Klaus warns euro pact will lead to full political union

EU Observer (Link) - Leigh Phillips (March 29, 2011)

Vaclav Klaus, the Czech Republic�s famously eurosceptic president renowned across Europe for holding up passage of the Lisbon Treaty for months, has launched an attack against a fresh EU target: the �Euro-plus-pact�.

�The Brussels summit on 25 March was not about anything else but the further integration of Europe towards fiscal ... union,� he wrote in an opinion piece in Czech daily newspaper Pravo on Monday, referring to the meeting of EU premiers and presidents where 23 out of the bloc�s 27 member states signed up to a pact that aims to boost European competitiveness.

�It was a radical reduction of the sovereignty of other EU countries.�

However, while trade unions and the left criticise the pact for its institutionalisation of fiscal retrenchment, limits to public spending and demands for wage constraint, Klaus, an ardent free-market liberal, attacked the document for delivering the opening steps towards a �redistribution union� between rich and poor states.

The pact, along with other far-reaching measures endorsed by the summit last Friday, intends to deliver ever closer �economic governance� where the economic polices of each member state are co-ordinated centrally and supervised by Brussels.

The hair-shirt approach to fiscal policies contained in the pact are the quid pro quo demanded by Germany in particular in return for boosting the size of eurozone rescue funds. Klaus believes this is the beginning of large-scale financial transfers between states.

The Czech president, the last EU leader to sign on to the Lisbon Treaty on 3 November, 2009, after months of stonewalling, accused EU leaders of using the economic crisis as an excuse to push for deeper integration.

�A few years ago when these people managed to pass the Lisbon Treaty - a European constitution - they knew that at the time this probably moved forward too fast and that there should now be a pause,� he said.

�They even told me personally when trying to convince me to sign up to the Lisbon Treaty that there would now be a pause [from further integration moves] for an interval of at least ten years.�

�By using the economic and financial crisis of 2008-2009 and the subsequent crisis of the euro in 2010 - still continuing - it gave them a wonderful excuse to get back to pushing forward with the further deepening of European integration.�

He worries that the fiscal integration that is occurring today will inevitably be followed by full political integration.

He wrote that the European Economic Community later became just the European Community, then along came European Monetary Union and the European Union.

�Sooner or later, this will be followed by other developments,� he wrote, saying that a European fiscal union, or �EFU� as he terms it, will be followed by an �EPU�.

�Where an EFU has been agreed in Brussels agreed ... an EPU is the final stage - the European Political Union.�

Softer position from prime minister

The Czech government for its part has said, similar to the position of the UK, Sweden and Hungary, that it does not intend to join for the time being.

It has said that while it has little problem with most of what is contained in the pact, there are two reasons why Prague could not join at the moment.

The government is wary that language contained in the document encouraging �consistency among national tax systems� is the first step towards tax harmonisation across the bloc. Ireland and Slovakia, already in the eurozone and signatories to the euro-pact, as well as Hungary, which lies outside both, also have strong reservations about a shake-up of tax policies.

The second concern is more easily resolved, in that the government being outside the eurozone had only had a few days to glance at the document before being pressured to sign on.

Government sources say that a consultation with other coalition members and the full parliament will be required before any endorsement can be given.

Once this consultation is completed and should sufficiently mollifying language on tax issues be found, Prague, like Budapest, could well join.

Sweden has also indicated that it would like to join but cannot so long as there is no majority in parliament in favour.

It is unlikely, say analysts, that the Czech Republic will choose to be left out in the cold for long.

�The prime minister welcomes the opportunity to still be able to join at a later stage,� said one Czech source.

Klaus however indicated he will resist pressure on his country to sign up to the pact.

�The position of [Czech] Prime Minister Necas - I wish this was the attitude of the whole of the government - in not entering the EFU, is certainly right and we should support him in it,� he wrote.

On 18 March, Klaus gave another speech in the Italian Tyrol attacking fiscal integration.

�In the first historical phase of European integration, liberalisation trends prevailed. In the second phase, especially in the last twenty years, unfortunately, centralisation, harmonisation, standardisation and regulatory trends have dominated.�

A source close to the president said he is unlikely to drop his campaign against the pact any time soon.

Czech diplomats stress however that the president was speaking in a personal capacity and that his arguments may not be the official position of the government.

Bulgarian central bank, finance ministry oppose euro-pact

In related news, EU observer has learnt that Bulgarian Prime Minister Boyko Borisov spurned advice from his finance minister and the head of the central bank last week, who recommended against the country joining the euro-pact.

Bulgaria has a flat income and corporate tax rate of 10 percent, the lowest taxes in the EU. Like the Czechs, Hungarians and Irish, it hopes to retain its ultra-low tax burden.

But the prime minister felt that if he signed on despite the opposition of his colleagues, he would guarantee entry to the euro for his country.

A government spokesperson confirmed the �negative stance of the finance ministry and the central bank,� adding however: �The whole of the government participated in analysis of the pact, and all opinions were considered, but the final decision was taken by the prime minister.� �