A BIT like the 46A Dublin bus of old, EU integration proceeds, it appears, through long bouts of exasperating inactivity, and then three “vehicles” come along together. And we can all move on. Yesterday’s ruling by the German constitutional court clearing the way for the European Stability Mechanism (ESM), and the European Commission’s draft plan to give the European Central Bank (ECB) supervisory control over the 6,000 banks in the euro zone, came just days after the bank’s historic announcement that it was prepared to buy “unlimited” amounts of bonds from stricken euro zone members.
Three key elements of Europe’s response to its debt crisis belatedly begin to slot into place - “a good day for Germany and a good day for Europe,” Chancellor Angela Merkel said in a speech to parliament yesterday.
Merkel’s speech was also a welcome implicit acknowledgment that although the Bundesbank had opposed the ECB bond decision, the German government is not that unhappy with it. It does have reservations about the commission’s plans for banking supervision, preferring for practical reasons to restrict the ECB’s role to keeping an eye on the top 25 banks, but reports suggesting that Germany is now out on a limb on the whole euro project are greatly exaggerated.
And the court’s positive ruling, specifically its two key rider conditions, are an important and welcome reiteration of the need to maintain democratic accountability at the core of economic union. The judges insisted that the Bundestag will have to be asked to approve any extension of the country’s current €190 billion liability to the rescue fund, and that confidentiality requirements will not be used to inhibit German ESM board members from reporting to the Bundestag. The reservations, which may necessitate an additional German treaty protocol, are perfectly reasonable and important to the legitimacy of the ESM, and the Government should give serious consideration also to signing up to such provisions.
The single supervisory mechanism proposed for banking is a logical and necessary quid pro quo for the welcome extension of the ECB’s role as a bulwark for Europe’s banks and their depositors. The challenge will now be in the detail and to put the whole package into place by the target date of the beginning of 2013. Experience suggests that is unlikely to be possible, and so the Irish presidency, due to start in January, will find itself with the formidable task of shepherding the final legislation through at the same time as Irish Ministers press their case for debt relief.
Raising his eyes beyond the immediate horizon of the euro crisis, commission president Jose Manuel Barroso yesterday also issued his own timely clarion call for a “broad debate” on the need now to move “towards a federation of nation states”, the only way, he said, the EU could meet the challenges of competing with major trading partners like China and the US deep into the 21st century. Many will disagree with his formulation, but the debate does need to begin.