There’s been a fierce debate raging in the comments of our recent post about whether or not the UK should really have tried to renegotiate powers at last week’s EU summit. Ultimately, British Prime Minister David Cameron used his veto, with the result that (as one of our commenters, Jason O’Mahony, predicted) a new intergovernmental treaty will now be signed outside of the EU framework. The exact membership of this “club within a club” has not yet been finalised, but there’s a chance that the new group might be “everyone but the Brits.”
Today, we spoke with Ivan Mikloš, the Finance Minister of Slovakia, and asked him to respond to some of your comments. Firstly, we asked him if he agreed with Tim Worstall’s comment that it was time for the UK to finally leave the EU once and for all.
I don’t agree with this. I think, for the UK, it is beneficial to be a member of the EU. But also for the others, it’s better that the UK is a part of the EU. However, the question of whether to join a fiscal union is the responsibility of each individual country. Meaning, it is legitimate that any country can say ‘no’. From my point of view, as an economist, new fiscal rules which are stricter will benefit everybody who joins. With the debt problem today, it is in everybody’s interest to push for tougher rules.
Very few of our commenters, however, seem to agree with you. Commenters from both the UK (such as Tim) and from other EU member-states (such as Josephine) argue that it is time for the UK to stop holding back the others and, possibly, even to leave the EU. We asked our readers in a Facebook poll “Should the UK be allowed to renegotiate powers away from the EU?” and, whilst only slightly more answered “yes” than “no”, an overwhelming majority voted that the UK should “leave altogether”. This is hardly a scientific poll, but does the Minister think that relations between the UK and the rest of Europe have been damaged by David Cameron’s veto?
I don’t know if the word ‘damage’ is correct. Of course, the relationship between the UK and other member-states is worsening. And, of course, the current situation is not helpful because it creates legal and other challenges; it will now be impossible to create stricter rules through EU treaty changes. But, on the other hand, it is legitimate for every country to decide.
Given these challenges thrown up by the UK veto, then, will the new “Euro-plus” treaty be enough to reassure the markets and bring an end to the debt crisis?
Nobody knows, of course, and the problem is that, in the short-term, we still have to solve the turbulence of the market. What I think is important is that we don’t implement something like Eurobonds, and we don’t have the possibility of the European Central Bank (ECB) buying without limits. Maybe from a short-term perspective this could solve things, but from a mid and long-term perspective it would create further problems. For a real mid and long-term solution, we need fiscal union by creating rules, and by giving further competency to the European Court of Justice and the European Commission.
This is interesting, because we had a comment from Protesilaos Stavrou arguing almost exactly the opposite. He thinks that, for a long-term solution, we need more than just stricter rules – we need full fiscal union with the possibility of a common treasury and fiscal transfers from surplus countries to others. He’s also critical of giving further competency to the European Court of Justice and the European Commission because they are unelected. In the long-term, is the Euro project really sustainable without the kind of fiscal union Protesilaos is arguing for?
Theoretically, it might be true what Protesilaos proposes. Practically, it is politically impossible. The only thing that is politically possible today is what was proposed by Germany and France. Politically, stronger fiscal union and a transfer union – which means creating and building new institutions along with new common European taxes – this kind of transfer union is politically unsustainable. Even if this vision was the consensus amongst EU governments today, which I can tell you it is not, it will be unsustainable because it will be rejected by the people.
Of course, some of these things – for instance, Eurobonds – are maybe politically possible, but only after we have created strong rules which will minimise the risk of any moral hazard. This kind of fiscal union, which is represented by Eurobonds and other institutional changes, will not be possible unless we first create new rules to minimise risk. After we’ve done that, then we talk about Eurobonds and other measures.
What about the criticism that these measures are undemocratic? Aren’t you nervous about giving Commission officials the power to investigate the business of your ministry?
No, I’m not nervous. In fact, I welcome stricter rules. But I have one precondition: they have to be automatic rules. If a country is not enacting responsible policies, then enforcement of the rules shouldn’t be subject to majority voting. If there is any doubt about the strength of the rules, then they will not function correctly. However, if implemented properly then they should create limitations on the populist approach of unsustainable government spending.
What do YOU think? Do you agree with Tim that it’s time for the UK to leave the EU and allow the other member-states to continue without it? Or do you think that both the EU and the UK are stronger together? Do you agree with Protesilaos that a stronger fiscal union is the only way out of this crisis, or do you think this is politically impossible? Let us know in the form below, and we’ll take your comments to politicians, experts and others to hear their reactions.
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Ivan Mikloš is the current Minister of Finance of Slovakia.