Ireland: A solution is emerging
The eventual solution to the Irish crisis already became apparent yesterday, during the foreign ministers’ meeting in Luxembourg. In a time honoured tradition, the EU will offer the Irish a special declaration in the form of protocols, guaranteeing them (but not others) a lot of goodies, the FT reports. These would include specific guarantees on corporate taxes, abortion, and political sovereignty (thought the Lisbon Treaty is silent on any of these issues).
The BBC reports that during yesterday’s foreign ministers’ meeting in Luxembourg, it was agreed to continue the ratification process, the sole purpose being to isolate the Irish, accept some new protocols, and bulldoze them into a second referendum.
As part of this route, Germany and France now appeared to tone down their rhetoric from the weekend, when they wanted to isolate the Irish. There have been a lot of bilaterals – between the Irish and the Germans, the British and the Germans, the British and the French etc. German foreign minister Steinmeyer clarified that he does not want the Irish to suspend participation in the European integration process. This was only seen as an option. So the strategy has now shifted towards softtalking, but there is no change in overall strategy.
An interesting aspect picked up by Frankfurter Allgemeine is that Sinn Fein, the former political wing of the IRA and one of the country’s most effective No advocates during the referendum campaign, has listed a number of conditions that could persuade it to change its position on the Lisbon Treaty. It is interesting, and very characteristic of the Irish debate, that none of these conditions have anything to do with the functioning of the European Union, and all about Ireland’s independence. Sinn Fein’s rent extraction plan includes acceptance of an Irish Commissioner, no dilusion of Irish voting rights in the Council, an explicit guarantee of neutrality and sovereignty over taxation, and several others as part of its wider coverage on the issue.
The Irish Independent has a story of an interesting analysis of the vote itself, conducted by the European Commission. It appears that the vast majority of the No-Sayers mistakenly thought that the treaty could be easily negotiated. People who did not understand the Treaty voted overwhelmingly No (which goes to suggest that a policy of information would have been the best campaign strategy).
Frankfurter Allgemeine has a useful over the variable geometry debate, which ranges from core Europe supporters, to those favouring concentric circles, plus a discussison on the limits of enhanced co-operation under the Nice Treaty.
No further enlargement without the Lisbon Treaty
Nicolas Sarkozy’s went to Prague to ensure that there is no second rejection of the Treaty, writes Le Monde. Sarkozy found a soft spot among the Czechs when he declared that there will be no further enlargement to the Balkans and Croatia without the Lisbon Treaty. The Czech Republic is part of the Visegard countries in favour of continuing the enlargement negotiations with Croatia despite the Irish ‘No’ vote. Sarkozy also counts on the fact that the Czechs will take over the EU presidency early 2009 and that they would like the tricky topics off the table. The Czech PM Mirek Topolanek announced earlier that the Czech ratification process is suspended until the constitutional court gives its verdict about the compatibility of the Lisbon Treaty with the Czech constitution but was careful not to say that the Lisbon Treaty is dead. Next Sarkozy will meet the British PM Gordon Brown ahead of the summit this Thursday.
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Daniel Gros writes in Vox that incentives are extremely misaligned when a small-nation electorate can punish ‘Brussels’ and its own political class at little or no cost. Ireland represents 1% of the EU, so 99% of the cost of the ‘no’ falls on other members. This column proposes a radical solution – the other EU members should propose to leave the old EU and create a new one with the Lisbon Treaty as its founding document. The Irish would then have to decide whether they’re in or out.
Stefano Micossi, writing in Lavoce, argues that the referendum result in Ireland shows the difficulty the pro-European establishment has in persuading the public of the benefits of European integration. Intead of being regarded as an institution that provides security, the EU creates fear among citizens, with confused messages about labour markets, immigration, internal security, the environment, and food prices.
Also writing in Lavoce, Pietro Manzini argues that the Irish voted No because they did not understand the Treaty, but there is no way to write in a way that is much clearer. This is why one should not subject treaties to referenda, but to parliamentary processes. He concludes that one of the consequences of the Irish No vote is the imposition of Lisbon without Ireland.
Needless to say, the Irish vote keeps the columnists and leader writers busy. In the FT, Philip Stephens writes that the best course of action would be to stop talking about the Lisbon Treaty, and to talk about wider foreign policy. Nobody in China cares about the Irish referendum. Gideon Rachman called on European leaders to respect the Irish referendum as a democratic choice.
Gusenbauer lost party leadership
The Austrian PM Alfred Gusenbauer was forced to give up his post as SPÖ party leader amid growing opposition in his party reports FT Deutschland. Party members accused him of passivity as a leader of the grand coalition. Gusenbauer insists that he remains chancellor and the next candidate of his party, but recent polls show that as a chancellor he is supported by only 16%, the lowest level ever for a chancellor. In the last few days calls for him to step down increased. Der Standard interviewed political observers who suggest that Gusenbauer could be toppled as a chancellor on the next party conference but that this event would not affect the grand coalition itself.
Inflation now at 3.7%
The biggest economic news was the latest inflation report, which shows euro area inflation at a new record of 3.7% (EU inflation is even higher at 3.9%). Germany was at 3.1%, France at 3.7%. Euro area core inflation eased back to 1.7%, Frankfurter Allgmeine reports, quoting analysts who said that there have been no second-round effects so far. The oil price has touched almost $140pb yesterday, shrugging off suggestions that Saudi Arabia might raise oil production from 9.5 to 10m bpd.
The Fed signals no rate rises ahead
All talk, no action. The Fed will not raise rates by much, and will certainly not do so in the short-term. Naked Capitalism and others have lengthy discussions about the Fed’s anti-inflation rhetoric, and conclude that not much action is likely. The Blog also made the point (correct in our view) that the financial markets overstated a recent comment by Ben Bernanke, in which he expressed concerns about inflation. The point is that Bernanke continues to be more concerned about the growth outlook than about inflation.
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