The Bear's Lair

At the end of January, European heads of state gathered for a European Council meeting to discuss the latest draft of the new fiscal compact, the treaty initiated by Angela Merkel and Nicolas Sarkozy at the previous summit in December 2011. With the exception of the UK, all member states have voiced their support of the fledgling agreement. As negotiations continue however, criticism of the new treaty (or inter-governmental agreement, as it more correctly termed) has poured in from all angles. The European Parliament has passed a resolution opposing it, while European trade unions have called for a European day of protest on February 29th, the day before the negotiations are set to be concluded.

In their political resolution[1], the Members of the European Parliament (MEPs) expressed their doubts on the necessity of such an intergovernmental agreement. Criticising the method behind the agreement, as well as its content, MEPS also blasted hypocritical European leaders who today support the enshrining of new rules on fiscal discipline, but who flaunted similar rules all to easily in the past. The fact that the new treaty simply reiterates measures that are already part of EU law, since the passing of the new economic governance package in September 2011, was also criticised.

Both the Parliament and the trade unions expressed their concern at the focus on continued austerity, and the lack of a complementary plan for growth, with the Parliament calling instead for a “Union of both stability and sustainable growth.” While the MEPs praised the use of the community method and the inclusion of the Parliament in the negotiations, they claimed that their suggestions to date have been largely ignored, putting the treaty’s democratic legitimacy at risk.

In their opposition to the treaty, the Parliament and trade unions have acquired an unnatural ally, with the rating agency Standard & Poors, fresh from downgrading several European countries in January, claiming that the new treaty’s sole focus on austerity could be largely self-defeating. According to their report, the new treaty will cause “domestic demand to fall in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.” Instead of negotiating tighter rules on fiscal discipline, S&P believes that European leaders should be focussing their attentions on “a strong and consistent program to raise the growth potential of the economies in the eurozone.”

To date, this diverse opposition against the treaty has yet to impact on the pace of its negotiations. If nothing else however, it will cause European leaders, some of whom face the prospect of a referendum on this treaty, to sit nervously.

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  1. The phrase “sustainable growth” goes unchallenged in the blog. Growth cannot be sustainable. Period. If sustainability is truly the goal – and I’m skeptical that any but a radical fringe do hold that goal – then stability should be the paired word. Business as usual (BAU) demands continual growth in order for the BAU business plan to work, but continual growth is inherently doomed to collapse. This is the dilemma faced by the EU and by Earth. And, if the EU and Earth continue to pursue an impossibility, well, good luck with that.

  2. They are, indeed, unlikely bedfellows…

    But I would rather focus on one of the them, S&P. If you read thorugh their reports of the past couple of years it’s difficult not to see a single pattern: Hit where it hurts the most and when it produces the maximum effect.

    So, in the case of S&P I’m not sure that “bedfellow” is the appropriate term. I was thinking of something closer to what is ussualy believed to be the oldest profession in the world.


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