The six pack and EU economic governance

 

                Whilst the eyes of the world and the media have been turned to Libya, the EU has been busily beavering away to strengthen its control over EU memebr states economies. The EU is close to agreeing six powerful new measures to control EU economies, and to create something like a single economic policy for the whole zone.

              Shocked by the debt and deficit crisis enveloping it, France and Germany have encouraged the Commission and Parliament to come up with ways of enforcing the favoured debt and deficit ratios of the EU, and ways to proceed to a full blown common economic policy, including social and wage policy as well as overall levels of spending, borrowing and taxing.

               The EU proposes an economic semester. This is a posh way of saying member states have to submit their national budgets as homework to be marked by the Commission. If the Commission disagree they can order the member state to change their approach. The EU wishes to enforce the old rules of  deficits below 3% GDP per annum, and total state debt below 60% of GDP. They intend to fine member states who do not achieve this or who do not follow an agreed plan to sachieve it. The latest version proposes a 0.5% GDP fine for fudging accounts, and a variable fine of 0.1% or 0.3% of GDP for failure to follow the policy. Members outside the Euro may remain beyond the fines, but there is talk of them losing EU spending instead.

             There will be an imbalances and excessive imbalances procedure to allow the Commission to intervene in most aspects of economic governance. The Europact which is also being floated goes even further and brings together social and wages policies for all participants.

                We will be told that as the official sancitons do not apply to the UK outside the Eurozone we should not worry. We need to read the final small print, but it looks as if these proposals will represent a further major extension fo EU power which is danger of dragging us in even though we are not members of the Euro.

                   The EU is creating an economic sovereign to seek to rule its unruly states and currency. Some of its rules make sense, but if we wish to remain in something like a sovereign country we should make it clear none of these new economic government rules apply to us. Just exempting ourselves from the larger sanctions is not sufficient.

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42 Comments

  1. norman
    Posted April 25, 2011 at 7:05 am | Permalink

    As we now wholeheartedly embrace, and let policy be guided by, the fairness doctrine I think the EU is moving in the right direction in this.

    Is it fair that an electrician in Germany gets paid more than one in Estonia? And is it also fair that the Estonian pays a lower rate of tax than the German? Surely neither of these things are fair. Is it also fair that an accountant who works 40 hours a week gets paid more than those two electricians combined, who may work 50 hours each?

    The fairness doctrine, to my mind, is a load of nonsense and more Marx than Smith, but as we now must measure every policy against what the left sees as ‘fair’ I don’t see how we can complain about any of this without appearing hypocritical.

    • lifelogic
      Posted April 25, 2011 at 10:45 am | Permalink

      Life is not andnever can be fair the government use “fairness” and “equality” as an excuse for raising more taxes and employing yet more parasites. It is never delivered nor could it ever be.

    • Posted April 26, 2011 at 8:32 am | Permalink

      Yes, it is fair that a German electrician gets paid more than an Estonian electrician, either because the former’s productivity is greater or because his country’s productivity is greater.

      • lifelogic
        Posted April 26, 2011 at 4:43 pm | Permalink

        Is it fair that someone is beautiful, rich and intelligent and another gets a horrible illness or that one gets killed in an earthquake/tsunami and other lives in peace to over 100.

        How is the state going to make it all fair – chop the legs of the lucky ones perhaps?

    • pjl20
      Posted April 26, 2011 at 11:31 am | Permalink

      norman

      You may wholeheartedly embrace the EU and agree that we are headed in the right direction, but at least 50% of the British populous do not agree with this sentiment at all.

      The plain fact is that the EU does not operate by the democratic rules that apply in Westminster and yet we must obey EU dictats.

      The EU Commission, that unelected supreme body, can overrule
      democratic decision making with which it may disagree.

      What you should wake up to is that the believers in the EU Super-state wish to create an economic sovereign regime to control member policy as regards currency and interest rate management.

      John Redwood is one of the few senior Tories who comes out against greater EU controls about how we in Britain run our own economy. What has happened to David Cameron’s promises made before last year’s general election?

