Cyprus bank account grab exposes EU's new feudalism

by Marc Glendening
 

The peasants of Cyprus are now truly revolting, following a decision by Angela Merkel and the other Eurozone heads of government to force Cyprus to grab private bank savings to contribute €5.8 billion towards an EU-IMF bailout. 

This edict demonstrates that the rule of law accounts for very little in the European Union. 

One of the big claims always made by supporters of Brussels-based governance was that the individual EU member states would be subject to a system based upon predictable and impartially applied rules, enforced by a Commission and Court of Justice above sectional, national interest.

The EU, they have argued, was therefore a continuation of the political project commenced by the European Enlightenment in the late eighteenth century. It has heralded, allegedly, another move away feudalism of the ancien regime. 

However, the situation in Cyprus proves what some of us have been arguing for some time. Namely, that the brave new world of the EU represents in reality a return to pre-modern, pre-democratic Europe. 

By Brussels fiat, savers' private property has been seized in an act of retrospective taxation. This is an arbitrary act of raw power befitting Louis XIV. A decision taken in private, passed on as a fait accompli to the EU's local agent in Nicosia, 'president' Nicos Anastasiades, and then imposed by him without reference to the national parliament - the same elected body that last week voted against divesting savers of their already taxed income. 

How convenient that Brussels and the Cypriot president have found a (constitutional?) way to circumvent the impertinent reservations of parliamentarians.

This is not the first time Brussels has made it all up on the hoof and disregarded the apparent rule of law that supposedly lies at the heart of the treaty. 

In 2003, Germany and France both broke the Stability and Growth Pact  rules that supposedly accompanied the single currency. No action was taken by the Commission for exceeding budget deficits of 3% and levels of national debt exceeding 60% of GDP. Portugal and Greece did, however, have their collars felt.

As many politically dissident Germans have argued, the various euro bailouts have contravened the supposedly strict Maastricht rules designed to prevent members of the single currency from becoming responsible for the debts of others. They claim, as a result, the EU treaty is now incompatible with the Germany constitution. 

When Alastair Darling was summoned to Brussels to discuss the eurozone crisis the day after the British general election in 2010, he thought there was no way Britain as a non-euro member could be forced to contribute to the bailouts. Wrong! The European Court of Justice and the Commission suddenly decreed that Article 122 of the EU treaty - a measure originally related to helping member states that had experienced a natural disaster - now covered those countries experiencing economic problems. Our then chancellor was forced to stump up £11 billion in loans.

At the beginning of the Cyprus bailout scandal we were told that this savings grab would be a one off. Now we learn from Jeroen Dijsselbloem, chair of the eurozone finance ministers, that this 'solution' might indeed be applied to other single currency countries as well. 

In Brussels anything goes and anything is possible. The European Enlightenment was about the rule of law and making the exercise of power accountable and transparent to the people. The EU is about reversing this process.

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written by Marc Glendening - Campaign director, Democracy Movement

For the latest campaign news and EU developments, follow us on Twitter: @DemocracyMovemt

EU's environmental failures expose its structural flaws

EUobserver reports today yet another high profile failure in the EU's grand-style, centralised policy-making, adding to a list that includes, most notably, the huge waste and imbalances of the Common Agricultural Policy, the depleted fish stocks of the Common Fisheries Policy and the euro austerity crisis.

Around 75 'green' NGOs are calling jointly for the EU to scrap its flagship environmental scheme for trading carbon emissions - the ETS - accusing the scheme of actually increasing carbon emissions instead of reducing them.

According to the EU, the ETS scheme is "a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively." It covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines.

But environmental groups, including Friends of the Earth and Carbon Trade Watch, say that by distracting from the task of reducing consumption and dependency on fossil fuels, the scheme has caused emissions to rise.

They also highlight how the EU-ETS facility to import cheaper emissions permits from abroad in return for the polluter supporting 'offset' projects in developing countries has provoked land-grabs, human rights violations and related environmental damage in poverty-stricken regions.

'Life support'

In recent months the EU-ETS has been described as being on "life-support" due to a collapse in the price of its carbon permits - the opposite of the scheme's intention. The EU hoped that higher carbon permit prices would incentivise businesses to cut emissions or invest in clean technologies.

