Serbia v Kosovo v EU
23rd April 2013
Here's my Commentator piece on that important Serbia/Kosovo/EU deal.
Kosovo did better on symbolism than substance. It won agreement that Serbian officials in the municipalities concerned would henceforth be paid by Pristina, not Belgrade, and come under Pristina’s overall legal and political authority. And by the very fact of Belgrade and Pristina signing an ‘international’ agreement, the Kosovo Albanians can now assert that de facto Belgrade has recognised Kosovo.
But to get this, Pristina conceded substantive autonomy to the ethnic Serbian communities in most major policy areas (health, education and especially police – in the Balkans control over the police is all). And it gave Serbia the chance to press on with its EU membership without recognising Kosovo.
Serbia in turn did better on substance than symbolism. Northern Kosovo and other Serbs in Kosovo have been promised far-reaching devolved powers that need never be ceded and allow them to work very closely with Serbia. Nothing real has been conceded on Serbia’s bottom-line issue of principle, namely Kosovo’s independence. And Serbia can get on with its EU integration processes without Kosovo-inspired blackmail.
Yes, the Albanians’ argument that Serbia has de facto recognised Kosovo is vexing. But Belgrade still has the diplomatic firepower to hold the line in the key capitals that matter (Moscow and Beijing) to stop Kosovo joining the United Nations except on Belgrade’s terms.
Brussels ended up with some substance (the prospect of easing wasteful tensions in that part of the Balkans, and getting the impossible Balkanites bogged down in EU accession bureaucracy) and some symbolism (a much needed diplomatic triumph amidst all that Eurozone misery and a show of leadership for the EU method).
Of course, this is just one way of looking at it. Back in real life plenty of people in the Northern Kosovo Serb community are feeling well and truly sold out, suggesting that Serbia lost heavily on both Symbolism and Substance. But NB it may be the case that Serbia qua the current Serbia leadership did a relatively good job in the negotiation but Serbs in general and Kosovo Serbs in particular did much less well.
So, goes the argument, Serbia surely has effectively renounced its claim to control that last part of Kosovo it (sort of) controlled. That must mean that Serbia has given up on Kosovo finally? And does that not mean that Kosovo 'therefore' is now accepted by Belgrade as independent?
Maybe. But in international law and politics a lot turns on what people say, as well as what they do.
Belgrade will find plenty of sympathetic ears out there in the world community of nations when it complains that it had 'no choice' but to go along with this bullying EU-led push, and that whatever happens it will not recognise Kosovo's 'illegal' secession. Note President Nikolic's carefully chosen words describing the deal: “the only possible way to guarantee to Serbia that Kosovo will never be a state accepted in the United Nations”.
This is Serbia's bottom line, and as diplomatic bottom lines go it is quite a good one. Even if Kosovo is a state 'accepted' by many countries, Kosovo will (he asserts) never be recognised as a full member of the international community without Belgrade's consent. Unless Russia and China agree, Kosovo can not enter the United Nations as a normal country just as all the former Yugo-republics have done.
This in turn means that Kosovo is highly unlikely ever to get accepted in world sporting bodies and most international organisations. It will have a sui generis twilight-zone status, recognised by roughly half the countries in the world but not the other half, including some of the biggest heavy-hitters in the 'non-Western' camp. Palestine, now recognised as a state by over 130 countries, is in a similar ambiguous position but with most of the states that have recognised Kosovo on the other side of that argument.
Meanwhile Kosovo is hoping that Serbia's concessions this time round will help persuade the likes of China/Russia/India/Brazil that Serbia is giving up the fight - why should they be holding out against recognising Kosovo, when Serbia's core position is eroding and (arguably) negotiable?
My guess is that Kosovo will not get much further down the international recognition road as a result of this agreement. Why? Because those large countries holding out against recognising Kosovo can't care less about the Kosovo/Serbia problem itself. They are making their stand against the idea that international borders can be changed by Western powerplay (where does that end?), and because it is never a bad idea to oppose on principle what 'the West' wants. Apart from anything else, the more you oppose it the more likely you are to get something in return for eventually changing position!
Anyway, soon the fun over local symbolism begins. It is one thing agreeing that Pristina henceforth will have ultimate responsibility for what happens in northern Kosovo and a growing grip on people there by paying salaries to public sector employees. It is quite another to expect that those Serb employees put up a picture of the Kosovo president in their offices or wear Kosovo insignia or otherwise doff their caps to symbols of Kosovo authority and legitimacy.
All that will drag wearily on. And on.
The point is that unless and until there is a deal involving Belgrade on Kosovo's independence the whole idea of Serbia and Kosovo joining the EU edges towards either complete stalemate or a new outcome of unfathomable diplomatic ingenuity. Back to Commentator:
Well into the future the European Union will have to decide whether to admit Serbia without recognising Kosovo and/or to admit Kosovo that is not a state recognised by the international community as a whole: A Euro-style Mexican stand-off.
This week Brussels, Belgrade and Pristina joined forces to kick decision-day well down the road. They all know that that fateful moment will come. But they’ll double-cross that bridge when they finally reach it. Oh, and who knows what the European Union itself will look like then?
That last one is a good question.
China on European Welfare Incentives
14th April 2013
Have a look at this magnificent AJ interview from late 2011 with Jin Liqun, head of China's Sovereign Wealth Fund.
The whole thing is impressive for Jin Liqun's steely logic and sense of effortless authority. But it moves into overdrive at 11.40 or so when he starts to talk about why investing in Europe is not necessarily a good idea as the welfare model is 'out of whack':
"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.
"Why should, for instance, within [the] eurozone some member's people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."
He goes on to say that China has accumulated its money through hard work over three decades. Is it fair to the Chinese people to risk that money by investing in a Europe where hard work is not so obviously a dominating feature?
Eurobonds - The Time Comes? Fine Soros Speech
9th April 2013
You have to hand it to George Soros. When he goes for it, he hits the target big.
Look at this speech arguing that the introduction of Eurobonds is by far the best way to solve the Eurozone's (and EU's existential crisis).
I myself have no idea what a Eurobond looks like or why it might or might not work. But what I like about this presentation is the way he comes across as taking seriously a good many alternative arguments (both substantively and politically) and working through them in terms most reasonably expert people might understand:
Germany is opposed to eurobonds on the grounds that once they are introduced there can be no assurance that the so-called periphery countries would not break the rules once again. I believe these fears are misplaced. Losing the privilege of issuing eurobonds and having to pay stiff risk premiums would be a powerful inducement to stay in compliance. Indeed the penalty would be so painful that the rules would have to call for small doses in order not to aggravate the offending country's financial position too abruptly. At the same time a the fiscal authority in charge would exercise stricter controls and disobedience would be punished by further reductions in the amount of eurobonds allowed to be issued. No government could resist such pressure...
Guarantees have a peculiar character: the more convincing they are, the less they are likely to be invoked. The US never had to pay off the debt it incurred when it converted the debt of individual states into Federal obligations. Germany has been willing to do only the minimum; that is why it had to keep escalating its commitments and is incurring actual losses. The fiscal compact, backed up by a well functioning fiscal authority would practically eliminate the risk of default. eurobonds would compare favorably with the bonds of US, UK and Japan in the financial markets.
