Lisbon Essay (27): If it’s No, Europe will simply find a way to move on without us…

Dan O’Brien, senior Europe editor at the Economist Intelligence Unit in London, posts from Berlin where he is covering the aftermath of the Germany election. He takes a sounding of insider opinion on Ireland and Lisbon, in several of Europe’s major capitals. The general assumption is that Irish voters will, as they did with Nice, change their minds in tomorrow’s poll. Most negative opinion is constellated around Paris and Berlin. In brief, that negativity centres around a disbelief that a country which thrived on huge cash transfers which cumulatively and on a per capita basis, have larger than any other country that joined before or since.

By Dan O’Brien

Germans and their politicians have paid little attention to Ireland’s referendum on the Lisbon treaty. In the EU’s largest and most powerful country, they have been too busy following their general election, which took place on Sunday. Besides, they have worked on the assumption that Irish voters will change their minds on Lisbon, particularly after being given concessions on the structure of the European Commission and assurances on issues the Irish government told them were necessary.

If next Saturday, as the vote counting moves towards a conclusion and news filters to Berlin that Irish voters have endorsed the treaty, there will be a sigh of relief. A process of institutional reform that began in 2001 will finally be implemented. If ,on the other hand, the treaty is rejected, things will change for Ireland. And the change will almost certainly be profound.

Across the bloc opinions on Ireland differ, but in the two most important capitals–Berlin and Paris–it is not hard to find negative views and perceptions. Here is a synopsis of what I have heard repeatedly heard over the years, this week included.

No other country has done better from the EU. When Ireland joined in the early 1970s, it was by far the poorest country of the then nine members. It was therefore entitled to large cash transfers, which have been, cumulatively and on a per capita basis, larger than any other country that joined before or since.

Among the things this money was used for was to allow very low rates of corporation tax to be levied on foreign companies. That gave and continues to give these companies, which are mostly American, a competitive edge over their European rivals in the European market (some people here in Berlin and elsewhere on the continent become visibly angry at what they see as a link between cash transfers and corporation tax ).

Germans have another long-term bugbear–Ireland’s financial regulation. For years they have been critical of Dublin’s financial services centre because they believed it was a dark crevice in which institutions could get away with things that would not try in Frankfurt or other continental locations. When German bank, HRE, blew up earlier this year and had to be nationalised, its Dublin based off-shoot, Depfa, was blamed by many.

Another gripe relates to monetary union. Germany only grudgingly agreed to give up the Deutschemark–it was the price to be paid for reunification. As negotiations took place in the 1990s on how the common currency would function, serious players in Germany sought to exclude countries with poor economic management records, such as Ireland, because a currency union would only be as strong as its weakest link.

Earlier this year both the German chancellor and finance minister felt obliged to state publicly that the no euro area country would be allowed to default as the financial crisis threatened to spiral out of control. They were referring to Ireland, along with Greece, as the two countries slid towards bankruptcy.

From a German perspective, Ireland causes more than its fair share of problems in the EU. For a small, peripheral country to be viewed as the source of so much trouble makes it vulnerable. But the killing of the Lisbon treaty by Ireland would be more than just another problem. It would say that the entire process of European integration has come to a halt because one of the smallest countries in the bloc says so.

The EU, as a Union of laws, cannot implement a treaty that has not been ratified by all members. But the EU is also a political entity. Politics, as the cliché goes, is the art of the possible. The political reality in Germany and most of the other key member countries is that there is a deep belief that an enlarged EU has to be made more effective and that it needs the changes in the Lisbon treaty to achieve this.

There are numerous ways that change could take place within the law. A core group of those countries who want to implement Lisbon could do so, creating two classes of membership. Alternatively, a new treaty could be agree, but with the explicit stipulation that if it is not ratified the EU is dissolved and a new entity to replace it be established (existing members would have a straight choice between being in or out). A worst case scenario for Ireland would be that it comes under pressure to withdraw voluntarily.

It would be a gross misreading of the dynamics of modern European history to believe that a strategically inconsequential country that has benefited so disproportionately from EU membership could now, for reasons that appear to outsiders to be capricious if not malicious, wreck an initiative that is almost universally supported by Europe’s political parties and took so long to put together.

O’Brien’s new book “Ireland, Europe and the World” is published this week. You can read the rest of the Lisbon Essays here.

, , ,

  • Dublin Exile

    Very interesting to read a well informed piece like this on how the rest of Europe see us. Dan is quite right in saying that we as a tiny nation will not be allowed to upset the whole EU project. Anyone who believes we can force the rest of the Union to renegotiate on our terms is living in cloud cuckoo land.