Companies have blamed government handouts of too many free permits in order to limit the initial impact of the scheme on the highest polluters and are supporting a European Commission proposal to suspend future permit auctions, hoping that consumption of credits in the interim will prop up prices. MEPs on the European Parliament's environment committee are due to vote tomorrow on the Commission's proposed reform.

The scheme's faults mirror the EU's similarly ill-judged rush to promote biofuels through dramatic targets and offering generous subsidies to grow fuel crops. The result has been large-scale deforestation in developing countries as land was cleared for growing these newly lucrative crops, together with a dramatic rise in food prices as farmers cashed in by switching millions of acres from food production.

Faulty structure

There are huge questions here, of course, about the merits or otherwise of biofuels and about how best to manage and preserve our natural environment.

But the far more fundamental question these failures should provoke is about whether the EU represents the best structure for effective decision-making on the now wide range of policy areas affecting our lives over which it has control.

The course of the EU's development has now demonstrated repeatedly through the increasing number of 'grands projets' emerging from its structure that over-centralised decisions, made by institutions too far removed from democratic accountability, are much more likely to be of poor quality and detrimental to Europe's security and prosperity.

Break down the elements of EU decision-making and its easy to see how this comes about.

First policy ideas are boiled down to the lowest common denominator in order to secure majority support in the Council of Ministers, often involving persuasion based not on the merits of the policy in question but on horse-trading over the benefits a country or countries could gain from a completely separate forthcoming EU decision. 

Second, the counter-balancing and constructive pressure of having to answer to voters on pain of losing their jobs, perks and privileges is not something felt by the vast majority involved in make EU decisions. Not even large numbers of MEPs who, thanks to the list system the European Parliament employs, enjoy safe seats by virtue of being near the top of their party's slate of candidates.

Third, majority voting on most policy areas in the Council of Ministers prevents those countries that disagree with an EU policy or strategy (perhaps rightly) opting out of its effects, resulting in these poor quality decisions and the resulting damage being imposed uniformly on a pan-continental scale.

Finally, when policies go wrong, the cumbersome structure and huge turning circle of the EU means that changing course and limiting the damage takes years. Despite EU biofuels policy having being roundly criticised now for several years, no change is expected before 2020. Even then, the EU's inherent faults mean new decisions are unlikely to be better constructed.

EU unfit

The growing evidence of failed policies confirms the view of many that the EU's structure simply isn't fit to make decisions of the quality required in the huge areas of policy with which it is today entrusted.

Its activities on the environment have shown vividly the damage its poor decisions can cause, but this is likely to be the tip of the iceberg relative to the effect of EU decisions in the many other policy areas in which it governs with longer or more obscure feedback cycles. 

Damage to the environment is bad enough. The detrimental impact of intrinsicly poor EU decision-making on a wide range of policies imposed over an entire continent should give far greater cause for worry with respect to Europe's future prospects.

The best solution would be for the accountable leaders of the EU's member governments to open their eyes and take steps to reinvent fundamentally the EU's structure to become more flexible, dynamic, accountable and attuned to Europe's 21st century needs rather than those of the 1950s.

Since the multiplicity of interests propping up the existing structure makes this highly unlikely, it is Britain's relationship with the EU that must in fact be rebuilt from first principles - those of trade, co-operation and cultural exchange, rejecting outdated and flawed centralisation.

EU admin costs to be focus of new budget summit

EU leaders will meet in Brussels tomorrow for talks aimed at reaching a deal on the next seven year EU budget (Multi-annual Financial Framework) starting in 2014. 

Negotiations on the new MFF broke down in November, according to the Prime Minister due to the dissatisfaction of several countries over the EU Commission's refusal to cut administration costs.

The most recent MFF draft, circulated by EU Council president Herman van Rompuy before the last summit and revealed by Open Europe, proposed spending of €973.5bn.

However, it also proposed large reductions to the UK rebate and showed the Administration budget remaining at €62.6bn - a 12.8% increase over the €55.5bn in the 2007-13 MFF - rather than falling with other public administration cuts in EU member countries.

The Commission, supported by the European Parliament, originally proposed a 5.8% rise in the overall budget framework to €1.033tr, which included a 6% share for Administration.