Admittedly, Germany would have to pay more on its own debt than it does today but the exceptionally low yields on Bunds is a symptom of the disease plaguing the periphery. The indirect benefit Germany would derive from the recovery of the periphery would far outweigh the additional cost incurred on its own national debt.
The main limitation of eurobonds is that they would not eliminate the divergences in competitiveness. Individual countries would still need to undertake structural reforms. Those that fail to do so would turn into permanent pockets of poverty and dependency similar to the ones that persist in many rich countries. They would survive on limited support from European Structural Funds and remittances.
But Germany accepting eurobonds would totally change the political atmosphere and facilitate the structural reforms that are also needed. Reforms work better when trading partners are prosperous than in conditions of widespread decline. Eurobonds offer a promising environment to structural reforms that are also needed...
The rhetorical craftiness of this speech lies in the way he makes his preferred conclusion seem calm and reasonable by whittling down the arguments against it. He even throws in the heresy that maybe Germany should leave the Eurozone and allow the remaining countries to issue Eurobonds:
Obviously, it would be better for Germany to leave than Italy and equally obviously, it would be better for Germany to agree to eurobonds than to leave the Euro. The trouble is that Germany has not been put to the choice, and it has another alternative at its disposal: it can continue along the current course, always doing the minimum to preserve the euro, but nothing more.
If my analysis is correct that is not the best alternative even for Germany, except in the very near term. The situation is deteriorating and eventually it is bound to become unsustainable. The longer it takes, the greater the damage. Nevertheless, that is Germany's preferred choice, at least until after the elections.
There is a strong case for Germany to make a definitive choice whether to agree to eurobonds or to leave the euro. That is the case I came here to argue.
And this sense of his agonising over how far to speak out and when is also cleverly done:
I reflected long and hard whether I should present my case now or wait until after the elections. In the end I decided to go ahead, based on two considerations.
One is that events have their own dynamics and the crisis is likely to become more acute even before the elections. The Cyprus rescue proved me right. The other is that my interpretation of events is so radically different from the one that prevails in Germany that it will take time for it to sink in and the sooner I start the better
So he concludes in a generous 'reaching-out' way that allows those in Germany who might utterly disagree with him to change their minds graciously. He appeals to a human sense that yup, sometimes we just get things wrong, for the best possible reasons - if so it's OK to change course.
To state my own views, my first preference is eurobonds; my second is Germany leaving the euro. Either choice is infinitely better than not making a choice and perpetuating the crisis. Worst of all would be for a debtor country, like Italy, to leave the euro because it would lead to the disorderly dissolution of the European Union.
I have made some surprising assertions; notably how well eurobonds could work even without Germany. My pro-European friends simply cannot believe it. They can't imagine a euro without Germany. I think they are conflating the euro with the European Union. The two are not identical. The European Union is the goal and the euro is a means to an end. Therefore the euro ought not to be allowed to destroy the European Union.
But I may be too rational in my analysis. The European Union is conflated with the euro not only in popular narratives but also in law. Consequently the European Union may not survive Germany leaving the euro. In that case we must all do what we can to persuade the German public to abandon some of its most ingrained prejudices and misconceptions and accept eurobonds
I should like to end by emphasising how important the European Union is not only for Europe, but for the world.
The EU was meant to be the embodiment of the principles of open society. That means that perfect knowledge is unattainable. Nobody is free of prejudices and misconceptions; nobody should be blamed for having made mistakes. The blame or Schuld begins only when a mistake or misconception is identified but not corrected. That is when the principles on which the European Union was built are betrayed.
It is in that spirit that Germany should agree to eurobonds and save the European Union.
Pow! Always praise good technique.
But will it work? If I were a German, would I trust other tricksy EU countries not to find a way to freeload on any shared Eurobond system and send me the bill?
Cyprus: Insolvency and National Sovereignty
26th March 2013
Here is an interesting (but not altogether clear) piece about Cyprus and 'national insolvency' by Stephen Kinsella at Harvard Business Review:
... national borrowing on the modern scale really only began around the seventeenth century. Before that in the monarchical era, so-called "court bankers" provided cash-strapped sovereigns with loans and quite often served as royal tax collectors and handled other fiduciary matters for them. Monarchical debts, when they were paid, were usually paid at the people's expense. For example the land now known as Pennsylvania was given by the Crown to William Penn to repay a 16,000 pound debt.
With the passing of the monarchical governance structure, responsibility for a nation's debt moved from the rulers to the ruled. Henceforth these were the people's debts, issued by a national bank, the Bank of England — in return for the privilege of producing its own banknotes — on behalf of the people, to their elected rulers.
I believe the analogy between national finances and insolvency is damaging. If politicians and policy makers believe their country is, literally, insolvent, then they behave differently towards their creditors. For politicians of debtor states, suddenly vast privatizations make sense, because of course you're selling some of your remaining assets.
Suddenly the will of the people of the debtor nation becomes secondary to the will of the nation's creditors. Suddenly democracy is an expensive irrelevance in the face of an overwhelming technocratic desire for a speedy, and market-friendly, solution.
There's more (my emphasis):
The single European currency project, in depriving member states of the ability to issue their own currency, has created the conditions for something close to national insolvency when economies slump. With high debt-to-national output ratios, current account deficits, fiscal deficits, and, putting it mildly, shaky banking systems, the debtor countries of Europe look very much like insolvent firms to the markets.
Their sovereign power to issue currency is gone, meaning only painful deflation through the wage channels are possible. Leaving the currency union is very, very costly. The solution is national austerity. Indeed, in some cases, like Cyprus, Ireland, and Italy, the banking systems are so big relative to the rest of the economy as to make the sovereign itself almost vestigial.
The saving of the banking system and the system as a whole is the prime concern of Europe's policy makers — typically representing the interests of creditor countries — but what will take its place?
A more or less autocratic system of coercion is the logical outcome of these policies. They come from using ideas like national insolvency to reduce the grip a people have on their sovereignty.
But there is no asset valuation concept in the founding documents of any nation state; nor should there be.
That last sentence is curious. Why 'should' there be no asset valuation concept in the founding documents of any nation state?
There is in fact always an implicit asset valuation, namely the ability of the state to coerce its own people to extract more taxes and so pay off debts. The 'asset' is the future work of the populace and the ability to extract value from it. Without that why would anyone lend money to a state when that state wanted to spend more than it was taking in from taxes?
The author is right to identify the emerging 'more or less autocratic system of coercion' as the logical outcome of EZ policies. And he's right that this reflects the fact that the EU/EZ projects do require people to have less grip on 'their' (sic) sovereignty. But that's not a bug. It's the key feature!
Nasty parochial national sovereignty is now required to give way to bold shiny higher EU-level sovereignty, in which the mass of Germans heavily outvote the puny Greeks and Cypriots - democracy! I have added a comment to the piece in this sense.
So, question. Is 'national sovereignty' (putting to one side the increasingly tricky of what a 'nation' is these days) a conservative, old-fashioned, obstructive force? Or is it something progressive and noble, the one unfailing must-be-maintained-at-all-costs barrier between the masses and the brutish technocratic markets?
