Article 121 TFEU (ex Article 99 TEC)

ei.sdraob

Just have a question here to the experts

The UK tabloids claiming that Article 121 is being used by EU to gain control over UK economy and "be ruled from Brussels"

http://www.express.co.uk/posts/view/161609/EU-chief-vows-to-run-our-economy-from-Brussels


Needless to say im quite sceptical

I thought UK have opted out of large chunks of Lisbon treaty?
And can Article 121 be used to take control of UK economy? especially considering they are not part of the monetary union (euro)

cheers

marco_polo

Looks to be yet another exiting article from Nice (Ex Art 99 TEU) that grants the EU the right to enforce existing ecomomic powers as defined within in the treaties, it is only later articles that appear to be specific to monatary union.

I have little desire to start combing through the minuate of the treaties again, but it appears that this gives the Council the ability to censure member states who are operating economic policies that go against the general economic principals of the EU such as the free movement of people, capital, goods etc.

Certainly there is zero scope to increase the competencies of the EU, but that never stopped the Express and their like before :rolleyes:

EDIT: In fact article 119 is crystal clear on what areas Article 121 applies to:

Article 119
(ex Article 4 TEC)

1.For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.


2.Concurrently with the foregoing, and as provided in the Treaties and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition.


3.These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.

View

ei.sdraob wrote: »

And can Article 121 be used to take control of UK economy? especially considering they are not part of the monetary union (euro)

Would that it could. One quick take-over from Brussels later and the UK is using the Euro, a full member of Schengen, using the metric system and driving on the left side of the road.

It'd drive all the Euro-sceptics wild

spacetweek

View wrote: »

Would that it could. One quick take-over from Brussels later and the UK is using the Euro, a full member of Schengen, using the metric system and driving on the left side of the road.

It'd drive all the Euro-sceptics wild

You mean the right!

The other three are no-brainers and should have been completed years ago. In fact, it annoys me greatly that they don't have those - typical obsession with being different on the other side of the Irish sea.

View

spacetweek wrote: »

You mean the right!

The other three are no-brainers and should have been completed years ago. In fact, it annoys me greatly that they don't have those - typical obsession with being different on the other side of the Irish sea.

Oops!

Mind you I could imagine all the Eurosceptics denouncing Brussels for making them drive on the left. "If Brussels is for it, then we are against it".

BetterLisbon

Anti-treaty trade unions pointed this out at the time but were shouted down by ICTU & Labour. Cuts in public sector pay are being demanded by brussels. Lisbon has given brussels a strengthened hand.

Cunsiderthis

spacetweek wrote: »

You mean the right!

The other three are no-brainers and should have been completed years ago. In fact, it annoys me greatly that they don't have those - typical obsession with being different on the other side of the Irish sea.

The view of the UK is that if a country gives up control of its currency, it also gives up control of its economic policy. Hence their reluctance to give up their currency and adopt the Euro.

Indeed, being members of the Euro had greatly exacerbated Ireland's economic downturn, with the irish government being unable to use interest rates over recent years as a weapon to dampen down economic activity when it was needed. Ireland no longer has any control over its interest rates as result of joining the Euro, and we are now paying, and will continue to pay, a high economic price as a result of being in the Euro.

Scofflaw

Cunsiderthis wrote: »

The view of the UK is that if a country gives up control of its currency, it also gives up control of its economic policy. Hence their reluctance to give up their currency and adopt the Euro.

Indeed, being members of the Euro had greatly exacerbated Ireland's economic downturn, with the irish government being unable to use interest rates over recent years as a weapon to dampen down economic activity when it was needed. Ireland no longer has any control over its interest rates as result of joining the Euro, and we are now paying, and will continue to pay, a high economic price as a result of being in the Euro.

It's been pointed out repeatedly that Fianna Fáil used every instrument at their disposal to exacerbate the boom - it's nice to think that they might have used interest rates to cool the bubble, but it's not something that was even slightly likely.

cordially,
Scofflaw

Cunsiderthis

Scofflaw wrote: »

It's been pointed out repeatedly that Fianna Fáil used every instrument at their disposal to exacerbate the boom - it's nice to think that they might have used interest rates to cool the bubble, but it's not something that was even slightly likely.

cordially,
Scofflaw

Whatever about guessing as to whether or not it was likely, it's irrelevant as it wasn't possible, however likely one may like to guess it may or may not have been. Nor will it be possible in future if you want to guess what future governments might like to do with interest rates.