Speaking to the European Parliament this week, the French President Francois Hollande said that he would accept a reduced EU budget settlement worth around €960bn, which aligns with a German figure circulated at the time of the last summit.

The British government's initial proposal was for a budget of €886bn but is now thought to be arguing for a total of around €940bn over the seven year period.

However, EU Parliament president Martin Schultz last week warned that MEPs would reject any deal that strayed too far from the Commission's original proposal.

EU taxes

Herman Van Rompuy has indicated that he will not circulate any new calculations before talks begin on Thursday. It is also not clear to what extent discussion over direct EU taxes are forming part of the EU budget negotiations.

The EU Council president before Christmas tried to turn the spotlight on Britain by proposing that proceeds from a new Financial Transactions Tax - in which Britain will not participate - should be contributed to Brussels and the amount offset against a country's contributions to the EU budget.

In 2011, the European Commission also proposed replacing the existing VAT-based contribution to the EU budget with a "modernized VAT" to arise "directly from the citizen to the EU".

The plan is thought to entail VAT levied at a fixed percentage by all member states in addition to national rates - likely to be a 1% uniform rate, rather than the 0.3% share of UK revenues the EU collects currently - and then transferred directly to the EU budget.

On the new MFF, David Cameron has pledged "at best a cut, at worst a freeze" in the seven-year spending limits, although Britain's contribution may rise in any case. On 31 October 2012, rebel Conservatives and Labour MPs teamed up defeat the government, with a majority voting for a real terms cut in the EU budget.

2013 budget rises

The EU's next MFF requires unanimous approval of EU member governments. If no agreement is reached in time to allow for legal ratification of the new deal by the end of 2013 - under a political, rather than legal, Inter-Institutional Agreement - the 2013 budget will be rolled over year-by-year with a built-in 2% rise to cover inflation.

Voting in Strasbourg just before Christmas, MEPs approved a €132.8bn (£107.2bn) annual EU budget for 2013. This included a 1.85% increase in the EU's admin costs from €8.277bn (£6.7bn) to €8.430bn (£6.83bn), at a time when member states on the other hand are making cuts to public services and national administration costs.

At €8.3bn (£6.7bn), EU administration costs amounted to 5.6% of the EU budget in 2012, but this will rise to 6.35% in the 2013 budget, showing that the EU's running costs - such as pay and perks for EU staff, plus the cost of buildings and facilities - are growing as a proportion of the overall budget despite Europe's financial difficulties.

Much of this is very visibly wasted on excessive EU pay, perks and grandiose facilities, together with EU self-aggrandisment. Examples include the EU's £45m tribute to itself, the House of European History, and a £250m refurbished 'Résidence Palace' building for the EU Council and its president Herman van Rompuy, due to open next year.

The 2013 deal also includes an extra €6bn (£4.86bn) added to the 2012 budget to cover EU overspending last year. This is less than the €9bn (£7.29bn) the Commission was demanding, likely resulting in a further request for additional funding being made by the EU as early as September 2013.

The addition of this extra €6bn to the 2012 budget gives the appearance that EU spending in 2013 will fall in comparison. But this does not take into account extra requests for funding predicted by the Commission later next year.

Cameron's challenge

This process of annual and subsequent amending budgets to make up funding shortfalls is making the patterns of the EU's actual spending more and more opaque.

EU Ministers must still formally approve the 2013 deal, but difficulties are not foreseen since the EU's annual budgets are agreed by majority vote. Member governments demanding a budget freeze or cuts are likely to be over-ruled by the majority (17) of net beneficiaries.

David Cameron was powerless to stop Britain's payments to the EU rising in 2013 and must now focus on the 2014-2020 budget framework negotiations to stem our liability to funding the EU's ever-increasing demands for public money.

Tomorrow's summit is a key test of the Prime Minister's EU negotiating abilities because if he cannot get a meaningful cut in Britain's contributions to the EU budget when he has billions of pounds in UK contributions to put on the table, confidence in the prospect of a broader renegotiation of the EU's powers will be significantly undermined.

Referendum welcome but Cameron's EU strategy risks embarrassment of failure

The national debate on Britain's future relationship with the European Union must step up a gear following David Cameron's speech this morning.