Who should have more say in how the EU deals with its currency and its debts? Large numbers of Germans or small numbers of other countries' citizens? What does democracy as a basis for sovereignty mean in this context?
And, as usual, the only question that matters: who decides?
Eurozone Wobbling Tightrope Walkers
21st March 2013
Back from sharing with the Croatian Diplomatic Academy some training thoughts on Lobbying and Negotiating in the European Union. With the Cyprus drama helpfully unfolding before our startled eyes.
These fiendishly complex financial/banking negotiations are impossible for normal people to follow, although anyone following my Twitter feed will have seen plenty of superb analytical pieces by different experts.
For example Frances Coppola, who has a superb writing style that explains things in ways even I can understand (sometimes):
The proposed deposit haircut of 6.75% for deposits under 100,000 Euros looks harsh and unfair. And indeed it is. But not because deposits were ever "safe". Compared with the alternative - bank failure, sovereign insolvency and unrecoverable loss of most of their money - this was a good deal for small depositors. And it may still be improved.
What is harsh and unfair is that depositors have been led to believe that small deposits were guaranteed, when the supposed "guarantee" is not worth the paper it is written on. In the Eurozone, deposit insurance is only as good as the ability of the sovereign to honour it. If the sovereign cannot honour it, it is worthless. And that is the situation not only in Cyprus, but also in Greece, Portugal, Ireland and possibly Spain. None of these sovereigns could borrow, print or otherwise raise the money to meet claims under the EU's deposit insurance scheme.
It is time that depositors were told the truth. The lack of a common deposit insurance scheme in the Eurozone means that deposit insurance is a luxury available only to those countries that can afford it - which are also the countries that least need it. Everywhere else, it is a sham.
Or try Beate Reszat, who wonders whether the time has come to retreeat to simpler and more manageable currency arrangements across Europe. Masses of subtle ideas here delivered clearly:
After 40 years experience with regional currency regimes, which eventually all failed, maybe the time has come for European monetary policy to choose a minimalist approach returning to national currencies and focusing on sporadic coordinated discretionary measures to influence market conditions and expectations, and to content themselves with being one stabilising element among others in times of turbulence.
Mitigating transition effects, regaining flexibility, and slowly and patiently restoring credibility and trust in European institutions and processes, taking along all member countries on an equal footing, should be the primary objective. Over 60 years of successful European economic and political integration would be worth it.
More generally, as regular readers here know, on our courses we explain that one way to approach negotiation is to move away from surface Positions and explore instead underlying Interests and Needs. What are those Interests and Needs in the Eurozone fiasco?
It's easy enough to explain the broad case for maintaining pan-European financial stability, even if extraordinary measures are required that set bad new precedents: the possible costs of abandoning the Euro are unfathomable, so doing that looks more risky even than the damaging new policies now emerging. The high tightrope walker with no safety-net is having to perform ever more manic gyrations to avoid toppling off, yet so far those gyrations appear to be working!
But Chaos Theory teaches us that in such radically unstable circumstances even tiny vibrations can set in motion far-reaching bigger changes. And maybe in fact the tightrope-walker starts to think that she/he is just not agile enough to stay on the rope in the conditions now prevailing, however feverishly she/he wriggles. Better to try to stay aloft in the hope that somehow balance and equilibrium can be restored? Or to try to make a controlled but risky jump down from a great height in the hope of hitting the deck under conditions she/he controls a bit?
Or maybe the tightrope walker misjudges her/his own skill, thinking that balance can be maintained when in fact (ie as events will show) a point of no return has been passed?
No 'right' answer on tactics. But for now we can be sure that the highest level guardians of Eurozone stability, namely the ECB inner elite, will do whatever they can to stay aloft. Heck, their professional reputations and salaries are at stake. They have Interests and Needs too, you know!
How about 'Fairness' as a basic Need as it might be said to underpin Trust?
This is hard to call.
On the face of it, it is Not Fair that 'ordinary' Cypriots who have money in the bank supposedly under a legal guarantee up to a certain level should have a slice of that grabbed by the state. Collectivist looting!
Yet as Frances Coppola points out (see above), those guarantees are worth nothing in a state that has bungled its finances to the degree Cyprus has done. All Cypriots have had the benefit of Cyprus scooping in global money via its comfy and not, ahem, invariably transparent tax arrangements. Plus check out this powerful piece by Michael Weiss on the many Russian (and Syrian) angles in the story.
In other words, trying to work out what any given Cypriot 'deserves' in this imbroglio is impossible. Cypriots might hoot that they have been aided and abetted by the European Union in countless ways, so the EU too should suffer. Yet even if there is a logical or accurate point there, it is a morally unworthy one:
I swear by my life and my love of it that I will never live for the sake of another man, nor ask another man to live for mine
What of wealthy Russians who have invested money in Cyprus banks? They have moved funds on a large scale out of their own uncertain country to an EU jurisdiction that treated them more than generously, and that in one way or the other they tried to squeeze in their favour. No-one elsewhere in Europe will cry bitterly if such people now take a sizeable hit.
Nonetheless it is a sign of just how unstable - and weak - the Eurozone now is that top EU folk are rushing to Moscow to see what if anything the Russians might do to help. In such circumstances the Russian elite and their oligarch chums have several advantages, not least a steely cynical far-sightedness. But that does not guarantee that they'll get an outcome they like, and they might just underestimate the no less steely cynicism and acumen of the Germans who are driving EU policy. Chaotic Eurozone collapse could wallop Russia's interests too.
And let's also remember that there is little difference between the state grabbing money from your bank account and the state 'inflating debt away' by debauching the currency. Either way force is being used improperly to cheat you in ways that are less or more subtle, "but it's in your own interests".
UPDATE: Maybe there is a way forward?
Again, the benefit of all this financial sleight-of-hand was the central bank printed money for Ireland today, and Ireland didn't have to pay it back for many years. As Wolfgang Münchau of the Financial Times explains, it was a deliberately convoluted way of printing money for the government to hide that they were printing money for the government.
Cyprus should pull an Ireland, and force the ECB to make a decision. Either the ECB refuses to accept guaranteed natural gas bonds as collateral, and Cyprus gets booted from the euro, or the ECB relents, and the panic subsides.
In other words, make the ECB decide whether the euro is worth printing 5.8 billion euros.
What does it all mean?
Only that we have created financial systems that are in principle so unstable that managing them goes beyond the wits of even the best minds on the planet. The Eurozone is the most staggering example, but there are others. Governments in Europe are fast draining their ability to cope - their blundering moves are too slow and too inaccurate and too inexplicable to the public.
Plus there is one appalling even deeper dynamic in play: demography. As Europe's birth-rates ebb away and older people start to require ever-more expensive healthcare, the longer-term EU 'social model' is in principle unaffordable. So are our fundamental mainstream economic models (based on an historic expectation of paying later for spending now) actually sustainable, when there just may be too few people around in years to come to generate the income to service the debts?
My guess? As trust in the technical capacity of governments to run a currency honorably declines, expect rival innovative systems like Bitcoin to look more credible.
And, as if by magic, dishonest governments fear honest competition and begin to mull new 'regulations'.
