True Finns continue to rise

Last week, the True Finns announced that it could not participate in a Coalition government that supported the bail-out of Portugal, its opposition to which was a key plank of the party's election manifesto. Announcing the decision, True Finns leader Timo Soini said, "It would have been nice to be part of the government but you cannot betray yourself."

Soini may have passed up on power, but his decision seems to have gone down well with voters. In an opinion poll carried out at the end of last week - when it had already become clear that the True Finns would not join the government due to the Portugal bail-out - the party got 22.4%, beating its election score by over 2% and making it the biggest party for the first time. It is trailed by the National Coalition Party on 20.6%, the Social Democrats on 18.6% and the Centre Party on 14.4%.

At this rate - particularly if the eurozone continues to deteriorate, requiring more bail-outs - Soini could become absolutely lethal in four years' time. It's that tension again, inherent in the eurozone structure - political ambition vs national democracy vs. economics...

On a separate note - irrespective of what we think of the True Finns - there's an interesting contrast here to a certain UK party, which, upon joining a Coalition government as a junior partner dropped from 23% at the election to 18% just over a month later and falling even lower this year.

The Great Euro Gamble

In today's Wall Street Journal we argue,

"When European Union leaders forged their monetary union without a full political and economic merger, they gambled on two vital factors: That economic forces could be kept in check, and that national democracies could be managed.

Over the past 16 months, we have been reminded time and again exactly how big and how irresponsible those gambles were. Sunday's was arguably the strongest reminder yet, courtesy of the anti-euro True Finns party that may hold the balance of power in the next Finnish government. Paris, Berlin and Brussels seem not to have factored Nordic populism into their grand plans for the euro. But ultimately the euro zone is about politics, and politics remain as local as they ever were."

We go on,

"The True Finns' success will not change European politics overnight, and the party may not even succeed in blocking Finland's participation in future bailouts. But, irrespective of what we think of the True Finns, the election does highlight how powerfully a euro-zone crisis can contribute to shaping national politics. Euro bailouts were also an important issue in Slovakia's elections last year, and helped to deliver a new governing coalition that refused to take part in Europe's Greek bailout. That government only reluctantly kicked in later to help create the temporary bailout fund that euro leaders are now looking to replace after 2013.

This year the True Finns asked voters to consider the same question that Slovaks did last year: Why should they work harder and retire later to pay for the mistakes and wasteful habits of southern European governments? This "triple-A populism" has proven a powerful force in a number of countries with sparkling credit ratings, including Germany. Writ large, this weekend's Finnish elections are a rebuke of one of the euro zone's central, and fatal, conceits: that political ambition can trump economic and democratic realities."

Looking at EU leaders' gamble on being able to keep economic forces in check, we note,

"Markets have now finally woken up to the fact that Greece and Germany are poles apart; it is time for EU leaders to do so as well. Ireland, Greece and Portugal have made all too clear that economic forces can rarely be predicted, let alone contained.

Some particularly federal-minded EU leaders took this as a pretext to push even harder for a full-fledged fiscal union. Former European Commission President Romano Prodi wrote in an op-ed in the Financial Times last May that "When the euro was born everyone knew that sooner or later a crisis would occur. . . . I was warning years ago that, through no one's fault in particular, extraordinary events could occur that would force joint co-ordination of fiscal policies."

That sentiment spurred EU leaders to take their next major gamble, which was even riskier than the first: They bet that once they did start to effect robust economic and political union, national voters and parliaments would play along and vote the "right" way. So last year, when the EU elites decided to break their own treaties and turn the euro zone into a de facto debt union, they forced taxpayers in some countries to take on the liabilities of foreign governments in other countries—without the possibility of voting these governments out of office. But taxpayers are now showing signs of revolt. "

We conclude,

"Will EU politicians' second gamble turn out as ill-judged as their first? Time will tell. But one thing is clear. The political price that European leaders are paying to keep their flawed project afloat continues to rise."

First to the Finnish line

This is a graph showing the support for the different parties, according to a poll published last night, ahead of the Finnish national elections on Sunday. All international eyes are on the True Finns (fourth from the left) - the party that has said it opposes a bail-out deal for Portugal and putting any more cash on the table for struggling eurozone economies. In fact, the party doesn't want to be in the euro at all.

