Five Presidents Report (Part 2)

Picking up the details of our critique, this post looks at the five main sections of the Five Presidents Report.

5PR: Section 1. The Nature of a Deep, Genuine and Fair Economic and Monetary Union


This section is not an analysis of the nature of a deep, … etc. There is much that is no more than propaganda, for example: “The euro is a successful and stable currency”, “It has … shielded them against external instability“, “They needed … to protect all that has been achieved“, “… the integrity of the euro area as a whole has been preserved“. Each of these claims is questionable; most would be widely denied. Indeed, they are both extraordinary and absurd, in the light of what had already happened when the report was published. But surely propaganda is needed to sell what would otherwise be rejected.

Specious claims:

No attempt is made to justify claims such as: “… we will need to take further steps to complete EMU“, “…risk-sharing can be achieved through integrated financial and capital markets“, “a deep and genuine EMU would provide a stable and prosperous place for all citizens of the EU Member States that share the single currency“.


Compare with the propaganda above the following acknowledgements: “Preventing unsustainable policies and absorbing shocks individually and collectively did not work well before or during the crisis“, “There is now significant divergence across the euro area“. So, where EMU is not successful, failure is the fault of the member states, not unsound policies and regulations. Therefore we need more convergence, despite the evidence to the contrary.

True agenda:

What emerges through this section of the Report is that the interests of member states are subservient to the project as whole: “Today’s divergence creates fragility for the whole Union. We must correct this divergence and embark on a new convergence process“, “the convergence process would be made more binding through a set of commonly agreed benchmarks for convergence that could be given a legal nature.“, “This report puts forward ideas which … can be translated into laws and institutions“. Europe’s nations cannot be trusted to look after themselves; they have to be managed, for their own good.

The sleight of hand, revealing the true agenda through implausible claims, is evident here: “Progress must happen on four fronts: first, towards
a genuine Economic Union that ensures each economy has the structural features to prosper within the Monetary Union. Second, towards a Financial Union that guarantees the integrity of our currency across the Monetary Union … Third, towards a Fiscal Union that delivers both fiscal sustainability and fiscal stabilisation.
 And finally, towards a Political Union that provides the foundation for all of the above … [A]ll euro area Member States must participate in all Unions“, “This longer-term vision needs [to] prepare the ground for a complete architecture in the medium term. This will inevitably involve sharing more sovereignty over time“, “… this would require Member States to accept increasingly joint decision-making on elements of their respective national budgets“. Note the implausible claims signalled by: “ensures”, guarantees”, “delivers” and “provides the foundation”. Each of these claims is used to justify ever closer union; no evidence is offered to support the claims.

5PR: Section 2. Towards Economic Union – Convergence, Prosperity and Social Cohesion


Euro area governance is well established for the coordination and surveillance of fiscal policies.”, “The Macroeconomic Imbalance Procedure (MIP) … serves as a tool to prevent and correct imbalances before they get out of hand. It has become a vital device for European surveillance“, “The European Semester has significantly strengthened the coordination of economic policies.” (Note ‘surveillance’ , twice, and think of Big Brother,)

Specious claims

It is equally in each member’s interest that all others do so [a list of desirable outcomes] at a similar speed.” Is it evident that Britain needs to move in the same direction and at the same speed as Italy? To Britons no, it isn’t evident. But the Eurocrats haven’t accepted Britain’s half-hearted, non-commitment to the EU; everyone must participate fully in every union and any country that opts out, doesn’t count. “… we need to set in motion a renewed effort for all to converge towards the best performance and practices in Europe, building upon and further strengthening the current governance framework.” This claim, that the current governance framework can deliver the best performance from its members, has no basis in theory or experience. “… concrete progress
on the basis of EU law is needed to move towards an Economic Union of convergence, growth and jobs“. Where is the justification? Is it that they know they won’t make ‘concrete progress’ until everyone is obliged to conform, by law?


“Europe is emerging from the worst financial and economic crisis in seven decades.” (i.e. since the EU project was initiated) “The challenges of recent years forced national governments and EU institutions to take quick and extraordinary steps. They needed to stabilise their economies and to protect all that has been achieved through the gradual and at times painstaking process of European integration.” (An extraordinary contradiction; a more plausible reading would be, ‘European integration has achieved the worst financial and economic crisis in seven decades.’) As a result, the integrity of the euro area as a whole has been preserved and the internal market remains strong.

True agenda

The notion of convergence is at the heart of our Economic Union … to nurture our unique European model“, “Sustainable convergence also requires a broader set of policies that come under the heading of ‘structural reforms’“, “In Stage 2, this convergence process would be formalised and would be based on a set of commonly agreed standards with a legal character“, “In the medium term … the convergence process … should become more binding.”, “[A] set of common high-level standards … would be defined in EU legislation, as sovereignty over policies of common concern would be shared and strong decision-making at euro area level would be established.” And the annoying Anglo-Saxons can lump it or leave it, which the referendum will decide.

5PR: Section 3. Towards Financial Union – Integrated Finance for an Integrated Economy


the Deposit Guarantee Schemes Directive has led to more harmonisation, especially on pre-funding of national schemes, but it still contains some national discretion, which should be reviewed.”  “As the vast majority of money is bank deposits, money can only be truly single if confidence in the safety of bank deposits is the same irrespective of the Member State in which a bank operates. This requires single bank supervision, single bank resolution and single deposit insurance.

Specious claims

“[T]he Capital Markets Union must be seen as a priority … so that companies, including SMEs, can tap capital markets and access other sources of non-bank finance” (Does this need a Union or more simply the removal of barriers to access to sources of finance?) “[A] well-functioning Capital Markets Union will strengthen cross-border risk-sharing through deepening integration of bond and equity markets“, “Truly integrated capital markets would also provide a buffer against systemic shocks“. (So shocks are your fault because you have not ‘truly’ integrated.)