This is where the real financial battleground of the next century or so will emerge. Between on the one side states and their tiny privileged elites clinging to the right to control people by controlling (and if necessary stealing) their money, and on the other side millions people demanding the choice to take responsibility for themselves.
EU Budget - Gurgling Down?
8th February 2013
Here's my Telegraph Blogs piece this morning on the news coming from Brussels that mirabile dictu the EU Budget may in fact not grow over the coming seven year financial cycle:
The French have made the usual belligerent noises, feigning to champion increased spending that they too can’t afford. As a net contributor (but unlike the UK with a huge stake in the existing bad pattern of spending skewed towards the CAP) France hoots for more Europe, then gracelessly falls in line behind the tough position determined by the other two largest net contributors, UK and Germany.
But wait. What about the European Parliament? Can’t they refuse to endorse the deal and impose annual budgets at higher costs to UK?
London’s answer to that will be “bring it on!”. If the EU Budget in all its labyrinthine complexity is not agreed at the start of the seven-year spending cycle, it gets far harder for the major net beneficiaries of structural spending (eg Poland and Romania) to plan sensibly. That in turn sharply increases the likelihood that by 2020 they will not have spent their allocations, so the actual spend by the UK and other net contributors is sharply down.
In other words, if the European Parliament tries this on in a clumsy power-grab it will incur the wrath of almost everyone, including MEPs on all sides who, taking their lead from their respective capitals, prefer the certainty of a comprehensive Budget deal now to the horrible uncertainty of annual budgets.
In any negotiation of this sort, those who pay in more than they get out decide the final outcome. This time round David Cameron – aided by the shamelessly opportunistic Labour Party in Westminster – has stuck to a firm position of principle that also makes sound economic sense. He is winning a major victory.
In a battle between Givers and Getters, Getters win. It just comes down to how little they want to Give, and how long the Getters want to keep the issues open, trading the hope of further small gains against the certainty in planning that comes from getting the whole boring business over and done with.
The depressing thing is that the EU now staggers on with no move seriously to downsize the role of the CAP in overall shared spending. Plus all sorts of budgetary bungs will have been handed out to get the final package close to approval, so the process is even more squalid and inefficient than usual. None of which helps maintain Europe's long-term position as a world economic force.
Maybe that's exactly how decline has to happen. It's just easier to stick with the sinking ship you know, and gently gurgle downwards with it.
But as a Speech?
23rd January 2013
My piece for The Commentator on the PM's UK/EU speech as a speech:
... Those sentences, like the opening blather about the origins of the European Union, are intended to send a strong signal to other European capitals:
You won't get a better UK Conservative leader than me who has a good chance of knocking over British Euroscepticism for a good while to come, so if I were you I'd start looking hard for some serious moves in my direction.
Listening to the speech on the radio, I could easily tell that the Prime Minister was reading it out. His speechwriters do him few favours, serving up too much predictable phrasing and rhythm amidst trite speech-by-numbers rhetoric and listy structure. These effects can combine to make him sound curiously artificial and intellectually thin.
Plus, by using teleprompter technology, the Prime Minister denies himself any opportunity to be spontaneous, thereby stripping out most of the possibilities for making a speech come across as an intelligent conversation with the audience rather than an over-scripted lecture.
Still, that's modern politics, where issues of language get put through the strainer of anonymous focus groups. They lose spontaneity and sparkle, and so lack emotional content.
Bottom line? Scope for improvement on style, but the strong substance went well beyond what we all expected a few weeks or even days ago.
Rarely has a Prime Minister's speech achieved so much immediate impact and analysis.He's done something right.
Once the dust settles, the UK will need to start outlining in general but non-trivial terms the sort of things it needs to put a recommendation for Yes/In to UK voters in a few years' time. Items on the list might include:
- rebooting the European Parliament to include MPs from national Parliaments
- a number of key competences returned to consensus, not qualified majority voting
- some firm treaty language to reinforce 'subsidiarity' and to make these changes ECJ-proof and competence-creep-proof
- abandoning some annoying Directives or giving the UK/others a formal opt-out
- reforms to improve budgetary discipline/transparency and oppress corruption in huge EU programmes
- reforms to extend the Single Market
- treaty changes that guarantee that certain key national interests for states outside the Eurozone can not be overridden without their express consent
- more good stuff like that
Most of these changes should be acceptable to most member states as a price well worth paying to get UK popular endorsement of its EU membership for the next three decades or so. Naturally they'll start out (as is already happening) by moaning about à la carte cherry-picking or whatever. Plus they'll fret about going through the whole misery of renegotiating a new treaty.
Yet none of these things is really so bad. There is a lot to be said for having a new treaty anyway, to define a stable relationship for EZ and non-EZ states. And if London knows that it will get a solid (enough) outcome from the whole process, the UK does not need to mount a rearguard action to throttle lots of it. Good grief, we might even be positive and constructive.
All of which said, even if D Cameron wins such a package, how do we all vote in any referendum? Does the fact that he likes it serve to reassure the rest of us that it is acceptable? Will the clamorous Eurosceptics persuade us that the concessions he has won are more or less rubbish?
Enough to keep me in happy punditry for a while. Which, after all, is the main thing.
David Cameron's Speech: UK/EU
23rd January 2013
Here is my Telegraph Blogs take on The Speech:
The core Cameron calculation turns on his probably shrewd calculation that the centre of gravity of the British people’s position on "Europe" is that they want Some EU, but Not Too Much.
He therefore has promised them a referendum on a New Deal that he fervently hopes to present as getting that balance substantively right, so that he can campaign for a Yes/In vote. (Notice how he sidestepped journalists’ attempts this morning to get him to accept that if he cannot get any significant changes he will campaign for No/Out vote)
The other smart, if inevitable, move in the speech was to deploy the argument that because the eurozone needs radical new measures to make it work as part of a wider struggle to regain European competitiveness, looking at tough radical changes is in the EU’s own interests, not just the UK’s. This happens to be true, and so helps see off (at least rhetorically) the trivial argument that anything the UK wants necessarily must be objectionable selfish British cherry-picking.
David Cameron now invites other EU capitals to work on a package either for the EU as a whole or for just the UK (that’s up to them) that allows him to tell British voters that a new, better balance really is on offer.
The ensuing negotiation is therefore about just this: what do EU capitals have to agree to change that makes a significant difference, or to be precise a difference that can credibly be presented by David Cameron to UK voters as making a significant difference (not quite the same thing)?
I give some clues...
I've done one for the Commentator that looks in rather more detail at the style of the speech and the way it was structured. Link to follow, if they publish it haha
EU - Who Wins, Who Loses?
17th January 2013
Here is an elegant bit of work by Jonathan Golub (golub means pigeon in Serbian, by the way) attempting to measure which EU member states are better at getting their way within the system.
I could add all sorts of glosses, but read the whole thing and see for yourself how he reaches his conclusions (one of which is that the UK is in fact pretty effective as compared to some other EU Bigs):
My statistical analysis shows that many of the smaller states including Finland, Sweden, Luxembourg, Denmark, Ireland and Austria tended to enjoy significantly more bargaining success than either France or Germany or Italy. Even in the fields where one might have expected them to excel — France in agricultural policy, Germany in internal market policies — neither beat the smaller states. Of the large states, only the UK’s bargaining success matched these much smaller overachievers.