A lot has been said about the True Finns, with the European media all of a sudden forced to become experts on Finnish national politics - it has to be said with varying degrees of success. That many still refer to the True Finns as a "right wing" party indicates the need for a bit more analysis and a bit less reliance on labels that are flying around. The party is pretty skilfully moving along the right-left scale. It's effectively social democratic on economic and welfare issues, favouring a big state, combined with a pretty clear socially conservative flavour. It's definitely populist and not exactly enthusiastic about immigration (and this in a country which accepts some of the fewest migrants in Europe).

So what will happen on Sunday? We wouldn't bet our money on any player. The True Finns have seen a drop in support recently - 15.4% in the poll published yesterday, down from 17.2% a month ago. The National Coalition Party extended its lead to 21.2% in yesterday's poll, while the Centre Party was the second largest party at 18.6%. The Social Democrats were at 18%. The Nordic bookies don't think the True Finns will make it into government and will give you 2.10 times your money for a bet on them winning ministerial seats, while a bet on them not making it only gives you 1.65 times your money.

Regardless, the True Finns are likely to make huge gains compared to the last elections in which they scored just over 4% (see the rise of the True Finns here, in yellow). And a second thing to remember, the Social Democrats - currently at 18% - have also expressed pretty clear opposition to a Portuguese bail-out, instead arguing for a restructuring. Between them, the two parties could well reach above 30% - that's a pretty powerful anti-bail-out bloc. As we've noted before, this could potentially hugely complicate a Portuguese bail-out, as well as efforts to top up the temporary bail-out fund (EFSM) and cash injections in to the permanent rescue mechanism (EFM).

The elections in Finland have made people - not least many opinion formers - start to realise that, shock horror, ultimately the eurozone is about politics. And as we know all politics is local.

In fact, it's difficult to find a more conspicuous example of the inherent flaws of the eurozone - the idea that political ambition can stamp out both economic and democratic realities - coming up against the full force of national democracy.

" A step backwards for transparency"

The bulk of the cost of regulations in both the UK and Europe stem from the European Union, as we've showed in our extensive research on the subject. But this isn't even the end of the story.

Many key decisions on the actual substance of EU laws and regulations are being taken during an uber-opaque process called “Comitology”. As we've noted before, Comitology involves special committees consisting of Commission and national experts deciding on how EU legislation should be implemented - usually behind closed doors - after the proposal has been agreed by national governments and the European Parliament.

The Lisbon Treaty - the document, if you remember, that would lead to more transparency in Europe - is introducing new rules for the Comitology procedure, effective from 1 March 2011. The new rules were meant to improve and simplify the system, but are now universally acknowledged to have made the situation even worse (we explain why here).

Political consultant Daniel Guégen, who is one of the foremost experts on this topic, makes the slightly worrying observation that as a result of the reform, power in Brussels “is shifting from the political level to the bureaucratic level.”

Even the European Commission concurs. Mario-Paulo Tenreiro, who is responsible for institutional questions at the Secretariat General of the European Commission (exciting job), says:

I must admit that for the general public the new rules are a step back for transparency...Hundreds of thousands of decisions will be taken by these Treaty articles every year.

Apart from the complexity and opaqueness of the new rules, Euractiv reports that the reforms are also causing legal uncertainty. According to Wolfgang Heusel, director of the Academy of European Law (ERA), this means that "courts will have to have the last word" on how EU legislation should be implemented.

Does this matter? Absolutely! As much as 50% of the actual substance of all EU rules is decided during the comitology stage after the law has already been agreed by Ministers and MEPs, according to Dutch academic research. So we're not talking about fixing little details.

Are the Coalition and other governments around Europe keeping up? We fear not.

Ahead of the last General Election, Ken Clarke (then Shadow Business Minister, now Justice Secretary) managed to give an entire key note speech on regulation and how to improve it, without mentioning the EU once.

Il faut le faire, as the French say.

In the words of a true EU statesman

European Council President, Herman Van Rompuy, presented his imaginatively titled new book yesterday - "Inside the world of Herman Van Rompuy" to a Brussels audience with bated breath.

But those interested in Van Rompuy's exploits as a top EU statesman would have been surprised to hear him declare:

"I don't speak here as a politician but as a free man. I don't have any voters. And I also prefer readers to voters".

Remember, this is the president of an organisation consisting of 27 democratic countries - full of voters!