While doubts remain over whether the Prime Minister will both be in office and able to deliver renegotiation and a referendum after the next election, the proposition that there will be a definitive test of public opinion on EU membership within the next few years cannot be dismissed.

Pro-democracy campaigners must now step up their efforts to rebut the disingenuous arguments being made by groups such as Business for New Europe, the Centre for British Influence in Europe, the European Movement and others, particularly in relation to trade, jobs and foreign inward investment.

One example is the scaremongering by the pro-Brussels lobby that, if the UK were to decouple from political centralisation, we would be locked out of the EU Single Market, have to pay high trade tariffs and, as a consequence, three million jobs would be put at risk.

In reality, especially given the trade surplus the EU enjoys with the UK, it's absurd to imagine that Britain could not negotiate free access to the Single Market in the same way as Switzerland, Norway and many other non-EU countries. 

Responding to the Prime Minister's speech, Democracy Movement director Stuart Coster commented:

"David Cameron's commitment today to an in/out EU referendum in 2017 is a welcome step forward.

"However, securing significant powers back from the EU via negotiation from within simply isn't feasible because it would require the agreement of 26 other member governments who show no signs of subscribing to David Cameron's vision of the EU's future.

"The true choice is whether to be in today's EU lock, stock and barrel, or to seek the new, more flexible, more democratic relationship David Cameron rhetorically supports by employing Article 50 of the EU treaty and notifying Brussels that we plan to exit the EU's structures.

"Holding out the prospect of something other than a 'status-quo-or-go' EU referendum risks the Prime Minister having to admit embarrassing failure."

"The most indefensible referendum position is sadly the one Labour leader Ed Miliband is adopting: that people shouldn't even be permitted to vote on Britain's relationship with the EU in case we vote to leave. The words of someone who has neither faith in his case for EU membership nor respect for democracy."

How credible will David Cameron's EU speech be?

In advance of the Prime Minister's long-awaited EU speech tomorrow morning, the DM has an article today on Public Service Europe looking at the credibility of his EU policy. 

The article as published is reproduced below:

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This Wednesday, David Cameron is to finally deliver his much-anticipated speech setting out his position on the renegotiation of some of the European Union's powers, bringing them back to Westminster and on holding a referendum. The prospect of the British prime minister making a statement about the United Kingdom's relationship with the EU has sparked a flurry of comment about whether or not Britain should renegotiate its membership of the union and, if so, which powers the country should seek back.

Cameron's every word is likely to be pored over by pressure groups on both sides of the debate and, not least, by a large number of his own backbenchers. They are looking for a clear indication that the Conservative Party leader shares their concerns about the EU's powers and will give them a popular referendum pledge with which to fight the next election. But there is one question it seems certain that the speech will not answer and, unfortunately, it is the question on which the entire credibility of Cameron's EU policy and the prospect of a referendum depend.

Beyond the desirability of renegotiation, which has so far been the main focus of debate, how feasible is it that Cameron will secure the necessary agreement of other member states to a renegotiation and a return of European powers from Brussels to Westminster? If the prime minister intends to make a referendum pledge dependent on his view of a positive outcome from such discussions, few will take seriously the idea that they will get the chance to give 'fresh consent' to Britain's links with Brussels - unless the process by which negotiations will take place is made clear.

There are only three methods by which treaty amendment discussions can be launched and Cameron's difficulty is that two of them require the cooperation of the 26 fellow member states. The prospects of this happening are looking increasingly bleak. In recent weeks, prominent figures including Ireland's Deputy Prime Minister Eamon Gilmore, Polish Foreign Minister Radek Sikorski and Italian Prime Minister Mario Monti have lined up to denounce the idea that any single country should be permitted to revise its membership of the EU.

French President Francois Hollande's comments after December's meeting of the European Council summed up the mood. "I think the treaties are there to be abided by," he said. "Europe isn't a Europe where competences could be withdrawn." Where, in this, does Cameron believe lies the support he needs to negotiate, never mind secure agreement to, a return of powers to Westminster?

The method the prime minister and his supporters tend to cite is that forthcoming negotiations over moves towards EU 'fiscal union' should be used to try to broaden discussions - to giving the UK opt-outs from other areas of the treaty. The EU, they say, "is changing" and Britain should take its chance to put its own changes on the table.