Why small states achieve such relative success is not entirely clear. It helps that they concentrate their efforts on a limited number of proposals and avoid taking extreme positions that leave them marginalised. But even after we control for these factors, French and German performance lags considerably.
He is looking at data from 1995-2002, but I'd expect the trends to be maintained going forward towards the present.
My own reasons for the relative success of the smaller EU states? Thus:
- they find it easier to muster a national elite consensus to pursue (or try to block) a given EU outcome - larger states have just that many more people in their system and outside it bickering over what to do and what priority to give it
- the decks are deliberately stacked against the larger states via vote-weighting. The whole point of the EU system is for the Bigs to do relatively less well. As the Bigs lumber around trying to get through bigger things they want, they scatter concessions to the Smalls to buy support - it's easy for the Smalls to play this game well, once they get the hang of it
- Smalls also do pretty well in getting 'their' people into EU jobs - it's almost a national priority, as big bucks flow to them if they do it well
In the UK's case, we have one huge advantage compared to other Bigs (and maybe most Smalls too): Whitehall encourages information-flow and discourages information-hoarding. E-swarms of officials across the UK bureaucracy including our Embassies round the world can be mobilised almost literally in minutes to come up with views and ideas, giving us a huge advantage in generating ingenious proposals or finding good reasons to delay things. In many other continental systems, the tradition of keeping things secret from one's own colleagues is alive and well, and/or procedures are simply too top-heavily hierarchical/clumsy to let dynamic work proceed.
In other words, a lot of explicit and implicit skills are needed to manoeuvre around the EU labyrinths - as ever it's partly about one's absolute weight, but much more about how cunningly one deploys whatever weight one has. Technique, in short.
Food for thought as we mull over the UK's future in this magnificent construction?
More on (Moron) UK/EU
16th January 2013
Just when you thought it safe to return to the water, here's me over at Commentator on the astounding idea of the Consent of the Governed:
Back in Europe the many issues arising from the UK/EU debate are no less far-reaching, and boil down to this 'consent of the governed' question:
- To what did the British public consent back in that 1975 referendum?
- If the UK loses out systematically to the Eurozone majority across the policy spectrum under EU Qualified Majority Voting, is that democracy? Or tyranny? Who decides where the line between them is drawn?
- When the Eurozone states move to a radically centralised monetary and banking union run by intrusive technocrats in Brussels, at what point does the consent of the governed become so attenuated that we conclude that the EU system is no longer substantively democratic at all?
- And if we do conclude that the system is no longer substantively democratic (or even if we are not sure), are we not obliged to withdraw our consent if we want self-respect?
Perhaps the most disturbing thing about the looming debate is the sense of Euro-collectivist menace that lurks behind some of the rhetoric. For a sizeable core of people the EU is not mainly an economic or political project – it’s a moral imperative. The Union represents Peace and Justice in their highest evolved forms, so anyone calling into question the Union’s existence even obliquely is undermining Peace and Justice. British calls for repatriating powers are intrinsically contemptible if not openly wicked.
Few European politicians want to stand out against this crude bullying even when they recognise it as such: the sheer intensity of the pro-EU-at-all-costs tendency funded lavishly by member states’ taxpayers’ money makes them look the other way.
This explains why the UK is now losing ground even with most of its supposedly natural partners (Danes, Dutch, Poles, Swedes) in the whole discussion. We come across – perhaps not inaccurately – as being not interested, non-committal in the whole thing for purely self-absorbed, banally utilitarian reasons.
Raising fundamental issues of democracy and the consent of the governed is seen as a self-serving distraction, the more so when the Europhiles have the glib answer ready to roll: more decisions taken in Brussels by politicians elected on an EU-wide basis, fewer pointy-headed anachronistic powers at the so-called nation state level...
What could go wrong?
That EU Debate Intensifies
16th January 2013
Imagine you're a member of the public mulling over EU issues and the future of the UK/EU relationship. Your heart must sink at the prospect of assorted former Ambassadors hooting mournfully at each other on these questions.
Over at Telegraph Blogs is my latest piece on this subject, pointing to a dilemma:
The Prime Minister’s speech will be closely scrutinised in EU capitals to see how far we might be ready to go to catalyse a real crisis to compel a redefinition of powers away from Brussels back to London.
Without a clear (enough) signal of UK willingness to force the issue, they’ll conclude that they need do no serious thinking about the way the EU should evolve to suit those few countries not in the Eurozone or expecting eventually to join it.
However, if the Prime Minister does make convincingly clear that for solid operational reasons it is in the EU’s own interests that these institutional issues be faced (and better sooner than later), the ensuing Euro-sulking directed against us precisely because we are right may make it all the harder to win any changes on a meaningful scale.
Meanwhile at the Guardian is Sir Nigel Sheinwald, probably the biggest and fiercest ex-FCO shark in the sea, as (a) he served as Ambassador to the EU and to Washington, and (b) he is quite recently retired so he knows the issues fresh and from the highest level (unlike me). Right from the start of his career Nigel had a simple policy for advancing to the top: to declare that he was going straight to the top, then watching as everyone else jumped out of the way in panic. It worked a treat.
Thus his views on the UK/EU:
"We have sold investment in the UK on the basis that the UK is the best gateway into the single market. That is the way we have presented ourselves. American firms and firms from the far east have based themselves in London for that reason. That has been such a success over the past decade or 15 years."
Sheinwald cautioned Cameron against tabling demands for the repatriation of UK powers, saying it is too early to know what the rest of the EU might seek in negotiations after the European elections in 2014.
"To take the position some take here in the UK, which is our European partners are going to be asking for the moon, and therefore it won't be surprising if we put in a very large demand on the table – that seems to be at the very least premature. In any event other members of the EU would regard any really significant proposals by us to renegotiate as opportunistic, given the main areas they are going to be examining are ones they would say are necessary for the euro to survive and prosper.
"These issues are existential for them, and they would argue of a different character to the sort of proposals we might be putting forward."
True. This is my point too: unless we are really difficult we'll simply be ignored, but if we are difficult enough not to be ignored we'll be strongly opposed by other partners.
The proposition (nay fact) that the UK is a gateway for foreign investment into the EU from the USA and Asia is a powerful force for sticking with the EU come what may, and probably the only one Ministers really take seriously. Would we lose much or most of that advantage if we were somehow to leave the EU? The answer to that is that we just don't know, but it seems risky: can we be sure that the benefits of being separate would outweigh or at least significantly offset the risks of huge slabs of foreign investment heaving a sigh and moving over to the Europeasn mainland?
On it wearily goes. Nigel Sheinwald may be massively invested in the European project, but he knows his stuff. Above all, he knows that it's all about timing: moments come when things get renegotiated, and showing your hand too far in advance is simply a negotiating mistake. The problem for us with waiting and seeing what the EU elites will come up with down the road is that back here in the UK the Conservative position is being eroded by UKIP at a fast pace. David Cameron has to come up with something that sounds meaningful and maybe even is quite meaningful, but nonetheless gives him room for manoeuvre with EU partners.