Now, what does this say about the mindset at the top of the EU? And will this comment make European taxpayers feel better about handing over billions extra (including between £450 mn and £900 mn from UK taxpayers in 2011 alone) to an organisation whose head apparently "has no voters"?

Commons weighs in on deposit schemes

Hats off to the House of Commons.

Earlier today it grasped the nettle and employed the Lisbon Treaty's 'yellow card' procedure for the first time (if nine national parliaments object to a proposal from the Commission on 'subsidiarity' grounds, within an eight-week window, the Commission is obliged to re-consider - but not scrap - the proposal). The House of Lords was slightly quicker off the blocks, using the procedure last week to object to the EU's proposed directive on seasonal workers from third countries.

The Commons provided a "reasoned opinion" on the proposal to amend the so-called Investor Compensation Schemes Directive, objecting to it on subsidiarity grounds.

As we've argued before, this proposal raises various concerns, as under the proposed rules member states would be required to lend to each other should a bank go bust and deposits needed to be guaranteed. As the Swedish Parliament argued, this presents a 'moral hazard' since some member states might be tempted to under-fund their scheme, knowing that someone else would pick up the final bill.

The House of Commons joined its counterparts in Sweden, Germany and Austria in objecting to the proposal.

Only problem is, the deadline for objecting to the proposal expires today. Eight weeks doesn't exactly give national parliaments plenty of time to mobilise, particularly when, as it did now, it coincides with parliamentary recess in most European countries (almost as if it was planned).

We confess to not being up to speed with how many national parliaments actually managed to formally object to the proposal in the end - but will be back shortly with an update.

Regardless, it's good to see MPs taking responsibility.

How could the 'referendum lock' be given teeth?

Over at the Spectator's Coffee House blog, we're taking a look at how the Coalition's referendum lock on further transfers of power to the EU could be given real teeth. The lock, which was announced yesterday, has come under criticism from Tory backbenchers for being too little too late.

However, we argue that if the Coalition takes a strict interpretation of 'transfer of powers', the referendum lock could actually prove significant.

Read our take on how this can be achieved here.

Sticking to your guns

The new Slovakian government is not bowing to pressure over its refusal to sign off on the eurozone bailout package. After a meeting with European Union Council President Herman van Rompuy tonight, Slovakian Prime Minister Iveta Radicova said, when asked about her view of the Slovakian contribution to the EU's €440 billion eurozone aid mechanism (still to be finalised) and the €110 billion bailout of Greece:

"The position of our minister of finance and also my personal and our political party [position] is as it was before, that we really do not agree, we really do not agree."

Crucially, according to Reuters, Radicova said her Cabinet would only meet to discuss the issue on Wednesday, meaning Slovakia would not be in a position to sign off on the €440 billion aid package when EU finance ministers meet to discuss it tomorrow.

To say that the Slovak Finance Minister, Ivan Miklos, will come under pressure at tomorrow's EU meeting is most definitely an understatement.

Would you trust this Miliband?

With the election only two weeks away now the country has turned poll-crazy as we rate the stars, ahem, politicians with every twist and turn of the election horse track.

The latest intrigue from the poll-vine comes from an interesting study released in yesterday’s FT, by market research firm Harris International. It reveals that David Miliband is one of the least trusted politicians in the UK, with a whopping 38 percent of people saying that they ‘distrust’ him in contrast to the scant 12 percent who ‘trust’ him.

The surprise must come as quite a blow to Labour’s wonder child, and to the party who widely tip him for future leadership. The question remains, what has Miliband done to upset the voters?

We think this poll shows that the public remember oh too well the failed promises that Miliband, and the Labour party, have offered and taken away from us over the years.

In his role as Foreign Minister, Miliband promised to put an end to the UK’s role in overseas torture cases, but instead ended up publishing guidance as to how to interview detainees overseas. He also presided over the financial scandal that saw the Foreign and Commonwealth Office lose vast sums of cash after the budget was left unprotected from exchange rate changes.

But in our view the most fundamental breach of trust was the reneged promise to hold a referendum on the Lisbon Treaty. Miliband was at the head of the party in the writing of New Labours' election manifestos which, as we well remember, promised us a referendum on a European Union Constitution. Strike 1 - the Constitution came and went without a referendum in the UK. Strike 2 – the identical Lisbon Treaty came and arrived without a referendum.

