Monday, February 11, 2013

Europe's austerity hawks are celebrating a triumph over peanuts

The compromise on the next long-term EU budget for 2014 to 2020, achieved last Friday in Brussels, has invariably been hailed as a victory for Europe's austerity hawks, led by Britain and Germany, over its austerity doves, led by France. This it undoubtedly is. The new budget plan – which is what it remains for now: an executive plan to be put to parliament – has also been praised as a victory for the European Union on the grounds that any agreement was better than a repeat of the negotiation failure last November. This may be true in the short term, but it is much less clear beyond the shallow euphoria of next-day celebrations.

Economically speaking, the night-long standoff between pro- and anti-austerity factions, with Germany conveniently playing the role of master broker, was a storm in a teacup. The EU budget is pocket money, granted by member states to a supranational rump agency, currently involved in firefighting an existential crisis of its most ambitious project, European monetary union (EMU). And it still must be agreed in advance how that pocket money will be re-distributed to member states.