Democrat September-October 2011 (Number 125)
European Stability Mechanism
John Boyd explains the aims of a new EU Treaty &
a solution to the euro-crisis
The proposed European Stability Mechanism (ESM) is fundamentally undemocratic and is outside EU treaties. The European Constitution (Lisbon Treaty) makes clear there cannot be a bail out of any of the 17 eurozone Member States. So the ESM is the proposed solution to the dilemma and specifically designed to finance what is in reality a slush fund. The ESM will be based in Luxembourg with a board of Governors appointed by the 17 eurozone states and will operate outside the EU. ESM is part of the two tier ‘Europe’.
In the run up to EU treaties including the Lisbon Treaty there were at least some discussions at national level. The ESM has been concocted in great haste with misleading publicity by the leaders of France and Germany. These leaders are dictating to the eurozone members that they have to make national balanced budget rules by next summer. This includes the assault on public sector spending and severe austerity policies. In other words national sovereignty, parliamentary democracy and the separation of powers in the EU are to be suspended by mutual agreement between France and Germany.
The proposed ESM measures are an attempt to salvage the wreckage of the monetary union which are to say the least highly unpopular and opposed by a growing number of people. These measures will not bring about real stability to an unstable monetary union as daily evidence makes clear.
On 9 September the German Chancellor told Germany’s parliament that the current European Constitution "offers no effective foundation" for the euro zone in the longer term. "The common currency can only be preserved if there is further integration and more reliability," adding: "We won't get around making further treaty changes." German officials have stressed that treaty changes would take a long time to negotiate and ratify, however, and that the euro zone will have to solve the current debt crisis on the basis of the existing EU treaty.
During the weekend immediately after and at the G7 summit of finance ministers Mr Osborne, Chancellor of the Exchequer, said: "It's on the cards that a treaty change may be proposed". "This would be to further integrate the euro zone, further strengthen fiscal integration. I have said there is a remorseless logic from monetary union to fiscal union, and it's in Britain's interests that the euro zone is stable”.
Mr. Osborne indicated Britain would support a new treaty-which requires ratification from all 27 EU Member States-but made clear that Britain's interests must be considered. "It's crucial that Britain's interests on financial services, on the single market, on competition are protected, that we're not out-voted by the euro zone, that there is not an in-built euro-zone caucus in the system,"
However, previously on 16 December 2010 the European Council agreed to add a third paragraph to Article 136 to the EU Constitution and agreed the text on 25 March: "The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality". This is a fundamental change and that is why the EU political elite class are rushing around to amend the Lisbon Treaty and in the meantime have in place the ESM. In other words Mr Cameron and Mr Osborne knew about these moves already but have not esplained them to either parliament or the electorate in Britain.
The suggested fund to be put in place varies where the latest figure is 500 billion euros (£430 bn). This would not be enough to bail out other states beyond Greece, Ireland and Portugal. But, Article 10 of the ESM permits an extension of the fund by a decision of the governors who are national finance ministers. They do not have to ask their parliaments for the approval. That would turn parliaments into open ATM cash points. Although national parliaments have to approve the transactions, in practice this is most likely to have been handed to the ESM governors along with the PIN code.
The governors will be a law to themselves as Article 27 and 30 of the ESM Treaty grants the institution and the officials “immunity from every form of judicial process”, AND, “property, funding and assets of the ESM shall, wherever located and by whomsoever held, be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action”. The ESM and staff will be exempt from taxation and normal rules for financial institutions.
In other words the ESM will be a law unto itself and a parallel government to the EU in Brussels over the eurozone and national budgets which is normally the prerogative of parliaments.
This Treaty is due for ratification by the end of the year without any meaningful discussion in the 17 parliaments. Above all else it will not resolve the financial problems of the eurozone or wider EU.
At the time of writing further extreme pressure on Greece is being exerted by Germany, France, ECB and the IMF to get out of debt. At the same time the interest to be paid on loans is currently 15%, the economy is shrinking not growing and practically everything bar the sun and sea has been privatised and taxed.
The outcome of all this bullying is not clear except that both France and Germany in particular do not want the euro to collapse. The hyped three way telephone chat on 14 September amounted to no change in policy and was designed to calm down the speculators for a short while. French banks own much of the Greek debt and want their money back. Germany wants to keep the dominant political and economic position in the EU and eurozone.
What should and must happen for the sake of the peoples not only in Greece but other EU Member States is for the euro to be disassembled and nation-states to go back to their national currencies, to retrieve the sovereign right to control their own budgets, and interest and exchange rates. That means ending the neo-liberal ‘free’ market as well.
Click here for the draft ESM Treaty
The EU Constitution and Lisbon Treaty - a side by side comparison by Open Europe
See and hear YouTube presentation on the ESM