      Just what are the benefits of continued EU membership to Britain? Certainly not trade as this will continue uninterrupted should we decide to leave in a future referendum on our (half-hearted) EU membership.

      • sjb
        Posted April 26, 2011 at 11:02 pm | Permalink

        HM Treasury seems to doubt that Foreign Direct Investment (“FDI”) will continue uninterrupted should the UK leave the EU.

        “[…] membership of the EU is a key factor in attracting investment to the UK, and demonstrates the importance of this investment for the UK. EU membership has contributed to FDI growth in the UK by reducing access costs to a larger market, enabling greater economies of scale and returns on investment, increasing competition and facilitating agglomeration. The UK has been a major beneficiary of FDI flows in the EU, but integration has also enabled growth in outward FDI to EU countries, and increasing returns on this investment. Important potential future FDI gains are possible from further integration, particularly following successful liberalisation of services industries. The long-term FDI cost of withdrawal would be significant.”
        http://www.hm-treasury.gov.uk/d/foi_eumembership_fdi.pdf

        Don’t forget the reason the US has been a very strong supporter of EU integration is because it never again wants to have to send its young men to die in European wars (see WWI & WWII).

        Reply: The UK is not about to leave the EU, but if it did it is difficult to see why this would cut its inward investment, as international trade rules would still allow access to EU markets. Nor can I see how the EU has stopped wars in Europe – it certainly did not stop war in former Yugoslavia.

        • sjb
          Posted May 10, 2011 at 3:09 pm | Permalink

          Perhaps because Yugoslavia was not a member of the EU. Since the Treaty of Rome in 1957 how many member states have declared war on another member state? Contrast that outcome with Europe’s bloody history in the decades before 1957.

  2. lifelogic
    Posted April 25, 2011 at 8:13 am | Permalink

    You say “if we wish to remain in something like a sovereign country we should make it clear none of these new economic government rules apply to us. Just exempting ourselves from the larger sanctions is not sufficient.”

    But is the UK still remotely sovereign now or even democratic. With MPs jumping to the EU tune rather than that of the voters? The EU control is the logical next step for them in the great power grab and takeover of sovereign countries following the single currency Trojan Horse. Leaving local puppet government fake democratic veneers to take the blame but without having any power. Surely a recipe for general civil unrest.

  3. John McEvoy
    Posted April 25, 2011 at 8:22 am | Permalink

    The Commission is now putting itself ‘in charge’ of member state economies. What it needs now therfore is a sort of financial Fat Controller, and I would like to propose an ideal candidate for the job – our former Primer Minister, Gordon Brown.

    • Stuart Fairney
      Posted April 25, 2011 at 5:02 pm | Permalink

      Amongst many other things, based on his Westminster attendance, would he actually turn up to the job d’ya think?

  4. Peter
    Posted April 25, 2011 at 8:35 am | Permalink

    “Just exempting ourselves from the larger sanctions is not sufficient.”

    Couldn’t agree more. The only way to stop being consumed by the Greater EU is to leave it. Agreements, exemptions and referendums mean nothing to the European elite as they simply reword a treaty or wait a while until the unsuspecting public aren’t looking and just do what they wanted to anyway. Sadly our politicians have neither the will nor the desire act in our interests and those that voted for a Conservative government have actually got a Lib Dem pro EU, roll over and play dead Prime Minister.

  5. John Wilkinson
    Posted April 25, 2011 at 8:40 am | Permalink

    Time to leave the E.U.
    Why don’t MP’s just repeal the Single European Act and have done with it?

  6. Edward.
    Posted April 25, 2011 at 8:48 am | Permalink

    “but if we wish to remain in something like a sovereign country”

    I think that, post Lisbon, we ceased to be a ‘sovereign country’, mention of Lisbon – the above ‘reforms’ may seem essential to the federalists but are they legal?
    Don’t these ‘reforms’ need to be ratified by all 27 member states? Or don’t we have rule of law in the EU anymore? – Silly b*88*r me, of course we don’t!