    BTW it took me a while to make the connection between Dan today and how he looked at college. Bring back that huge ginger afro man ! Far better than the crew cut and squared off glasses.

  • “From a German perspective, Ireland causes more than its fair share of problems in the EU. For a small, peripheral country to be viewed as the source of so much trouble makes it vulnerable. But the killing of the Lisbon treaty by Ireland would be more than just another problem. It would say that the entire process of European integration has come to a halt because one of the smallest countries in the bloc says so.”

    That is the legal position. But we are not the only country holding out against Lisbon. The Czech ratification process has not been completed. The Czech president has refused to sign thus far. A Czech Constititional challenge has been filed with the Constititutional Court, and interim PM Jan Fischer has told EU leaders the challenge may delay Czech ratification for 3-6 months. Typically for the Euro-bullies who can’t take no for an answer and who have shown their contempt for democracy by refusing to respect the French, Dutch and Irish “no” votes, Sarkozy exploded with dark, thinly veiled threats of “consequences” if the Czechs did not ratify. It is entirely plausible that the Czech ratification process will last long enough to allow David Cameron as the newly elected Tory PM in the UK in May/June to keep his promise to hold a referendum on the Treaty, as he has said he will do so, and call for a no vote (which would be almost certain in a referendum there), which he has said he will do if the Treaty has not by then come into force by ratification in all member states. Then Lisbon is dead.

    “The EU, as a Union of laws, cannot implement a treaty that has not been ratified by all members. But the EU is also a political entity. Politics, as the cliché goes, is the art of the possible. The political reality in Germany and most of the other key member countries is that there is a deep belief that an enlarged EU has to be made more effective and that it needs the changes in the Lisbon treaty to achieve this.”

    Nonsense. The EU is already efficient as things stand with respect to the throughput of decisionmaking. A study (Adapting to Enlargement of the European Union: institutional practice since May 2004) by Professor Helen Wallace of the London School of Economics has proven this. It studied the performance of the EU institutions since 2004, and concluded that talk of gridlock was nonsense, and that the speed of decisionmaking in some areas had actually increased:

    (Report by LSE – Adapting to Enlargement of the European Union: institutional practice since May 2004)”..a relatively agreed overall picture emerges from across these studies. They indicate that the ‘business as usual’ picture is more convincing than the ‘gridlock’ picture as regards practice in and output from the EU institutions since May 2004. Some changes and variations can be observed, although not all of these can be tied to the impact of enlargement as such. It is also clear that there are some differences across policy domains, which need further exploration. These become more apparent once attention is turned to the implementation phase and the ways in which EU policies and rules are put into practice inside the new member states.
    The key data on output from the EU institutions:
    Over the period 1999-2003 an average of around 195 legislative acts were adopted each year (but only 164 in 2002 and 165 in 2003); around 230 were adopted in 2004 (with a surge in April 2004 just before the EU15 became the EU25); some 130 were adopted in 2005: and 197 in 2006 . Data need to be added for non-legislative decisions, increasingly important in fields such as foreign policy and some aspects of justice and home affairs, where activity levels have been high. Mattila(forthcoming 2008 ) reports that some 942 acts other than legislative decisions were agreed between May 2004 and December 2006. Of the 360 (Hagemann and De Clerk-Sacchse 2007) legislative decisions adopted between May 2004 and December 2006 some 43 were identified as revisions to existing legislation to incorporate the new member states. Settembri (2007) reports that decisions taken show an increase in ‘ordinary’ or ‘minor’ subjects, and a decrease of 11% in what he classifies as the more ‘important’ topics.
    In the context of the ‘less is better’ objective of José Manuel Barroso as President of the European Commission (an objective shared by the Council) we can observe only a modest drop in the number of proposals for legislative acts made by the Commission: 2003-491; 2004-526; 2005-411; 2006-482. In 2006 the Commission withdrew 68 proposals and put forward 33 ‘simplification’ proposals and 22 ‘codification’ proposals. In 2006 the Commission also tabled 324 communications and reports, 10 Green Papers and 2 White Papers (covered in the Annual Report 2006, published in 2007)….