While there will undoubtedly soon be discussions, mainly centred on the eurozone, about passing further budgetary sovereignty to Brussels - since other EU members could dismiss his proposals as irrelevant, this strategy would involve Cameron having to play extreme hardball with the EU. He would have to refuse to approve changes purportedly designed to ensure the euro's survival, until UK opt-outs were granted.

As well as being politically very dramatic and therefore unlikely, this would leave the UK open to charges of both blackmail and hypocrisy; since the British government has said that it supports greater fiscal union for the eurozone countries in order to reduce the effects of euro instability on the UK economy. The second method is for the government to invoke Article 48 of the EU treaty. This opens a convoluted process to revise the treaty involving a succession of conventions and conferences at the end of which other European governments and institutions are likely, also, to collectively reject any repatriation proposal.

That leaves the third method, which is the only way to guarantee that discussions about the EU's powers cannot simply be dismissed by other European leaders and, therefore, is the only way that Britain can underpin the credibility of Cameron's EU strategy. If he hopes on Wednesday to dodge the accusation that he is seeking merely to introduce more delay and distraction into the EU debate, rather than respond to clear public concerns about the union's powers, he must make clear that he plans to employ Article 50 of the EU treaty.

Only by giving notification that the UK intends to decouple itself from the EU's growing political centralisation can the PM convince his peers that he is serious about achieving change. And only then can the country focus on a necessary debate about how best to shape future relations with our European neighbours - such that they meet the needs of business, retain the benefits of cultural exchange but also, crucially, respect democracy and national diversity.

EU renegotiation is not feasible from within

This Friday, the Prime Minister is expected to make a speech setting out his position on returning some decisions from Brussels to Westminster and on holding a referendum on the outcome.

Much of the recent debate that has been provoked by the prospect of this speech has been about whether or not Britain should renegotiate its membership of the EU and, if so, which powers we should seek back.

No attention whatsoever has been paid by mainstream commentators to the methods by which any renegotiation could occur.

Essentially, a phony debate has been conducted, no doubt encouraged by Number 10, about the desirability of renegotiation and not its feasibility. But the PM's evident interest in 'substance' over 'process' in fact highlights the vulnerability of his EU policy.

Because all the potential methods of initiating a discussion with the EU about the balance of powers between Westminster and Brussels - short of informing the EU that the UK is leaving - are highly unlikely to deliver a formal negotiation, nevermind agreement.

The credibility of David Cameron's forthcoming speech, and the likelihood of any referendum, depend entirely on the Prime Minister setting out a feasible method of securing a renegotiation.

Three methods

There are only three methods by which David Cameron can attempt to initiate discussion about a return of powers from the EU to Britain.

1. Use forthcoming negotiations over the proposed EU 'fiscal union' treaty to try to secure UK opt-outs from other areas of the treaty. This is the method David Cameron and other supporters of renegotiation tend to cite. But there are many problems with this strategy.

First, because other member states could easily dismiss any attempt to broaden the negotiations beyond proposed treaty changes, it would involve playing extreme hardball with the EU by refusing the approve changes designed to secure the future of the euro until UK opt-outs were granted. As well as being politically dramatic - a potential tactic that has already been described as 'blackmail' by the German government - this would leave David Cameron open to charges of hypocrisy, since the government has said that it supports greater fiscal union for the eurozone countries in order to reduce the effects of its instability on the UK economy.

It is not credible relative to his position on the eurozone, politically likely nor desirable for Britain's relations with other European countries, for the Prime Minister to threaten to withhold his consent from the new treaty unless agreement is reached on a return of powers to Britain.

2. Invoke Article 48 of the EU treaty, which opens a convoluted process to revise the treaty on a proposal from a member government, the Commission or the European Parliament. But there are many hurdles in this process that the government is unlikely to overcome. Such a proposal must first achieve majority support within the European Council. Then, the proposed amendments must be approved by a Convention drawn from representatives of all the member states governments and their national parliaments, the European Parliament and the Commission. The EU official chairing this body will be responsible for determining the "consensus" opinion of the Convention on the proposed amendments. Formal votes will not be taken. Once this has concluded its deliberations, a conference of representatives of the member countries will decide finally what amendments should be made to the EU treaty.