    This whole idea, leaves me with a vision – of Rodney Trotter and his gang ….. rolling up at Threadneedle Street banging on the door and asking to be let in to sort out the ‘finances’ of the nation.

    Having said all of that, I can also quite see the logic of these measures too Mr. Redwood but they are too late – the present monetary unit called the euro was always doomed to go down.
    If it had stayed in the North with D, Fr, Benelux, Denmark, Sweden maybe, however…..we’ll never know.

  7. waramess
    Posted April 25, 2011 at 9:07 am | Permalink

    The problem with trying to enforce a uniform regime for economic stability across the EU is that it will simply place a sticking plaster over one part of the burst balloon and cause the pressure to breach another part. Be sure that a uniformity enforced across the not so uniform economies of the EU will simply cause unemployment to surge.

    The economy of the USA, which the Europeans try to emulate, is able to get away with it because people can easily move to areas where economic activity is more robust. For the people of the poorer EU nations the only option will be insurrection or starvation.

  8. CHEESED OFF
    Posted April 25, 2011 at 9:17 am | Permalink

    This makes very sad and scarey reading – but it will take some unorthodox and gutsy tactics by those who care to stop all this happening.
    You’re right to keep us informed in language we can understand but has anyone any ideas of how to galvanise the anger ordinary folk feel?
    If so the moment is nigh.

  9. Posted April 25, 2011 at 9:36 am | Permalink

    “The euro is and will remain a central part of European integration.”

  10. Posted April 25, 2011 at 9:45 am | Permalink

    “We will take back powers from the EU”, Cameron said.

    What a liar he turned out to be. I don’t want to be part of the EU Dictatorship. I’d rather go to jail than pay taxes for a bunch of bureaucratic criminals like the ConLibs and EU politicians.

    You were voted in to represent us, not to become our Masters!

  11. alan jutson
    Posted April 25, 2011 at 9:47 am | Permalink

    John

    The effective EU takeover should come as no surprise to anyone, let alone MP’s, they have after all had a good number of decades to get used to the game plan as it is set up !!

    You simply cannot run a membership club, with differing rules for all members involved, who pay differing amounts to be members, and where some members get more benefits than others. Its simply not fair or equitable, and would not be entertained in any other sort of organisation.

    Logic would therefore suggest that at some stage you have to make the rules the same for all, charge the same amount for membership fees, and give the same benefits to everyone, otherwise you could be accused of favouritism.

    Clearly then the logical first step is to have a similar set of rules for everyone concerned, similar employment laws, similar immigration policies, similar health and safety requirements, similar company, personal and business tax rates, and of course control of members budgets and legeslative powers to enforce them.

    Later comes a general foreign policy, armed services, law and order, a one size fits all welfare and benefits system, and a President who has real power.

    Why anyone is now surprised at recent and proposed developments, quite honestly surprises me.

    Clearly all those MP’s from all countries who have buried their heads in the sand for the past few decades, now need to get the grit out of their eyes, and start becoming aware, otherwise they may find they are not required at all.

    John, thanks for continuing to highlight the EU situation, at least you and a few (too few) are clued up. Keep on plugging away, the rest may eventually wake up and smell the bacon before its too late.

    Just out of interest, where to the fines go, and who is responsible for spending this money?

    If you do not pay the fine, are the leaders put in jail, or do you just get expelled from the club ” in poor standing”

    Reply: They are still arguing over who gets the fines. If you do n ot pay the first time round, they fine you more.

  12. Liz
    Posted April 25, 2011 at 9:57 am | Permalink

    You have got to hand it to Continental Europe – they just love dicatorships and tyrannies. Absolute monarchs, Military dictators, Political dictators, Fascism, Communism and now a new one – Bureacratice Dictatorship – they have tried them all: almost anything than give the people power through democracy. Why the political elite in this country should be in the thrall of the latest effort is amazing and perpelxing- perhaps they have secretly never been very keen on democracy at all! One comforting things is that if history is anything to go by the EU will fail eventually as have all other attempts at tyranny in Europe.