In a Monetary Union, the financial system must be
truly single or else the impulses from monetary policy decisions … will not be transmitted uniformly across its Member States. … At the same time, the financial system must be able to diversify risk across countries” (i.e. make stronger countries pay for the mistakes of weaker ones, thus weakening the stronger ones and generating justified resentment. Here is one of the signature features where the Union is most likely to fail: spreading risk from those who create it to those who have avoided it.)

True agenda

Completing the Banking Union requires first and foremost the full transposition into national law of the Bank Resolution and Recovery Directive“, “All banks participating in the Banking Union need to enjoy a level playing field. This will require further measures … to address the still significant margin for discretion at national level“, “This should lead ultimately to a single European capital markets supervisor.” (So the integration of capital markets leads ‘logically’ to the need for a supervisory body, i.e. EMU control again.) “A true Capital Markets Union also requires other improvements, some of which can only be achieved through legislation.” (One way is top down; another is bottom-up. Bottom-up is untidy and doesn’t provide jobs for the boys. However, top-down is both undesirable and unachievable, at least before the individual members are completely subjugated. As always, we need to legislate in order to control centrally, in order to integrate, which is the ultimate aim, not justified by any rational argument. Everything so far is justified by its role in pursuing integration (union), which is not in its turn justified.)

5PR: Section 4. Towards Fiscal Union – an Integrated Framework for Sound and Integrated Fiscal Policies


It is important to ensure also that the sum of national budget balances leads to an appropriate fiscal stance at the level of the euro area as a whole.” “The objective of automatic stabilisation at the euro area level would not be to actively fine-tune the economic cycle at euro area level. Instead, it should improve the cushioning of large macroeconomic shocks and thereby make EMU overall more resilient.” (As always, this is presented as a statement of fact, with no supporting evidence; the purpose, as always, is to promote unification.)

Specious claims

This new governance framework already provides for ample ex ante coordination of annual budgets of euro area Member States and enhances the surveillance of those experiencing financial difficulties.” (It can be argued that national governments contribute, often negatively – simply by staying out of the way, to commercial and social success. The argument is not easy to make but is impossible for an agency at two stages removed from economic activity, if the main objective of the agency is control through legislation. Note ‘surveillance’ again.)


This new advisory entity would coordinate and complement the national fiscal councils that have been set up in the context of the EU Directive on budgetary frameworks.” (emphasis added) “In the meantime, we need to reinforce trust in the common EU fiscal governance framework.” (So we give up responsibility for managing our own affairs, because we are not up to it, and place reliance on a supra-national outfit that does not suffer from any democratic nuisance; i.e. which can exercise control while still blaming us (nation states) for any failures. Prior to EU/EMU no European nation failed economically. Greece has suffered more than most recently and that despite EMU. And, as a result of EMU, its suffering spread throughout Europe. To avoid repeating this the presidents say we need more EMU. Where is the evidence that this can be made to work? If the Greek crisis, for example, resulted from internal cultural issues (e.g. corruption, cronyism, tax evasion) then it is difficult to see how these could be managed from outside. Any attempt at a superficial (policy) level would result – as it did – in contagion.)

True agenda

“[I]t would be important to create
 … a euro area-wide fiscal stabilisation function. Such a step should be the culmination of a process that requires, as a precondition, a significant degree of economic convergence, financial integration and further coordination and pooling of decision making on national budgets“, “Such a European Fiscal Board should lead to better compliance with the common fiscal rules …” (We – individual, ‘sovereign’ nations – need not merely rules but also rulers.)

5PR: Section 5. Democratic Accountability, Legitimacy and Institutional Strengthening


Greater responsibility and integration at EU and
 euro area level … means and requires more dialogue, greater mutual trust and a stronger capacity to act collectively.” (They need to convince us that the latter require the former – specious propaganda.) “The EU is the world’s largest trading block and the world’s largest trader of manufactured goods and services. It has achieved this by acting with one voice on the global stage“, “[T]he European Stability Mechanism has established itself as a central instrument to manage potential crises.” Propaganda is needed when the truth sits uncomfortably against wishful thinking. In fact (as opposed to propaganda) the global share of GDP attributable to the EU’s 28 countries has shrunk by almost half over the last 20 years.

Specious claims

The large economic and financial size and the existence of a single monetary and exchange rate policy for most of its members make the EU policy decisions and economic developments increasingly relevant for the world economy.” (Once again wishful thinking is presented as unquestioned fact, without any evidence to support the claim.) “The Stability and Growth Pact remains the anchor for fiscal stability and confidence in the respect of our
fiscal rules.


At the height of the crisis, far-reaching decisions had often to be taken in a rush, sometimes overnight.
 In several cases, intergovernmental solutions were chosen to speed up decisions or overcome opposition.” “Greater responsibility and integration at EU and
euro area level should go hand in hand with greater democratic accountability” (Note: democratic accountability v. overcome opposition. To the presidents “democratic accountability” means the ability of the European Parliament to overcome opposition from democratically elected national governments. This may be the only function of the Parliament, and it is not a democratic one by any normal definition.) “It has achieved this by acting with one voice on the global stage.” “[I]n the international financial institutions, the EU and the euro area are still not represented as one.”

True agenda

Now is the time to review and consolidate our political construct – and to build the next stage of our Economic and Monetary Union.” “As EMU evolves towards Economic, Financial and Fiscal Union, its external representation should be increasingly unified.” (These unions don’t ‘evolve’, they have to be manufactured, often against the best interest of the member states.) However, in the international financial institutions, the EU and the euro area are still not represented as one. This fragmented voice means the EU is punching below its political and economic weight as each euro area Member State speaks individually.”


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.