In any case, I was talking about the view in the UK as to why they chose not to enter the Euro, and not about Ireland or Fianna Fail.

Scofflaw

Cunsiderthis wrote: »

Whatever about guessing as to whether or not it was likely, it's irrelevant as it wasn't possible, however likely one may like to guess it may or may not have been. Nor will it be possible in future if you want to guess what future governments might like to do with interest rates.

In any case, I was talking about the view in the UK as to why they chose not to enter the Euro, and not about Ireland or Fianna Fail.

Very sorry - I was confused by your second paragraph into thinking you'd mentioned Ireland...

amused,
Scofflaw

sirromo

Scofflaw wrote:

It's been pointed out repeatedly that Fianna Fáil used every instrument at their disposal to exacerbate the boom

Would you include the decisions they made at the EU level in that? Were those decisions made with a view to helping fuel the boom or were they made with the best long-term interests of the economy in mind?

Scofflaw wrote:

it's nice to think that they might have used interest rates to cool the bubble, but it's not something that was even slightly likely.

Our loss of competitiveness as an economy was connected with our above average inflation during the first half of the last decade. If we had the ability to raise interest rates we would have had the power to bring inflation under control.

Cunsiderthis

Scofflaw wrote: »

Very sorry - I was confused by your second paragraph into thinking you'd mentioned Ireland...

amused,
Scofflaw

I did, and then you started speculating that Fianna Fail would never have used interest rates as a means of controlling the direction of the economy.

I then went on to point out that to speculate about that was irrelevant as it is no longer an option. Even if fianna fail did want to use interest rates, they would not be able to do so as membership of the Euro rules out their ability to control interest rates.

Keep up!

sirromo wrote: »

Would you include the decisions they made at the EU level in that? Were those decisions made with a view to helping fuel the boom or were they made with the best long-term interests of the economy in mind?

Our loss of competitiveness as an economy was connected with our above average inflation during the first half of the last decade. If we had the ability to raise interest rates we would have had the power to bring inflation under control.

The EU didn’t go out of its way to make decisions which were harmful to Ireland. But by giving control of the interest rates, the EU makes a decision to try to fit in with 25 different economies, and each individual economy loses the ability to use interest rates to help their own economy. One size fits all, except that it doesn’t.

Our loss of competitiveness is more due to our minimum wage, high taxation and high rents rather than losing control of interest rates.

Interest rates would almost certainly have helped dampen the boom if we had been able to use them wisely. The point is we can’t use them at all, whether wisely or foolishly, and we have lost a major weapon in our ability to control our own economy.

sirromo

Cunsiderthis wrote: »

Our loss of competitiveness is more due to our minimum wage, high taxation and high rents rather than losing control of interest rates.

Wages are tied to inflation. An increase of inflation will lead to an understandable demand for higher wages to make up for the rise in prices. Ireland's above average rate of inflation over the last decade is one of the reasons for our loss of competitiveness. If we had the power to set our own interest rates we might have been able to keep inflation under control.

Scofflaw

sirromo wrote: »

Would you include the decisions they made at the EU level in that? Were those decisions made with a view to helping fuel the boom or were they made with the best long-term interests of the economy in mind?

Hard to tell, really, since the Irish government as such doesn't sit on the ECB board, and the EU as such doesn't have very much control over any other bit of fiscal policy.

sirromo wrote: »

Our loss of competitiveness as an economy was connected with our above average inflation during the first half of the last decade. If we had the ability to raise interest rates we would have had the power to bring inflation under control.

Wage demands were driven more by the property bubble than anything else, and if the banks had been required to lend prudently, we'd never have had a property bubble. If they'd been regulated properly, they wouldn't have tens of billions in questionable assets. If the government had adopted the recommendaitons of various experts, rather than giving tax breaks for virtually anything connected with development, we wouldn't have had 25% of our economy in construction, a property bubble, half the country covered in a rash of unsustainable housing, banks whose portfolios were incredibly exposed to property and development. If the government had cleaned up our planning laws, we wouldn't have had half the corruption we've had. If Irish people had borrowed to invest in companies rather than bricks and mortar, we'd have a real economy. There are a very large number of instruments besides the interest rate at the disposal of any government - and indeed our government is now having to use those instruments in a more sensible way.

And the euro area interest rates haven't even been all that low, if it comes to it. They started at 3% (which is the historical average interest rate), and stayed between 2% and 4.75% until late last year. That's not strikingly different from the Bank of England rates (which averaged maybe 1% higher) during the same period. Irish interest rates would most probably have tracked the rest of the first world's rates.

