JUNCKER IS GALLING FOR BRITAIN, BUT LIFE--THREATENING FOR FRANCE AND ITALY / THE TELEGRAPH

Juncker is galling for Britain, but life-threatening for France and Italy

The Cromwellian method by which Jean-Claude Juncker was foisted upon the nation states is a breach of the Treaties

By Ambrose Evans-Pritchard

9:45PM BST 02 Jul 2014
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'You have to be politically unhinged to think it wise or proper now to entrust the EU machinery to an arch-insider, as responsible as any man alive for the calamitous decisions that have led Europe into its current cul de sac, and a master of the Monnet Method to boot.' Photo: AP

The sovereign parliaments of Europe are victims of a constitutional sleight of hand, though some acquiesce more easily than others. The Cromwellian method by which Jean-Claude Juncker was foisted upon the nation states is a breach of the Treaties.

The episode clarifies the need for British withdrawal from the Union, or the withdrawal of France or any other country that wishes to remain self-governing under a rule of law.

The Lisbon Treaty did not create a European state in any shape or form. France and Britain fought ferociously to stop this happening when the text was drafted, in its original form as the European Constitution. They insisted that the EU remain an "intergovernmental" treaty club, and rightly so. To do otherwise would eviscerate national democracies without putting anything workable in their place.

Germany's push for an EU federal state -- idealistic and dangerous in equal measure -- was defeated. The canny duet of Valery Giscard d'Estaing and Lord Kerr saw off the threat.

The Treaty that emerged did not give the European Parliament powers to pick the head of the Commission. The prerogative lies entirely with elected EU leaders accountable to their own voters, a safeguard that anchors authority in the sovereign states.

Euro-MPs have the right to turn down the Commission. They may not appoint it. Yet that is exactly what they have just done. A clique of hardliners in Strasbourg rammed through Mr Juncker on a series of spurious claims. Craven EU leaders accepted the fait accompli, either to trade concessions or to curry favour with Berlin.

These Rump Parliamentarians clothe their office-seeking and grasp for patronage in the bunting of democracy, asserting that the centre-Right group (EPP) has the authority to impose its choice because it "won" the European elections.

Yet the earthquake upset in May went entirely in the opposite direction, a primordial scream by Europe's peoples against EU overreach and the job destruction of crude austerity. The Front National won in France with calls for euro-exit and a visceral rejection of the EU Project, a watershed event in a country that is still the beating heart of Europe.

You have to be politically unhinged to think it wise or proper now to entrust the EU machinery to an arch-insider, as responsible as any man alive for the calamitous decisions that have led Europe into its current cul de sac, and a master of the Monnet Method to boot. "We take a decision, then put it on the table and wait to see what happens. If there is no protest, because most people have no idea what we are doing, we take step after step until we are beyond the point of no return," he once told Der Spiegel.

He is a gift to the Front's Marine Le Pen, now vowing to boycott the Strasbourg ratification as her first act of protest. "I will not participate in a vote for the prison gaoler: I will try the escape the prison," she said.

He is a gift too to the Five Star Movement of Italy's Beppe Grillo, seizing on Mr Juncker as the face of the scorched-earth policies that have trapped Europe in a Lost Decade. "Wherever Juncker goes in Europe, the grass no longer grows," he said.

The EPP suffered the biggest proportional fall in the elections. Almost nobody voting for Greece's New Democracy knew they were at the same time picking Mr Juncker to oversee their fate for five years, the same man who played such a large role in their own national drama as head of the Eurogroup. How many Irish voted for the EPP's Fine Gael because they wanted further leaps in EU integration?

Let us be honest. This travesty was imposed by the German bloc of Euro-MPs, both to boost the powers of their own institution and because Mr Juncker is deemed the safest curator (for now) of an EU status quo that serves German interests tolerably well. It was backed with strange enthusiasm by a German press that seems to think such methods will close the EU's "democratic deficit".

This status quo is ruinous for France and Italy, yet Francois Hollande and Matteo Renzi have gone along meekly, leaving David Cameron to make quixotic stand against a decision that is nearly suicidal for the EU itself. They think they have secured breathing-room on austerity as a quid pro quo, but there was no substantive change on EU deficit rules in the summit conclusions. "The threat of more flexibility in EU fiscal policy has been avoided," said Holland's premier Mark Rutte, shooting their fox stone dead before they had even returned home.