    • Julian
      Posted April 25, 2011 at 11:49 pm | Permalink

      You are right – this is dictatorship by people in business suits.
      But it will fail in the end – eventually the people will not have it.

  13. Stuart Fairney
    Posted April 25, 2011 at 10:01 am | Permalink

    Is it possible to ask the PM if he will assure the house that none of the six-pack provisions apply to the UK and we will never submit to any nor recognise EU competence (ie sovereignty) in this area?

  14. Alte Fritz
    Posted April 25, 2011 at 10:05 am | Permalink

    Do the Commission’s own accounts now pass audit?

  15. sm
    Posted April 25, 2011 at 10:49 am | Permalink

    “He who controls the money supply of a nation controls the nation” (James Garfield)

    If France, Germany want this then let them get on with it. If they want ‘ever closer union’ sans democracy it will crumble. I’m not sure rules mean anything to the EU club – remember the Mastricht criteria? They should really consider their electorates wishes and needs. Good luck, i hope it works well for them.

    We need to step back and consider how to simply extricate ourselves whilst co-operating in mutual agreed areas subject to the primacy of UK parliament and UK law.

    Are we afraid to stand alone if needs be? it certainly seems that way with our leaders.

  16. Derek Buxton
    Posted April 25, 2011 at 11:39 am | Permalink

    What is this “EU wanting to control economies”, it has been the plan all the time. It is plain that there cannot be a single currency like the “EUro” without central control of every part of the whole economy. This was implicit from the start and many realised it but were shouted down by the “government” and it’s cheerleaders, led by them wot now best!!!

  17. Posted April 25, 2011 at 11:41 am | Permalink

    These measures are fine for Eurozone member states in order to make their currency credible but not the least bit acceptable for member states that are not, and do not want to be, in the Euro zone.

    The correct policy for the UK is to insist on a two ring Europe (federal core, non-federal associates) and to press for as few member states as possible belonging to the central core. As a beneficial side effect, this structure will make it much easier to negotiate treaties with Turkey and Russia.

    • Jon Burgess
      Posted April 25, 2011 at 9:21 pm | Permalink

      I disagree. The correct policy for the UK is for the Governement to tell the EU to get knotted, repeal the Treaty of Rome and end the whole EU flirtation once and for all.

      But sadly that won’t happen and nor will your suggestion. We will be told none of this applies to us, only to find out later that it did, but by then it will be too late to do anything about it.

      Wouldn’t it be great if politicians could be fined for telling the electorate lies whilst in office? Or have their pensions taken away?

      Vote UKIP, people; it is the only answer to this nonsense. Join UKIP, Mr Redwood. Unlike your current party, they actually agree with you on this stuff!

      Presumably, this will qualify as a transfer of sovereignty to the EU, so Dave will be offering a referendum on it? Or giving a cast iron guarantee that he’ll consider it as an aspiration, at least!

  18. Eric Arthur Blair
    Posted April 25, 2011 at 12:32 pm | Permalink

    Did you see the Sunday Telegraph report (which had made the blogs an entire year beforehand) on Climategate, the BBC, and (questionable actions -ed) in the highest levels of government – with Parliamentarians embroiled in (the climate business? ed) making a nice little earner out of the faked science of ‘man made global warming’, with the BBC up to it’s (words left out) neck in the scandal?

    It doesn’t matter what we, the people think. The political class, their civil servant masters, the quangos and all the rest will do want they want.

    What we, the people think long since stopped mattering.

    So, we can all be appalled at this EU economic governance plan. We can say what we like. Hell, we can even protest, provided we get permission in writing from the revenue motivated police force who deliberately ignore the Treason laws to allow politicians to commit the most grave acts of treachery against this country.

    But, to cite Mary Ellen Synon, many of us down here on the ground are openly discussing revolution. Go around every MSM forum – the talk is widespread.