The strong point he has with them (as it happens to be true) is that the EU as currently constituted is a mess and needs a lot of hard-love reform. the underlying dynamics are grim, whatever the current uneasy calm may be saying to us. A new paradigm involving a systematic arrangment for 'inner' Eurozone countries and the rest of Europe (including Ukraine and Turkey) makes a lot of sense.
Alas there is no prospect of thinking about doing that without a really ghastly crisis, and if there is a crisis too many Eurocrats will be desperate to cling on to the status quo.
So, in short, it's a total mess. And almost certain to stay that way, whatever the Prime Minister says later this week.
Climate Change Negotiation: Europe Learns at Last
8th December 2012
The Climate Summit at Copenhagen was a supreme example of collective European negotiating incompetence:
Copenhagen was a startling example of how this big tent approach to agreeing global issues is unworkable. It predictably slumped into an uncontrolled haggle which as each day passed grew more and more detached from respectable scientific and long-term economic calculations.
The mass of participants had no real interest in being responsible.
Those who hoped for a carrot had every incentive to keep pushing up the price.
The relatively few countries both wealthy enough and inclined to pay into a collective new pot could not write a blank cheque; they needed guarantees that they would be getting a reasonable return on their investment, which meant above all buy-in from the fastest-growing mass emitters, namely China and India.
And China and India saw that for the first time in centuries things were going their way – was it really so risky to them to priori
In other words, the negotiating psychology framework was all wrong.
The ‘stick’ waved by those wanting a deal was far too remote: incalculable and uncertain climatic problems decades down the line.
The carrots offered by the few countries prepared to offer carrots (in the form of large new development funds to help poorer countries cooperate with expensive climate change policies by making the transition to cleaner technologies all the faster) were too small to deal with the problem as they themselves had defined it.
Plus many would-be recipients could read news reports of horrible pressure on government spending in the Western democracies, and no doubt suspected that a lot of the promised ‘new’ money would be funding rebadged from existing development budgets, much of which in any case would end up in the coffers of Western consultants.
In other words, because the EU promised the main developing polluters money (but not enough money) to pollute less, the developing polluters simply bid the price up.
The lesson? That it is hard to persuade another side to agree with you if they have no immediate downside from not agreeing.
Therefore the time has come to stop being silly about these issues and be a lot more pragmatic instead. It looks as if Germany will be leading the way, as described by Kai Konrad:
Konrad: Germany and Europe are inviting freeloaders. It's a mistake to believe our noble behavior will so greatly impress others in these talks that it will move them to make concessions in return...
We need to make clear to China, the United States and the large developing nations that Germany and Europe are no longer going to try to save the climate alone. Instead of avoiding CO2 at any cost, we should prepare ourselves for continued global warming. It's a credible threat. Everything we know suggests that Central Europe will suffer comparatively little from global warming. Berlin will simply have the temperatures that Rome does today. The adjustments we will have to make are quite manageable.
SPIEGEL: But Western, industrialized nations are responsible for the high CO2 concentration in the atmosphere. Don't we have a debt to repay to China, for example?
Konrad: That may be. But it won't advance the negotiations if we make so many concessions to China's position that there is no more movement at all.
SPIEGEL: Environmental organizations expect Germany to contribute generously to climate funds for helping developing countries address climate protection. Rightly so?
Konrad: Here, too, it would be smart not to put up these funds at the very start of the negotiations, without asking for something in return.
What? Making it clear that if others want a deal they have to make some concessions too?
When is a Budget Cut Not?
23rd November 2012
My latest piece over at Telegraph Blogs looks at how far if at all we can fathom out whether any given EU Budget outcome represents a 'cut', and if so a cut of precisely what:
The key thing to look for this time is (a) the baseline used for any percentage increase (or not) in the budget framework ceiling, and (b) the likelihood of the EU spending anything close to that ceiling. Is the EU using the previous 2007-2013 budget ceiling as the baseline for this framework period’s budget calculations? Or the likely 2007-2013 actual spend as the baseline? Or something else. These numbers can be very different, so working out what they are likely to mean in both presentational terms now and then in substantive terms up until 2020 is genuinely tricky.
One other gloss. It’s possible for the EU Budget to be frozen and the likely overall UK net contribution to stay the same, but the UK rebate is cut as part of the deal. We lose some money there, but get it back elsewhere. How damaging that is to the rebate thereafter depends on precisely what has been agreed as the basis for cutting it now.
All of which said, if David Cameron can pull off something like the 2007-2013 budget ceiling rolled over to serve for 2014-2020 without the silly increase proposed by the commission and European Parliament, he will have done well by any standard of measuring these things. It will be the first time ever that the EU budget’s real growth has slowed right down to almost nothing.
And with that new discipline in place, over the period as a whole up to 2020 the actual spend may turn out to be lower than took place in 2007-2013 – a remarkable change of course.
A funny story, as told to me by a senior French diplomat who was part of the French team at the time. Back in the early 1990s the budget was again up for discussion. As the discussions dragged on, the French delegation were in awe of the perfidious Brits who turned up with, gasp, small computers to run the permutations. The French had only a pocket calculator that ran out of battery – and it was no one’s responsibility to run out to buy new batteries.
Never underestimate the role of operational technique in these matters.
That EU Budget (Again)
22nd November 2012
Decision time (or not) for the EU Budget for the period 2014-2020.
I have written extensively on this subject. Here is my classic analysis (in two parts) from 2010 at Conservative Home on the whole process. Read it to get up to speed.
More recently I was opining at Telegraph Blogs on why London is - horror! - not isolated in demanding some sort of good sense for a change.
And here is a good Guardian piece today on the way the money is spent.
Remember the legendary Chinese alarm-clock?
In EU negotiations there is only one way to have influence. The power to block decisions, or to threaten to block them. If an EU decison is taken by 'qualified majority vote' you need to be part of the blocking minority. In some policy areas (not so many these days) you have an absolute veto. The Budget falls into the latter camp. Any member state can say NO.
Which is fine if you want to control the Budget debate and are prepared to block. But then others may block big things you want, or otherwise find lots of smaller ways to make life miserable, or form majorities to ram through stuff you really don't want.
This is one of the most fiendishly complicated negotiations on earth. Yet at root it is very simple. It is absurd that the EU system is pressing for lots more money when every government in Europe is having to trim budgets and make savings.
The banal assertion that it is not 'spending' but 'investment' is especially annoying. Even if an investment makes sense it itself, you can make only those investments you can afford.
And when so much money is wasted on schemes that need not be supported any longer in this way (eg the CAP) or through malpractice/corruption or on excessive salaries and fancy buildings, it is unconscionable to pretend that 'more investment' is some sort of moral imperative and that opposing more of the same is 'un-European'.
EU Budgets Again
14th November 2012
Here I am after a long gap (spent trying to earn some money) back at Telegraph Blogs, offering my thoughts on the various EU Budget rows now unfolding:
The EU has annual budget rows. But the big row comes around every seven years, when the so-called Financial Framework for the coming seven-year period falls be negotiated. The next financial framework period is from 2014 to 2020. The figures agreed for that period set ceilings on what might be spent in forthcoming annual budgets. The UK like every other member state has a veto on these large Financial Framework decisions. Annual budgets are decided by EU-style majority voting.
