Europe’s tussle for power

European Commission President José Manuel Barroso addressing the European Parliament last Wednesday. Photo: AFP

European Commission President José Manuel Barroso addressing the European Parliament last Wednesday. Photo: AFP

With EU Commission president José Manuel Barroso calling for a federal union with more power to Brussels, Kurt Sansone asks whether this will be the end of the EU as we know it.

Parliament will vote to beef up the EU’s bailout fund this week and with it Malta’s guarantee of €400 million.

I cannot see a federation developing in the immediate future

Government and opposition have agreed the first reading will be held tomorrow with the discussion and vote expected on Wednesday.

Sources told The Sunday Times the vote is unlikely to face any hiccups although the opposition has not publicly expressed its support.

The urgency of the debate is dictated by the sovereign debt crisis that has rocked the eurozone and which necessitates that all 17 member states ratify the agreement reached by heads of government in July.

Beefing up the European Financial Stability Facility to €440 billion is viewed as an important step to pacify the markets but it may not be enough.

The bailout fund is being used to shore up Greece, Portugal and Ireland but fear that the crisis may spread to Italy and Spain has pushed the European Commission to search for a more lasting solution.

Speculation is rife that in tomorrow’s meeting of EU finance ministers the Commission will propose a much larger bailout fund to the tune of two or three trillion euros. It may not be the only proposal.

For more than a year now the EU has tried to solve the post-recession debt crisis with solutions looking increasingly like stop-gap measures as market fears kept returning.

But European Commission president José Manuel Barroso’s state of the union speech to the European Parliament last week left no doubt as to the direction he would like the EU to take.

Applauded by the 736-member Parliament Mr Barroso proposed the introduction of an EU-wide financial transactions tax and the setting up of Eurobonds – the issuance of joint debt by the 27 member states – in what was a clear drive towards greater fiscal, economic and political integration.

Focusing on the euro, he admitted monetary union should be completed by economic union, crossing the red line whereby taxation and national budgets have always been in the remit of the individual member states.

Mr Barroso’s was possibly the single-most important speech yet outlining the importance of a federal Europe but hardly had his words rested when the UK government shot down the financial transactions tax proposal in a stark reminder of the EU’s difficulty to speak with one voice on budgetary matters.

But the rift between those who advocate a federal model of the EU on the same lines as the US and those who champion a union of sovereign states is a very old one according to historian Joe Pirotta.

“The very long time it took for the European Community to be set up after World War II was already an indication of the two currents within Europe that are still evident today,” Prof. Pirotta said.

The historical divide pitches the federalist-inclined Germany, Italy and France against the UK and other Nordic countries that oppose the idea.

These divergent views, he added, were also evident in the EU’s decision to allow member states to opt out of the single currency.

A more centralised EU is being posited as a solution to the current debt crisis but Prof. Pirotta is not optimistic this will happen any time soon.

“I cannot see a federation developing in the immediate future and if it does come about it will likely be established after a lengthy political process,” he said.

However, Isabelle Calleja, head of the international relations department at the University of Malta, believes the union has evolved into “a political animal that increasingly resembles a federal model”.

“This reality is spelt out, or if you wish masked somewhat by such terms as pooling sovereignty, supra-nationalism and functionalism, meaning there is greater efficiency in working together,” she said.

This shift was reflected in the growing powers of the European Parliament and the European Court of Justice and the increasing use of qualified majority voting rather than unanimity in voting.

“Today over 80 per cent of all legislation in member states emanates from the EU,” she said, adding that what Mr Barroso advocated last week was in line with developments that have been taking place in the EU since its inception.

Dr Calleja believes it is evident that if the EU does underwrite the debts of the separate states, in the long run it will increasingly have a say on economic and budgetary policies. The International Monetary Fund works much the same way when it provides defaulting states with funding, she said. “Economics like everything else today is played out well beyond the confines of the nation state.”

Malta is not immune to these developments but Finance Minister Tonio Fenech has gone on record saying that adopting the euro gave the country stability and protection during the global recession two years ago.

The question is whether greater centralisation will benefit Malta.

“You are asking me to look in a crystal ball because a federation will give us better economic and security protection but it also means we will lose the right to determine our social legislation,” Prof. Pirotta said.

But for former Labour MEP candidate and self-confessed Eurosceptic Sharon Ellul Bonici greater centralisation will lead to further erosion of the country’s ability to determine its own future.

“We have lost our own currency, which means we have lost control over our own money and credit supply and as a eurozone state, other than contributing millions to the EU budget we are also contributing to that bottomless pit the EFSF,” she said. A political and monetary union with its own central bank could only work with a centralised treasury department with an all-powerful EU finance minister, she said. “The six-pack legislation on EU economic governance and eurozone budgetary surveillance spells the beginning of this fiscal union.”

Ms Ellul Bonnici believes that government’s request for collateral on loans to Greece is a step in the right direction but cautions against “debt-enslavement” by being drawn into taking out more guarantees to sustain the bailout fund.

“The only solution is to get out of the eurozone and embrace our own Maltese lira,” she said.

And with Mr Barroso describing the debt crisis as the EU’s “greatest challenge ever” it is unlikely that the historical tensions on how much power should be transferred to Brussels will go away any time soon.

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