    And we, the people can knit.

    • sm
      Posted April 26, 2011 at 12:35 pm | Permalink

      At what point would a ‘revolution’ become legal? Any human rights lawyers out there when you need one? I ask only because the Police are meant to uphold the law and democracy? Also im not keen on revolutions except of the paper non violent kind.

      We would need to see multiple institutional failures before then. I fear others countries are destabilising around us daily.

  19. Javelin
    Posted April 25, 2011 at 12:46 pm | Permalink

    It’s good you have pointed this out – as I’ve posted for a while now there have been dubious ethical motivations going on in the Eurozoneu. It’s been obvious to us who closely watch the financial markets (as I’m an ago trader in a big hedgefund) that the Eu has been stringing along the PIGS to achieve closer union. Given the asymmetric fiscal/currency structures in the PIGS I would have let my country default at the same time as restructuring fiscally – the PIGS would have been far better off to blow bond holders out and fixed the fiscal problems than carry on limping and dependent on the Eu. To believe bond holders would not lend is to believe that equity markets would never recover. If bond buyers saw a genuine fiscal correction interest rates would fall – bond holders would be more vigilant in future. The current state of affairs let’s the PIGS hobble along with broken fiscal strategies all the time keeping doubt in bond holders minds and weakening the PIGS soverigntity. But above all of this the EU has used this crisis to weaken soveigntity, confidence and economic liquidity in order to promote a centralised, inflexible set of rules – the cost of which will be further brittle fiscal strategies and budget crises in a few years. The sooner Greece defaults the sooner reality will return to the EU.

    • Javelin
      Posted April 25, 2011 at 1:06 pm | Permalink

      I just wanted to add – those of you who wonder what is going on in traders minds I will tell you – basically it’s a simple swap of tax payers cash for continued risk in the bond markets. The deal is as follows Sovereign Politicians permit the Eu to bail them out in return for not having a politically embarrassing default. Bond holders get tax payers cash in return for taking the risk the Germany/France will stop taking money from their tax payers or the PIGS will stop wanting to be controlled by the EU. The risks in the market, for traders are political and not economic risks. Given the unstable and relatively unpredictable nature of politics (eg Finland) these risks have created a more volatile Market that is difficult to hedge against. So the government bond Market has stopped being a economically determined one – but a politician one – which creates all sorts of problems. For example price curves and volatility curves are increasingly being questioned. The recent LIBOR disconnect – and now zero coupon politicisation has potentially destabilised many banks balance sheets – it’s just so difficult to unstained what a liquid asset is any more.

      • Mike Stallard
        Posted April 25, 2011 at 7:08 pm | Permalink

        I just want to thank you for being so lucid – rare for a money man I think.

      • Posted April 25, 2011 at 8:01 pm | Permalink

        “it’s just so difficult to unstained what a liquid asset is any more”

        A decent bottle of scotch. Buy on every good loss leader.

  20. forthurst
    Posted April 25, 2011 at 1:36 pm | Permalink

    Will not the beaks in Brussels need to us examine us, if we are potentially to be subject to negative EU funding, to ensure that we are pure and clean and free of the vampire squid’s stigmata?

    One way for prospective defaulters to improve their positions will be to offload asylum seekers and other sources of negative income onto us.

  21. acorn
    Posted April 25, 2011 at 1:36 pm | Permalink

    Thanks for the reply. Sooner rather than later, the UK is going to have to decide if we are in this EU thing or out of it. Personally, I am getting … off with the debate. If we can have a referendum on AV v FPTP, I am sure we could have one on the EU. The only thing that bothers me is what would the debate degenerate into.

    The mud slinging over AV may be a small prototype example of what we could expect for an EU referendum. I don’t think I could stand that. The current AV grandstanding by politicians, we should take with a large pinch of salt. It’s all part of modern political marketing to a dumb and getting dumber voting public. None of the media hyped rhetoric, will change whose turn it is to buy the beer in the Commons bar after the referendum. It happens in local government, just the same. No party wants a general election with the current state of party funds.