Thus the current excitement. Two important, separate but related negotiations are going on at the same time. One is for the annual spending in 2013 under the current Framework. The other is for the 2014-2020 Framework as a whole...
... London and a group of other capitals have stood firm and deployed a solid blocking minority to stop the increases in the 2013 budget as proposed by the Commission and European Parliament. The European Parliament flounced out of the meeting and was last seen lying on an expensive divan calling weakly for more smelling salts.
When these EU budgets are agreed (or not) everyone naturally focuses on the headline figures, and tries to claim victory or apportion blame accordingly. But this is only part of the story. The tough stand taken by the key contributors on the 2013 budget is in fact a major achievement, as it comes after several years of new discipline that is bringing home the overall spend well beneath the projected Framework ceiling: up to €60 billion that the EU might have spent between 2007-2013 in fact will not have been spent, representing a substantial saving to the largest budgetary net contributors such as the UK.
This helps explain why it is not in the interests of large net funding recipients (such as Poland) for the matter to drag on without agreement. Holding out for a larger budget overall may lead to a worse outcome: it's no good having the hope of more money if realistically that money can't be allocated and spent in the time available...
Which, perhaps, explains this remarkable statement by Radek Sikorski, Poland's Foreign Minister:
Speaking on the Hardtalk TV programme, he said Poland agreed that EU spending levels should be frozen - but based on the 2013 figure plus inflation, not based on the 2011 budget figure. "Britain's position is different, I'm afraid. It wants to take as the base a single annual budget, and an artificially low one - 2011 - and not even the budget, but the actual expenditure, and the budget was underspent. That amounts to a very drastic cut of 200bn [euros]. This is why Britain is so different from the position of the Commission and all the other states," he said.
Now THAT's progress. When everyone is arguing not for huge increases but rather about what baseline is used to measure what a 'freeze' actually is.
Although, of course, if you define a freeze cunningly enough you may get some large increases anyway haha. Luckily we are alert to that. I hope.
The key thing in any negotiation is to shift the discussion on to the intellectual terrain that suits you. And so far London, supported more or less openly by various other capitals, is doing just that. As expected. After all, it's our money that goes a long way to make up the pot drawn down by others.
28th September 2012
Over at the FT is a magnificent article by Samuel Brittan that with unerring precision demolishes certain arguments often put forward for why the European Union 'must' be supported.
I subscribe to the FT online edition so it may be paywalled and unable to be seen by some readers. If so, cough up for an online subscription if only to read it.
It's probably one of the best pieces I have ever read. Not so much because it is dense and clever or even I agree with the arguments he advances, but because of the light, subtle, measured way he presents the case on a different plane of analysis.
A couple of examples:
What I am saying is that the EU no longer deserves the devotion of practical idealists. When voices in Paris or Berlin say the answer to any problem is “more Europe”, by which they mean more centralised power to EU institutions, we should turn a deaf ear. And when some leaders say that “without the euro there is no Europe” we should shrug our shoulders and look at an atlas to reassure ourselves.
Although there was always a strong federalist element in the background, the post-1945 European movement began in earnest with the Schuman Plan, designed to integrate German and French coal and steel industries so that war between the two countries would be impossible. There followed the common market, designed to free up trade in western Europe; and I can remember urging Harold Macmillan, the British prime minister, to get on with his application to join.
But as time went on, the EU, as it became, acquired more and more ambitions and a whole cadre of eurocrats developed, concerned with increasing EU power and influence for its own sake. At this point they lost me...
... But of one thing I am sure. I know the language of intolerance and authoritarianism when I hear it. Words such as unthinkable, unmentionable and undiscussable are hurled at anyone who dares question EU orthodoxy, not only on the euro. Even if everything else in this article is wrong, EU intolerance of criticism is enough to turn me off the project.
This last point is why we need to worry.
There is too much talk of the unwavering 'determination' of Europe's political leaders to 'do what it takes' to keep the Eurozone afloat. Indeed the blunt emphasis on this determination was the rhetorical highpoint of Radek Sikorski's speech at Blenheim Palace laying into UK Eurosceptics:
You could, if only you wished, lead Europe’s defence policy. But if you refuse, please don’t expect us to help you wreck or paralyze the EU.
Do not underestimate our determination not to return to the politics of the 20 century. You were not occupied. Most of us on the continent were. We will do almost anything to prevent that from happening again...
Isn't acceptance by our leaders that politicians are empowered to do only what is lawful (as opposed to 'almost anything') the bedrock of democracy?
As Samuel Brittan concludes, the very intensity of the language that leaps over such fundamental practical principles in favour of some sort of higher abstract normative - and imperative - standard for running Europe's affairs really sounds ghastly to most informed British ears.
Radek Sikorski on UK Euroscepticism
26th September 2012
Last week I had the pleasure of going to Blenheim Palace to watch Poland's Foreign Minister Radek Sikorski deliver a powerful speech about Europe - and the UK's increasingly unhappy role in it.
Here is the full text.
While you are an important market for the rest of the EU, accounting for about 11% of the rest of the EU’s trade, your trade with the EU is 50% of your total trade. No prizes for guessing who would have the upper hand in such a negotiation...
So think hard: the EU is a market of 500 million people who enjoy the highest average standard of living in the world. According to the IMF and the World Bank, Europe’s GDP is about 2.5 times than that of China and nine times that of India. Do you want to lose your privileged access to that market?
... Yes, the UK outside the EU would have more freedom of manoeuvre, in a number of significant respects. But the UK would be less powerful and less free.Certainly Britain would lose its influence in many international forums. By negotiating as one bloc in world trade talks, the European Union gives all of us, the UK included, a powerful and united voice to use when speaking to China and the USA. If you leave, you lose that...
Britain standing alone would suffer not only on multilateral level. Are you sure that you will command the same kind of attention in, say, Kuala Lumpur, Lagos and Bogota? What about Washington? At the moment, your hosts know that you speak on behalf of London and have an influence to shape decisions taken in Brussels on behalf of the whole continent as well. Alone, you won’t be so interesting...
You could, if only you wished, lead Europe’s defence policy. But if you refuse, please don’t expect us to help you wreck or paralyze the EU.
Do not underestimate our determination not to return to the politics of the 20 century. You were not occupied. Most of us on the continent were. We will do almost anything to prevent that from happening again.
It's not difficult to see why. Poland wants to be with Germany and France as partners, leading a strong, democratic European political-economic space. We do not want to be a buffer between Western Europe and a less democratic Eurasian political-economic space dominated by Russia.
More importantly, we believe the Eurozone will survive, because it is its members interest for it to survive. The leaders of Europe will step up operational integration at the European level. The new institutional arrangements within the EU will be different. But eventually they’ll be strong. They'll work because Europe’s leaders want them to work...
All of which is fine as far as it goes. But the speech seemed to me to steer wide of the key issues:
is the Eurozone sustainable even though European leaders insist it is?
Are EU voters going to put up with the increasingly desperate manoeuvres being made to keep things afloat?