I appreciate people would like not to be responsible for the mess we're in, but it's not really possible to take the credit away from us.

cordially,
Scofflaw

sirromo

Scofflaw wrote:

Hard to tell, really, since the Irish government as such doesn't sit on the ECB board, and the EU as such doesn't have very much control over any other bit of fiscal policy.

I wasn't talking about the decisions made by the EU or the ECB. I was referring to the Fianna Fail government's EU decisions. For example, do you think their decision to allow the free-movement of people from the accession states in 2004 was made with the best long-term interests of the economy in mind?

Scofflaw wrote:

If the banks had been required to lend prudently, we'd never have had a property bubble. If they'd been regulated properly, they wouldn't have tens of billions in questionable assets. If the government had adopted the recommendations of various experts, rather than giving tax breaks for virtually anything connected with development, we wouldn't have had 25% of our economy in construction, a property bubble, half the country covered in a rash of unsustainable housing, banks whose portfolios were incredibly exposed to property and development. If the government had cleaned up our planning laws, we wouldn't have had half the corruption we've had.

Exactly, and nobody is arguing about this. Some of us would just add to that list that our membership of the euro and the loss of our control over our interest rates didn't help us to prevent the overheating of our economy. If we had a good government and control over our monetary policy then we might have been able to respond to the early warning signs of an overheated economy and that would have helped us to avoid a hard landing.

Scofflaw wrote:

There are a very large number of instruments besides the interest rate at the disposal of any government

I thought there were only two instruments - monetary policy and fiscal policy. What other instruments are there?

Scofflaw wrote:

I appreciate people would like not to be responsible for the mess we're in, but it's not really possible to take the credit away from us.

I get the impression that many people in this country would like to give the EU the maximum amount of credit for the good times but they seem very reluctant to even admit that there are at least minor negatives to our membership of the euro.

It's not anti-EU either to point out that our membership of the euro might not be in our economic interest. It was a decision of an Irish government for us to go into the Euro in the first place. We're the people to blame for the mess we're in, not the EU.

View

Cunsiderthis wrote: »

The view of the UK is that if a country gives up control of its currency, it also gives up control of its economic policy. Hence their reluctance to give up their currency and adopt the Euro.

Well, the argument made in the UK was essentially that retaining Sterling would, in the event of a downturn, mean that they could avoid the worst effects of a recession due to their greater economic freedom.

Problem is, though, if we look at their economic performance there is little to bear that view out. Yes, they have indeed performed better than Greece (though that isn't hard) but they are an awful long way behind Germany. In fact, if memory serves me correctly, they were the last of the "big 4" EU member states out of recession.

I have to confess when I hear their view on the matter, it comes across a bit like Ireland around 5-10 years ago when our view was property would always go up and that Germany should follow Ireland's lead on economic matters.

Cunsiderthis

sirromo wrote: »

Wages are tied to inflation. An increase of inflation will lead to an understandable demand for higher wages to make up for the rise in prices. Ireland's above average rate of inflation over the last decade is one of the reasons for our loss of competitiveness. If we had the power to set our own interest rates we might have been able to keep inflation under control.

Competitiveness really means wages and productivity. Our wages have ensured that we are now a very unproductive economy, with benchmarking ensuring virtually all civil servants and public sector workers have seen enormous rises in their pay packets, and with the highest minimum wage I can think of, Ireland is now comparatively a reasonably unproductive economy.

sirromo

Cunsiderthis wrote:

Competitiveness really means wages and productivity.

Would you not accept that the increase in wages was at least partly linked to the increase in the cost of living?

Had our rate of inflation not been as high relative to our competitors then the public sector would not have had as strong a case for demanding pay rises. Nor would we have seen our minimum wage become the second highest in the EU. An increase in the cost of living affects people on the minimum wage more than it affects people on middle incomes and so there will always be pressure to increase the minimum wage in response to an an increase in inflation.

Cunsiderthis wrote:

Ireland is now comparatively a reasonably unproductive economy.

I don't know if that's correct. According to this, the Irish workforce was the third most productive in the OECD in 2007 - well ahead of the Germans and almost twice as productive as the Japanese.

Things have changed drastically since the survey was carried out but I haven't seen anything to suggest that our workforce itself has become less productive over the last two or three years. Concerns over the security of our jobs might have even made the employed majority of the workforce more productive.

A loss of competitiveness does not always mean a loss of productivity. It just means that either wages increase faster than productivity or that productivity fails to rise at the same rate as the rise in wages.