Vague euro deal could create huge divisions in future of EU
02 July 2023
Superficially we have gained from the European summit. The release of euphoria, as a result of being mentioned in the communique, pumped a much-needed spurt of adrenaline into the Irish political system. This was good for Enda Kenny and Michael Noonan.
However, what we will get from the deal is unspecified and probably quite limited. We still carry the burden of the ghastly mistake by Brian Lenihan. He was duped by the banks back in 2008. The debt imposed on tax payers is still there and, following the summit, we are likely to benefit from its attenuation rather than any cancellation.
Well over half is unlikely to fall within the terms of the communique, an obscure document that gives little detail beyond a nod in Ireland’s direction.
Where we differ from Spain and the other euro beneficiaries, Greece and Italy, is in the relationship between our banks’ debts and the country’s. The Brussels decision was to break the lethal embrace between banking and sovereign debts by the creation of a euro banking union. But with our banks nationalised, how does it work for us? Do we hand the banks over to the control of the ECB? And if so do we strip them of what they owe us first? We may well be counting benefits that will not accrue.
The reality is that there are more seriously damaging political changes in what happened at the summit in Brussels. The Europeanisation of banking controls has come with a possible major and unforeseen change in the European power balance under three distinct headings. The first is the apparent collapse of the Franco-German partnership. Its rigidity was not helpful to Ireland.
Replacement with the new team of Italy, Spain and Greece, with Ireland tagged on and with France being supportive seems radical if insecure. We shall see.
The second clear outcome from the summit is the very serious division which it marks in Europe, with virtually all power and action on economic growth and fiscal discipline concentrated on the eurozone, weakening the EU.
The summit considered one half of Europe. The proposed banking union is concerned only with the institutions within the 17 euro member states. It will of course have a much wider effect because non-euro banking systems are linked with or supported by banks in the 17 euro countries.
The welfare and stability of the 10 non-euro states was not uppermost in the minds of those who toiled through the night to work out a euro banking union. Far from it. The damage resulting from the rupture of the Union may be larger and more fundamental.
All EU countries have sovereign debt. All have their own banking crises. Last week dealt with those in 17 states. Yet the two areas are inextricably mixed. However, rescue pro- grammes are eurozone ones and that is the focus of the European leaders.
THE real fear of this two-Europe future is underlined by growing support for a form of democratisation leading to a eurozone parliamentary assembly. This would be separate from the European Parliament. Such thinking adds to fears of non-eurozone countries.
There is growing resentment, outside the eurozone, that the EU also continues to maintain its macroeconomic controls out- side the euro, at times threaten- ing to freeze EU funds, while it bends before the large countries – Italy, Spain, Greece – which have now taken control.
It is perhaps not surprising that the Government and Fianna Fail have concentrated on the summit outcome insofar as it accepts some of our terms over banking and bank debts. Is it not strange that Britain’s increased isolation was not picked up by Sinn Fein in respect of the widening gulf North and South as we in the South are drawn more into the euro area and the people of the North into the increasingly euro-sceptical UK?
However, what we will get from the deal is unspecified and probably quite limited. We still carry the burden of the ghastly mistake by Brian Lenihan. He was duped by the banks back in 2008. The debt imposed on tax payers is still there and, following the summit, we are likely to benefit from its attenuation rather than any cancellation.
Well over half is unlikely to fall within the terms of the communique, an obscure document that gives little detail beyond a nod in Ireland’s direction.
Where we differ from Spain and the other euro beneficiaries, Greece and Italy, is in the relationship between our banks’ debts and the country’s. The Brussels decision was to break the lethal embrace between banking and sovereign debts by the creation of a euro banking union. But with our banks nationalised, how does it work for us? Do we hand the banks over to the control of the ECB? And if so do we strip them of what they owe us first? We may well be counting benefits that will not accrue.
The reality is that there are more seriously damaging political changes in what happened at the summit in Brussels. The Europeanisation of banking controls has come with a possible major and unforeseen change in the European power balance under three distinct headings. The first is the apparent collapse of the Franco-German partnership. Its rigidity was not helpful to Ireland.
Replacement with the new team of Italy, Spain and Greece, with Ireland tagged on and with France being supportive seems radical if insecure. We shall see.
The second clear outcome from the summit is the very serious division which it marks in Europe, with virtually all power and action on economic growth and fiscal discipline concentrated on the eurozone, weakening the EU.
The summit considered one half of Europe. The proposed banking union is concerned only with the institutions within the 17 euro member states. It will of course have a much wider effect because non-euro banking systems are linked with or supported by banks in the 17 euro countries.
The welfare and stability of the 10 non-euro states was not uppermost in the minds of those who toiled through the night to work out a euro banking union. Far from it. The damage resulting from the rupture of the Union may be larger and more fundamental.
All EU countries have sovereign debt. All have their own banking crises. Last week dealt with those in 17 states. Yet the two areas are inextricably mixed. However, rescue pro- grammes are eurozone ones and that is the focus of the European leaders.
THE real fear of this two-Europe future is underlined by growing support for a form of democratisation leading to a eurozone parliamentary assembly. This would be separate from the European Parliament. Such thinking adds to fears of non-eurozone countries.
There is growing resentment, outside the eurozone, that the EU also continues to maintain its macroeconomic controls out- side the euro, at times threaten- ing to freeze EU funds, while it bends before the large countries – Italy, Spain, Greece – which have now taken control.
It is perhaps not surprising that the Government and Fianna Fail have concentrated on the summit outcome insofar as it accepts some of our terms over banking and bank debts. Is it not strange that Britain’s increased isolation was not picked up by Sinn Fein in respect of the widening gulf North and South as we in the South are drawn more into the euro area and the people of the North into the increasingly euro-sceptical UK?