3. If this fails, the only other option is for a government to invoke
Article 50 of the treaty. This covers the arrangements for arriving at a new relationship between a member country wishing to leave the EU and the European Council, the body on which the other political heads of state are represented. Given that David Cameron says he does not support Britain leaving the EU this is clearly not an option he would consider viable. But it is the only method by which a significant renegotiation can be guaranteed.

Who will agree?

Prominent figures across Europe have already denounced the idea that Britain should be permitted to renegotiate its membership of the EU.

Ireland’s deputy prime minister, Eamon Gilmore, has said that there cannot be "different forms of membership… There cannot be flexibility on the core conditions. You cannot have a European Union if you end up with 27 different forms of membership."

The Polish Foreign Minister Radek Sikorski, has already gone on record as saying to David Cameron: "Please don't expect us to help you wreck or paralyse the EU."

Speaking after December's meeting of the European Council, French President Francois Hollande indicated his opposition to repatriating EU powers, saying: "When a country makes a commitment, generally, it’s for life. So I think the treaties are there to be abided by. And so far I haven’t heard Mr Cameron at a European Council asking to opt out of certain competences ... Europe isn’t a Europe where competences could be withdrawn."

The Italian Prime Minister Mario Monti said that, rather than renegotiate, Britain must be asked the fundamental question: "Do you want to remain in the European Union?"

And President of the European Council, Herman Van Rompuy, said: "If every member state were able to cherry-pick those parts of existing policies that they most like, and opt out of those they least like, the union in general, and the single market in particular, would soon unravel."

Delay, distraction?

Where, in this, does David Cameron believe lies the support he needs to secure agreement to British opt-outs?

The unfeasibility of renegotiation makes the PM's strategy look far more like delay and distraction than a response to public concerns about the EU's powers.

This Friday, the mainstream media must focus on exposing the feeble foundations of his EU policy. If David Cameron is serious about renegotiation, he must first notify the EU that Britain will leave. 

DM letter: Pryce so wrong on the EU

The DM has a letter in today's Evening Standard in response to a comment piece published yesterday by the economist Vicky Pryce.

In her article, Pryce repeated a number of claims and myths about the impact of the EU, some so detached from reality it's hard to imagine from where they can possibly have emerged, beyond simply someone's fevered imagination.

The full version of the DM's response is reproduced below:

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Dear Sir,

No wonder Vicky Pryce thinks this is no time to seek a new deal with the EU (Comment, 14 January). Her understanding of the EU's impact is wrong in every key respect.

She says "85% percent of our budget contribution comes back to the UK", but Treasury figures for 2010-11 show the figure is just over 57% - a net cost of £8.8bn that year alone. Pryce also says "regulations are mostly national", despite a House of Commons Library study from October 2010 showing in fact just over half of new laws now have their origins in Brussels.

Her concern about the EU market becoming more difficult to access surely makes the highly unlikely assumption that Britain could not achieve a free trade agreement as part of any new relationship with the EU - a deal that our trade deficit with the EU shows would be in the interests of EU businesses far more than that of UK plc. 

Overcoming ignorance about the EU through a proper national debate on the basis of facts and giving us all the chance to make an informed decision about Britain's best path to prosperity in the 21st century is exactly why David Cameron must promise to hold an EU referendum.

Yours faithfully,

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Pryce's article comes on the back of a recent propaganda onslaught by political and business elites seeking not only to intimidate the Prime Minister from seeking any change in Britain's relationship with the EU to bring decisions back to Westminster, but also to deny the rest of us a real choice about Britain's future and how we are governed.

In his speech on Friday, David Cameron is expected to announce an intention to renegotiate aspects of the EU's powers and hold a referendum on the outcome sometime after the next general election (IF there is a new 'fiscal union' treaty, IF other countries agree to renegotiate, IF they agree to hand back EU powers, and IF he wins the 2015 election outright).

Despite the likely dependence of such a pledge on a range of improbable developments, the temperature of the EU debate is nevertheless rising. The last few weeks have seen the opening skirmishes of a referendum battle, which David Cameron's speech on Friday may well exacerbate over the coming months and years into full political war about the best course for Britain's democracy and future prosperity.