    “If Brits had come into Union [French bit meaning 110% I think], you be running the [outfit ?] now and could rid of Scot-s-land as other Union country”. (French advice: yesterday afternoon). The lady nearly had me convinced!

    So 100% in or 100% out; no more sitting on the fence, cos my a**e is getting sore. I may even end up voting for a fringe party to take the pain away; if I can be bothered to vote that is. Under AV, I may even get a surprise win; could be even better than a day at Sandown Park. Can you do an each way bet under AV, probably need five runners?

  22. Anthony Harrison
    Posted April 25, 2011 at 2:08 pm | Permalink

    Just exempting ourselves from the larger sanctions is not sufficient.
    Exactly so, Mr Redwood. We have to quit the EU: there is simply no alternative. The mire of indecision, compromise, hypocrisy and downright untruth in which the Conservative leadership is trapped grows not merely more embarrassing daily, but more dangerous to our sovereignty. When are you going to do the logical thing and resign the Tory whip? Why don’t you join UKIP? You talents and refreshing honesty would be welcomed there, and would augment that party’s already growing electoral chances…

  23. Mike Stallard
    Posted April 25, 2011 at 2:19 pm | Permalink

    Mr Cameron, Mr Gove, Mr Clegg and several others of the inner circle of the government have all been to Public Schools which instilled leadership in them from the time they entered until the time they left Oxbridge.
    So why are they sitting on the fence?
    All of them are simply refusing to lead, just as Mr Blair did before them.
    This is not the time for shilly-shallying around: it is the time to set boundaries and shout “No No No!”

  24. Javelin
    Posted April 25, 2011 at 4:39 pm | Permalink

    It’s interesting reading that a citibank trader is being questioned by Interpol over an email alleging a potential forthcoming Greek default. (makes allegations without proof – the bank is saying it was reporting market rumours and had no inside information -let’s wait and see what happens next -ed)

  25. BobE
    Posted April 25, 2011 at 4:51 pm | Permalink

    Mike, they won’t shout no because the EU is their future after the next election when Labour will win. Cleg and Cameron will be dethroned and found a role in the EU. Dave may even try to be president as Blair attempted.

  26. Brian Tomkinson
    Posted April 25, 2011 at 5:35 pm | Permalink

    The hypocritical EU is supporting uprisings in North Africa and the Middle East in the name of bringing democracy to those countries whilst at the same time it behaves as an unelected dictator ruling over its member states. This will not have a happy ending and I wouldn’t like to think that the European countries have to resort to the same tactics as the others to free themselves from the shackles of anti-democratic despots.

  27. Peter van Leeuwen
    Posted April 25, 2011 at 6:55 pm | Permalink

    Sorry, posted a comment in the wrong blog.
    As far as the six-pack is concerned, it was known for quite some time that this was coming. The only difference is that by now, British and other MEPs have had their say and it it is now going to be discussed in the European Council. Of course the UK should fight its corner, it may end up with a nice à la carte membership as there may not be many other EU countries in the “outer EU ring” in future, most countries bound to adopt the euro in time. There is of course the other option, leaving the EU all together, but why hurry if there is first a chance to see what conditions the UK can negotiate for itself as a respected and weighty EU-member.

  28. Alan Wheatley
    Posted April 26, 2011 at 9:10 am | Permalink

    Why should it be believed that these latest proposals will be any more successful than the Stability Pact that was intend to control euro borrowing, but didn’t?

    Further, what is the sense in imposing a penalty that takes cash from those who offend because they are short of cash?

  29. Scottspeig
    Posted April 26, 2011 at 12:27 pm | Permalink

    Can we have that referendum now? Oh wait, I’m sure the government ministers will parrot the line “This does not affect us, we’re not part of the Euro, and it is not a transfer of power” and then it’ll come – just like the bail-out of Portugal.

    If the Conservatives do not get a grip on the cabinet ministers, it will die out as a political party as UKIP will grow stronger.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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