By also leading the defence on the Treaty in the Commons (which a clear majority of the British people didn't want) Miliband is very much synonymous with the whole insult to democracy that the Lisbon episode involved. It’s no wonder then that the people don’t trust him.

And the winner is...the European Commission

Remember the promise that the Lisbon Treaty would 'streamline' the EU institutions, i.e. making them simpler and more democratic? Well, if you still believe it (after this, this, this, this and this) with the risk of being bored to death, check this out:

One of the more mysterious - and tedious - elements of EU decision making is "comitology". The system works like this: after an EU law has been agreed by the European Parliament and Council (after having been proposed by the Commission), the Commission, aided by national experts, still has room for manoeuvre in amending or adding to the Directive at a later date, with limited involvement from the European Parliament and the Council (as we explain here on page 31). Whenever a Directive says that something will be decided through "implementing measures", this means that details of an EU law are hammered out in these comitology committees.

The European Affairs Committee of the Danish Parliament has noted that the system of comitology “means that the Commission can adopt EU legislation against the will of a majority of Member States in the Council", saying “We find such a procedure undemocratic” and “Another problem with the comitology system is the short time made available for parliamentary scrutiny.”

Recently, University of Utrecht researcher Gijs Jan Brandsma found that expert bureaucrats from the Commission and member states, sitting in these comitology groups, are responsible for deciding the content of almost half of all EU regulations after the actual decision has been made by the European Parliament and the Council of Ministers. Brandsma argues that the extensive use of expert bureaucrats creates big problems for scrutiny and accountability. In his thesis, called "Backstage Europe" he also interviews one of those expert officials, who in a revealing remark sums up how much discretion these guys have in the implementation stage:

On our way to Brussels, he tells me how he has decided what his input is going to be. Nobody higher up in the hierarchy seems to be involved in his case. There are no instructions. His ministry does not take a clear position regarding his file.

Incedentally, experienced EU lobbyist Daniel Guéguen, has just published a book, titled: "Comitology: Hijacking European Power?". In it, he writes,

today, without comitology, the EU would quite simply be at a standstill. Where does the political level stop and the administrative start? (...) The system has become totally out of balance because the implementating measures have come to +/- 2500 per year while only about fifty directives have been adopted during the same period.

He concludes, "comitology represents about 98 percent of the regulatory activity of the Union in a year. And this 98 percent is the Commission's competence".

This is where the Lisbon Treaty comes into the picture. Under the Treaty, the system is being 'streamlined' (wait for the irony) and replaced by a new legal framework which seperates between delegated acts (art 290 TFEU) and implementing acts. Guéguen attempts to explain the new system:

The word comitology is going to disappear! The only common element of understanding about it is going to be removed from the dictionary. From now on, people will talk of delegated acts (which replace quasi-legislative acts) and implementing acts (which replace comitology strictu sensu).

This is murky territory, but basically, "Delegated acts" are "quasi-legislative acts" which amend Directives. They have political impact and are therefore subject to scrunity by the European Parliament (according to a deal agreed in 2006). "Implementing acts" are very similar, but classified as "administrative measures" with no political impact and therefore subject to very limited parliamentary scrunity. Confused? We are too. But it's getting worse.

According to Guéguen, the Lisbon Treaty will blur the distinction between the two even further, and interpreation will vary from institution to institution.

And MEPs are not quite keeping up. A press release from the European Parliament notes that an EP report on how delegated acts will work is due to be discussed in plenary in April. It notes that Hungarian MEP József Szájer, who is the author of the report, claims that the new system will mean a power boost for the European Parliament, arguing "The consequences of this change are considerable as the EP has achieved its historical maturity being placed on the same footing as Council."

But Daniel Guéguen disagrees; MEPs might be put on the same footing as the Council but, he says, "under the Treaty of Lisbon, the Commission will dominate the institutional trio" (page 62). He argues:

as for the Council of Ministers and the member states, they seem to have forgotten what they negotiated and what they signed in the Treaty of Lisbon (...). The new reform (...) was meant to put the European Parliament on the same footing as the Council of Ministers for delegated and implementing acts. But quite the reverse has occurred. The Council of Ministers has lost its power in the area of implementing to the Commission. It can only intervene after the event for delegated acts and has seen its power curtailed in the area of implementing acts

He concludes: "Henceforth, the institutional triangle is no longer an equilateral triangle. One side of the triangle, the Commission side, is now considerable larger than the two other sides."