  • (LSE Report continued):”There has been a reduction in the time lag between proposal and decision on both those subject to the unanimity rule and those based on qualified majority voting (QMV) treaty articles. This is so especially for decisions under the consultation procedures with the European Parliament (EP), including many on agricultural issues, where the data indicate a 5% reduction in the time taken to reach agreement. Issues subject to codecision take somewhat longer than before (Settembri (2007) notes that during the one-year period which he covers that this means some 22% more days). Interestingly, however, a rising proportion of decisions subject to codecision have been reached at first reading: 2003-34%; 2004-45%; 2005-64%; 2006-59%. In 2006 a revised joint declaration was adopted by the EU institutions, designed to improve the efficiency of the codecision procedure….There is no evidence of declining ‘productivity’ in the judicial system of the EU, at least as regards the work of the ECJ (Naômé forthcoming 2008 ). On the contrary numbers of cases completed and pending compare favourably with the period before enlargement, one in which there had been rising concerns about the existing overload on the judicial system, even without the added impact of enlargement. There is no significant increase at least yet in the number of new cases. The length of Court proceedings also shows a downwards trend. The Court of First Instance (CFI) has not adapted so easily to the increased pressure of cases combined with its backlog of prior pending cases.”

  • Now. Continuing my response to what DOB said:

    “There are numerous ways that change could take place within the law. A core group of those countries who want to implement Lisbon could do so, creating two classes of membership.”

    That is not legally-possible because Enhanced Cooperation provisions in the Treaties do not apply to Constitutional-Affairs. Enhanced-Cooperation, in any case, requires the consent of 8 member states, and the Commission has a veto. If we reject Lisbon, it is dead, despite what you would obviously prefer.

    “Alternatively, a new treaty could be agree, but with the explicit stipulation that if it is not ratified the EU is dissolved and a new entity to replace it be established (existing members would have a straight choice between being in or out). A worst case scenario for Ireland would be that it comes under pressure to withdraw voluntarily.”

    That is cloud cuckoo-land. Leading pro-Lisbon advocate Wolfgang Munchau (of the pro-Lisbon Financial Times) has already said on Newstalk last week that Ireland won’t be marginalised if we vote no – saying the consensus to do so simply isn’t there. He also said in FT: “This is a pre-crisis treaty for a post-crisis world . . . I, too, find the treaty increasingly hard to defend with a straight face”.

    In that context, it is not credible to argue that Lisbon has a role in improving the condition of the Irish economy. After Spain voted yes to the EU Constitution – which is 95% the same as the Lisbon Treaty – their unemployment rate doubled to 18% – a fact you conveniently neglected to mention when recently asked about comparisons between the Irish and Spanish economy on the radio. FDI in Ireland has actually increased in Ireland since the no vote – rising 14% in 2008 alone. Ours is essentially a construction-related recession. That is where it is coming from. It has nothing to do with the no vote whatsoever. Irish exports have risen 5% in the year up to April, compared to a drop of 29% in Germany. In May-June June, Irish exports also rose 5%. Irish industrial production rose 8.9% in the year to July – rising by a huge 68.3% in the American pharmaceutical sector here. This evidence suggests strongly that the no vote has not impacted negatively on investor sentiment of Ireland. Intel and Ryanair have their own reasons for supporting Lisbon, relating to Intel’s appeal against the €1.06 billion fine, and Ryanair’s desire to takeover Aer Lingus which the Commission previously blocked. What is dragging the economy down has nothing do with Lisbon, but may partly be laid at the door of the ECB’s monetary policy, which has imposed Franco-German interests on an economy at the perhipery of Europe, which had an overheating economy until 2008. A property-bubble and crash became inevitable as a consequence. If anything, events underline the dangers of too much centralisation of economic sovereignty in supranational institutions, which tend to be dominated by the Big States.

    Wolfgang Munchau, Commission President Barroso and Catherine Day have made clear that the political-will for what you are talking about simply isn’t there. These threats are rolled out every time an EU country has a referendum on the project. They are told the sky will fall in, and that they will be thrown out of the EU – but it never happens. Not to the Dutch/Ftench for rejecting the EU Constitution. Not to the Danes/Swedes for rejecting the Euro. Not for the Irish for voting no to Lisbon. This is constitutional-fantasyland, and the fact that the elites have to resort to this sort of bullying “or else” rhetoric underlines how lacking the Lisbon Treaty is in terms of provisions to recommend itself on its own merits.

    “There will be no discrimination against Irish people if there is a No vote. You will not hear from me any threat to Ireland.” (Commission President Barroso)

    “the EU is not punitive and there would be no question of throwing Ireland out [of the EU] or taking repercussions” against the State.” (Catherine Day)

    I fully intend to vote no, just as I did last year.