Greater forces are at work in any case. Perma-slump is already written into law under the EU Fiscal Compact. Each country must cut its public debt mechanically for twenty years until the ratio reaches of 60pc of GDP, regardless of monetary policy or the state of the world. This is already haunting France as it slips deeper into a debt-deflation trap, with zero growth causing the debt trajectory to spiral upwards, despite one austerity package after another.

French debt jumped to 93.6pc of GDP in the first quarter from 91.8pc a quarter earlier. Gilles Carrez, head of the French parliament's finance committee, says it will probably punch through 100pc by next year. This means that the debt will have to be cut by 40 percentage points, or 2pc a year, in the midst of an unemployment crisis.

It is worse for Italy, with debt ratcheting above 133pc. Mr Renzi can try to gain a little leeway for extra investment, but the task is beyond any political leader at this point. The EMU straight-jacket imposes obliges him to run a primary budget surplus of 5pc of GDP for year after year even if the European Central Bank meets its 2pc inflation target, which is it failing to do. At the current 0.5pc inflation rate , Italy has to run a surplus near 7pc to comply.

This is neither possible nor desirable in a country with a contracting workforce and Japanese demographics. Mr Renzi should have confronted German Chancellor Angela Merkel while his landslide mandate was still fresh, demanding a reflation blitz to change the European economic landscape entirely. He has missed his chance, leading one to ask whether he is not just another chatterer, likely to fizzle out quickly. Perhaps it was impossible for him to do more without help from France's Mr Hollande, by now a tragic figure doubling down on deflation policies like Pierre Laval in 1935.

The horrors of Franco-Italian debt-deflation can be disguised as long as the global liquidity cycle holds up, with China letting rip with stimulus yet again and the Yellen Fed targeting job creation above all else. Once the cycle turns, Mr Renzi and Mr Hollande will rue the day they ever agreed to a Merkel-placeman at the Berlaymont.

Much has been made of Mr Cameron's bare-knuckled diplomacy. But what of Germany's diplomacy? Mrs Merkel has blithely pushed her advantage with poisonous effects on the political psychology of Britain, lifting the pro-Brexit tally to a record high 47:39 on the latest MoS poll, seemingly in order to placate her "boulevard press" and the euro-apparatchiks of her own party.

Berlin is now scrambling to control the damage. Vice-Chancellor Sigmar Gabriel warned that British exit would set off the disintegration of the European Project. "We should not underestimate the impact in the Anglo-Saxon states and the financial markets. Europe would seem broken and weakened in the eyes of the world. It is already viewed as a continent in decline," he said.

Finance minister Wolfgang Schauble said Brexit would be "absolutely not acceptable", vowing to do everything possible to keep Britain in the system. Quite so. British departure would upset the EU's internal chemistry of the EU, risking a chain reaction. It would shift the centre of gravity to the South and the poorer regions of the East, leaving Germany with an untenable hegemony, deprived of a key ally in favour of free trade and market reform.

Exactly how this plays out over the next three years depends on whether Britain's economy continues to outgrow the eurozone by 2pc annually. The UK has the EU's fastest-rising population, expanding by 400,000 a year, at a time when Germany is already entering a chronic ageing crisis. It is of course a fragile boom -- built on trade deficits -- but if it lasts, the political landscape will already by unrecognisable as the Brexit vote nears in 2017.

Reading William Hague's biography of Pitt the Younger on holiday last week, I was struck by European views of Britain in the 1780s after it lost American. Austria's Joseph II issued a typical verdict, supposing the country to have "fallen entirely and forever, descended to the status of a second-rank power, like Sweden or Denmark." It would not be long before Vienna was begging for subsidies, and the hard-drinking Pitt was the arbiter of Europe. Such was the force of compound economic growth.

Mr Hague is now in the odd position of acting out the diplomatic roles he describes so well in his book. Perhaps he could tell us what Pitt would have done about Mr Juncker.