Perhaps a book that should be on MEPs' reading list.

We've recently found that around 70 percent of the cost of regulations in the UK originates in EU legislation. In addition to that, 50 percent of the content of these EU laws could well be decided after the Council and the European Parliament have agreed on the actual proposal. And now the Lisbon Treaty would give the unelected Commission more powers to implement laws under the radar of public scrutiny.

This Treaty's democratic credentials aren't exactly getting stronger by the day.

'Economic government' and the democratic deficit

The comment pages of today and the weekend's papers were understandably filled with reflections on a potential Greek bailout and the wider implications for the euro and the EU as a whole. We argued in our recent briefing that a bailout would have far-reaching negative implications for the eurozone, establishing a precedent for rescuing profligate states that fails to address the inherent problems of a monetary union between the eurozone's differing economies without the harmonisation of fiscal policies, for which there is no public support.

The crisis is nonetheless being used to justify the establishment of EU 'economic government' - the next step towards the federalists' Holy Grail of fiscal or political union, with common taxes and redistribution across the eurozone. This marks a significant change to the rules of the game, with the EU now largely dictating the terms of Greece's economic policy to the Greek government. This is precisely what citizens were told wasn't going to happen when EMU was designed and agreed, even if certain politicians had other ideas.

In the Weekend FT Tony Barber noted that:

It looks very much as if Greece’s fiscal sovereignty will be, for most practical purposes, temporarily suspended. [The EU] can either clutch its worry beads and hope that Greece, acting under formidable outside pressure, will transform itself into a self-disciplined polity. Or it can exploit this crisis as an opportunity to shift European monetary union into a higher gear by taking irrevocable steps to closer fiscal integration.

Meanwhile, in the Guardian, Gary Younge argued that the eurozone crisis is emblematic of an EU democratic crisis:

The issue is not the failure to match economic and monetary ­union with political union. It is the naked disregard for democratic engagement in the entire system that in no small part ­explains why voter turnout in EU elections has plummeted by more than 30% in the last 30 years. Whenever people vote no to a phase of integration – as they did in Ireland two years ago – the EU simply orders them to vote again until they produce the right result. Once they vote yes there is no turning back.

The Weekend FT's leader writers concurred:

...even for advocates of closer integration in Europe, this is a mistake. The EU suffers from a lack of popular legitimacy. The manner in which the Lisbon treaty was passed was unedifying, giving the impression that the EU is a stitch-up by a small elite. If Europe, or just the Eurozone, is to become more deeply joined, it should be a deliberate and honest process, not an accidental and covert one.

However, there is a short term path of less resistance. As the Weekend FT article argues:

There is no need for the EU to expose itself to these difficulties. It has another option for saving Greece: the International Monetary Fund. It would be embarrassing for a member of the EU to receive help from the Washington-based Fund, so admitting the continent could not solve its own problems. But better that than sleepwalking into constitutional upheaval.

Going to the IMF is the best of a bad bunch of short term options but the EU's leaders have a nasty habit of staking pride and prestige ahead of the democratic process.

Hear, hear

Simon Jenkins' piece in today's Guardian gets a big thumbs up from us. The article suggests why Gordon Brown would make a good EU President arguing that "He [Brown] is clearly unhappy with the rough and tumble of democratic politics, with the daily grind of public appearances, glad-handing and schmoozing. But these are not required in Brussels, where nobody is elected to anything and such populism as smiling at cameras and holding referendums are anathema."

However, he makes a much more significant point about the nature of debate about the EU and, in particular, the defensiveness of those in favour of further EU integration. He writes,

"An inability to think laterally has long been the curse of the European movement. A sign of its intellectual insecurity is that it cannot handle scepticism, treating any but the most craven sycophant as an enemy...Brussels is like an office of the doctrine of the faith, tolerating no Francis of Assisi. Criticise it and you are damned as anti-European."

Jenkins also points out that the debate is so polarised that scepticism of the EU can easily be pigeonholed at the other extreme. "The noble word, sceptic, has become code for rejectionist," he says.

He concludes saying,

"The language of the Lisbon treaty is that of an elite of 40 years ago, a smokescreen for the accretion of establishment power. David Cameron is right to keep open a determination to change it, as is indeed allowed by the treaty. The only sensible response to Lisbon is not rejectionism but a ferocious scepticism, properly so called."

Right on the money.