Last Wednesday we MEPs were in the Hemicycle in Straz for one of the big set-pieces of our calendar: the annual State of the Union Address by the Commission President (strange how the EU zealots resent and envy the Americans, yet feel obliged to ape them). The speech was the usual dreadful amalgam of cliché, and wishful thinking, and absolute refusal to engage with reality. Yes, we have a crisis caused by Europe. But the only solution is more Europe! We need more federal and fiscal integration. Nothing less than a European Federation. We need more effort to promote pan-European political parties, to give Europe a united political consciousness. Then all our problems will be solved in peace, freedom, prosperity and mutual euphoria.
So far, so boring. After the big speech, we got the responses from Group leaders, and it’s only worth staying around for the fireworks when Nigel Farage speaks (although to be fair, Martin Callanan is coming up with more common sense than we ever heard before from the leader of the Tory MEPs). This particular occasion was notable, though, for one unusual event. Our respected President (of the Parliament) German Socialist MEP Martin Schulz interrupted in the middle of a speech (I think it was the Liberal Verhofstadt on his feet).
“I have exciting news”, quoth the bold Schulz. “The German Constitutional Court has approved the ESM!” Of course the political (and economic) classes in Europe had been waiting with bated breath on this decision. Draghi had announced his “Big Bazooka” to resolve the €uro crisis, but it depended fundamentally on the European Stability Mechanism (ESM), as a funding vehicle. But some bothersome eurosceptic academics and politicians in Germany had challenged the ESM, arguing that it was contrary to the German Constitution, since it transferred fundamental spending decisions outwith the democratic control of German institutions.
Had the Court decided against the ESM, the Draghi plan would have been in tatters, and the bankruptcy of southern Europe much closer. But there it was, approved! Rejoice, rejoice, rejoice! Glory be! The €uro is saved! God’s in his heaven, all’s right with the world! MEPs leapt to their feet, cheering and waving order papers.
But of course we know the pattern, because we’ve seen it so many times. Good news on the €uro crisis. Let joy be unconfined. Markets leap on the announcement. Clouds roll away and the sun shines. But then comes the hangover, and the rain. And the markets deflate as the latest wheeze unravels.
And so it was with the Karlsruhe Court. And as so often happens, it was Ambrose Evans-Pritchard who explained most clearly what went wrong — and why those bothersome German sceptics were mightily cheered, having got most of what they wanted. In the small print of the judgement, the Court capped German contributions to the ESM at €190 bn. So when (not if) top-up finding is needed, Germany cannot oblige. The ruling rules out hopes of a banking licence for the fund. Both houses of the German parliament must be consulted on bail-outs — and they are stuffed with sceptics and showing clear signs of bail-out fatigue. The decision appears to rule out euro-bonds, or debt-pooling, or fiscal union, without a change in the Basic Law, or Constitution.
So MEPs may have cheered the decision, but it hobbles the €uro project in fine style. Today as I write the attention of the markets has shifted to the US, and there is euphoria over Bernanke’s decision to resume Quantitative Easing. But pretty soon they’ll turn their minds back to Europe, and they won’t like what they see.