about excessively curved bananas instead of the economic governance proposals, in particular one element called the ‘European Semester’. “If they only knew what’s happening!” he said.

It is well known that the quid pro quo for Greece and Ireland’s EU-IMF bail-outs, the pair have had all domestic fiscal policy decision-making amputated without anaesthetic by a team of commission surgeons trained by the German finance ministry and using hacksaws and chisels that appear to be on loan from the University of Chicago Economics Department. Portugal – even before it applies for a bail-out – has for some time now had its government programme dictated by Brussels and Berlin.

But these are all supposed to be emergency measures and have featured prominently in the media. What is less abroad in the public discourse is how the EU has signed up for similar centralisation under the aegis of Brussels of national budgetary decision making for all member states as of 2011.

If much of the UK has not cottoned on yet, the commission is fully aware of the centripetal shift in powers.

“What is going on is a silent revolution – a silent revolution in terms of stronger economic governance by small steps,” commission President Jose Manuel Barroso said in June last year after the EU Council had given the nod to the commission’s initial concepts for economic governance. “The member states have accepted – and I hope they understood it exactly – but they have accepted very important powers of the European institutions regarding surveillance, and a much stricter control of the public finances.”

But it is far less a silent revolution than a silent coup d’etat.

Under legislation already approved, the European Commission and its senate-like corollary, the European Council* direct a year-long schedule of national budgetary oversight called the ‘European Semester’. The commission first produces a broad outline, called the ‘Annual Growth Survey’ [AGS], a set of guidelines for the sort of budgets it would like to see all member states craft for the following year. Already published in January for the 2012 budget year, there is no democratic input, not even ‘stakeholder consultation’ that feeds into the drafting of this document.

Jacques Delors, the former commission president and a man very far from any sort of trenchant critic of neo-liberalism, called the Annual Growth Survey “the most reactionary document the commission has ever produced.”

After multiple rounds of stringent austerity in every EU member state since 2007, the document declared that for all the billions of euros, pounds, kroner and zloty already slashed from budgets, this misery is not enough.

The AGS demands still further welfare reform, including more conditionality attached to benefits, and a raising of “premature” retirement ages. Labour markets should also be made more flexible and “strict and sustained wage moderation” should be maintained. Brussels is also demanding a move away from taxation on labour toward regressive indirect taxation such as VAT.

The European Parliament, the only directly elected EU institution, may issue an opinion about the survey, but the chamber cannot amend it. The survey then gets the green light, with amendments from the Council by the end of March.

Member states must then submit their budget plans for approval from the commission and council before they present them to their own national legislatures . The UK has managed to winkle a phrasing that allows it to submit its budget to parliament first, but the broad outlines must still be submitted to Brussels in advance, producing the same effect.

Then, if the budget plans do not pass muster, the commission issues detailed, country-specific ‘recommendations’ including on wage levels and spending on social services.

Next, if a country does not adhere to these recommendations, the EU takes punitive action. While the commission and the European Council cannot block a national government’s budget if it does not adhere to the recommendations, they can issue alerts, sanctions and, for eurozone countries, annual fines of 0.2 percent of a country’s GDP. Non-compliance for three consecutive years with European Semester demands may result in fines of up to 0.5 percent of GDP.

Based on 2009 figures, for a country the size of Spain, such a fine would amount to €5.25 billion.

The UK, outside the eurozone, is not subject to the fines, but instead ‘peer pressure’ from other member states. Peer pressure may not sound like much, but remember that it was peer pressure and not any threat of fines that forced Ireland into accepting an EU-IMF bail-out package Dublin was loth to request. Even without fines, there may be the possibility that EU structural funds may be withdrawn instead, producing what amounts to a fine as far as revenues are concerned. Off the table – but only for the time being – is the idea that a country’s votes in the Council would be suspended. That is to say, a country would be forced to implement EU law, but have no say whatever over whether laws are approved.

Alongside the European Semester are other proposals, currently in the pipeline but yet to be approved, that would set similar ‘corridors’ of acceptable behaviour by member states to prevent ‘macroeconomic imbalances’ over the longer term. There is a cross-over here with the European Semester, but where the former covers a single annual budget, the proposals to prevent imbalances between member states is open-ended.

The proposals to prevent imbalances may cover such problems as trade deficits, underperformance in price competitiveness, levels of private and public debt, housing bubbles, the ‘misallocation of resources’ and ‘unsustainable levels of consumption’, but in theory, it could be anything.

This is because, at this Mad Hatter’s tea party of market fundamentalists, definite, quantifiable indicators – specifying what precisely at what point and in what policy area a country has reached a macroeconomic imbalance – have yet to be written and, because the commission argues that the importance of different imbalances varies over time, they actually will only be defined on an ad hoc basis after the commission finds that a member is guilty of this crime.

To be clear, a state will be found guilty of macroeconomic imbalances first and only then will the commission define what that means.

The commission then initiates an ‘excessive imbalance procedure’ – punitive action along the same lines as those envisioned in the European Semester, with similar fines and sanctions.

The European ‘economic governance’ project is also impossible to track or influence by citizens, journalists or civil society. The entire process is performed by experts and lawyers behind closed doors in the commission and the Council. Their names are not known to the public and reporters are not allowed to ask questions of the technocrats who make these decisions that have such transformative effect on hundreds of millions of lives.

Jyrki Katainen, Finland’s finance minister, explained in January why such a radical step was necessary: the new system of economic governance is about taking on the bloc’s powerful competitors to the east and across the Atlantic: “If we manage to co-ordinate our efforts through this new process, the EU will become stronger and more resilient to potential pressures from the world markets.”

The project is an attempt to achieve nothing less than a massive deflation across the bloc – through more flexible labour markets, lower wages, the laceration of pensions, the commercialisation of public services where they can’t be privatised, and a reconfiguration of education and research so that they more immediately serve the needs of business – in an attempt to return competitiveness to the EU in the face of an all-but-welfare-state-less US and a sweatshop-ridden China.

The Daily Express is right. The EU is up to no good.

Because the Sun and the Mail and the Express rage daily against the commission supposedly forcing clotted cream to be made in Brittany and making circus performers wear hard hats and because the Tories are out tubthumping against the European Court of Human Rights (which, FYI, is actually not part of the EU) for giving prisoners the right to vote, it can seem like you’re siding with Kilroy and Ukip and Norman Tebbitt and your slightly racist gran if you criticise the EU.

It’s okay. Your gran’s right this time. That thing she read in the paper the other day about the men in Brussels out to destroy British democracy?

It’s true.

(But, of course, also true about Greek democracy, and Irish democracy, and French democracy, and…)

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Leigh PhillipsLeigh Phillips is a regular Red Pepper writer and was previously a Brussels-based journalist and Red Pepper's Europe correspondent.

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