And if heavily new centralised arrangements can be devised to keep the Eurozone going, will they be democratic in any sense that we understand the word?
Look at this piece describing Roger Bootle's firm view that the Eurozone is not viable:
Bootle is not shy about championing his highly unpopular view. "The euro is a depression-making machine," he tells Fortune. "The politicians keep throwing money to support the weaker nations' debt problem. They never talk about restoring growth. Far from a disaster, a breakup of the euro is the only way to bring back growth and get Europe out of this mess. It can't happen soon enough."
... But the continued bailouts are just buying time. Even economists who dread a euro breakup admit that it will probably happen eventually unless Germany and other healthy nations provide far greater support to their weak neighbors. "Europe needs to create federal-style debt shared by all the eurozone members," says Greek economist Yanis Varoufakis. "If that doesn't happen, the eurozone will probably dissolve."
The bet here is that Bootle is right and that the euro will fracture in the next few years. The result will be extremely messy in the immediate aftermath, bringing severe hardship to the exiting countries -- a rash of bankruptcies, giant defaults on sovereign debt, and temporary panic in world stock markets.
But the pain that a breakup compresses into a one-time shock will happen anyway if weak nations remain in the euro. It will simply stretch over a number of years and turn out far worse. As Bootle argues, Europe must choose growth, and a split in the euro will bring it back with surprising speed.
So the answer to the eloquent Sikorski argument is that it misses the point. Yes, there are plenty of good reasons for the UK to stay within a formal EU framework much as it is now (just as there are some good reasons for some sharp-edged changes to that framework).
But what is increasingly on offer is very different. A radically centralised Eurozone that puts democracy very much in a post-modern mysterious subservient place and under the control of mainly unelected European officials and central bankers. A Eurozone in which huge transfers of wealth occur from richer Europeans to less richer Europeans without any clear-cut political legitimacy.
So the drama is not the UK drifting away from the European Union - it is the EU drifting away from us.
Oh, and by the way - will Poland itself be joining the Eurozone any time soon?
Repatriating EU Powers
23rd September 2012
Hmm. Is the UK going to try to 'repatriate' powers from Brussels? And if so, what are the chances of success?
It isn't clear to me why the other EU member states would go along with this, unless we block something horribly important to them (such as the next Budget) and then get wildly accused of being anti-European.
The real problem here is that we seem to end up in a narrow self-absorbed way articulating a status suited just to us - we need to look ahead to the emerging radical centralisation of powers needed by Eurozone countries and define a better, lighter status for everyone who does not want to be part of that. Such a 'two-tier' Europe could help integrate eg Turkey and Ukraine without the tedious impossibility of them joining the 'inner' Eurozone space.
Aaaargh. A 'two-speed' Europe would be bad for the UK! But why should the 'inner' zone be 'faster'? A good case can be made that the 'outer' zone would stand to do much better as it will be better run and more democratic.
Oh, and if we are serious about repatriating powers, the smart and simple thing to do is pass a law that allows UK law to have supremacy over EU law, much as the Germans themselves have achieved. Then odious new rules emanating from Brussels can be simply struck down, an outcome that might well influence the people drafting them.
Are Crazy US and EU Energy Policies Related?
23rd September 2012
What would happen if the state took aim at national energy policy where investment decisions and later outputs have to be calculated over decades - and decided to go for something Completely Different?
Riga Conference 2012: Europe as Greater Switzerland?
17th September 2012
An interesting and instructive visit to Riga for this year's Riga Conference. Thoughts.
First, Riga itself. Latvia took an enormous (and partly self-imposed) hit as the Euro zone crisis began, opting for radical austerity measures. Views now differ. Yes, the economy is growing once again at a pretty good rate. But did they heavily overdo it? Today’s growth is from a notably lower and weaker base.
The main problem is emigration. Latvia is a small country with some two million people and cannot afford to see people drifting away for better opportunities elsewhere in Europe. Even the heart of Riga seems oddly un-busy, with neither people nor cars bustling around. Riga is now a superb place to buy a smart Art Deco apartment at prices that are derisory by UK standards. But do you want to live/invest in a country that may be evaporating?
The Riga Conference series started in 2006 when Latvia hosted a NATO Summit. It aspires to be a significant European forum for discussing strategic economic and security issues. It faces competition from Estonia’s annual Lennart Meri conferences. Seasoned European conference-goers seem to find the Estonian events rather sassier/sharper (eg the conference wifi there works 100%).
But this year's Riga event mainly did the business. It started with two sessions on the Eurozone and its various problems. The first was opened by the Latvian and Lithuanian Prime Ministers and Estonia's feisty President Ilves, complete with sardonic American accent (he was brought up in the USA) and snazzy bow tie. They argued in unambiguously positive terms that the euro was a strong currency backed by strong resolve: recent ECB decisions and the Dutch election results showed a new technical and popular awareness to take the responsible decisions needed going forward. The three Baltic states needed to be within the Eurozone, as outside it they were much more vulnerable to economic shocks.
The conference organisers had had the good idea to set up a live #RigaConf Twitter feed showing on screens in the conference hall. Alas the wifi arrangements were not up to the challenge for much of the time. However, as I managed to get a connection during this first session I thought that I would join the fun and tweeted a terse “Eurozone crisis? What Eurozone crisis?” say Baltic leaders observation, a witty and not unreasonable contribution promptly retweeted by various Twitter folk. This made President Ilves crossly complain that people needed to be accurate in reflecting what the speakers had said. Apologies, Mr President, but it's not what you say -- it's what they hear!
The Baltic leaders’ generally rosy views were countered by Prof Leszek Balzerowicz, author of Poland’s legendary Balzerowicz Plan that helped define central Europe's successful transition from communism. He argued with simple if not brutal logic that it was dangerous to keep piling on Eurozone bailout after bailout: the only tried and proven way forward lay in stepping up competition and getting rid of "19th century university practices".
The next session looked at Europe in the context of the global economy. For me the best contribution came from Croatia's foreign minister Vesna Pusic, who warned that the European Union Croatia was joining had changed markedly in recent years as it grappled with its internal problems: the EU’s "normative dimension" had declined and "talk of democracy is even embarrassing". It was striking to hear such a radical (and accurate) insight expressed so publicly. Another speaker suggested that the best long-term result for Europe was to accept a lesser role in a world dominated by Asian demographics and become Greater Switzerland: a well-run and sophisticated but unthreatening phenomenon with no wide ambitions for influence or control. I feel an article coming on ...
My own modest role at Riga 2012 was to join a panel on Protracted Conflicts (usually seen as those in the former Soviet Union - Nagorno-Karabakh, Georgia/Abkhazia and Transdnistria - as opposed to Cyprus or Serbia/Kosovo/Macedonia/Bosnia or even UK/Argentina).
Moldova's Foreign Minister Iurie Leanca came to the panel armed with a hopeless speech prepared by his team that he wisely abandoned in favour of some sensible extempore remarks. He, Matthew Bryza (experienced former US envoy) and Dr Martin Sieg (foreign policy adviser in the Bundestag) variously argued the case for Europe engaging actively with recalcitrant territories: isolation got nowhere and if anything made things worse. True.
I brought to the discussion some observations on the application of Negotiation Theory to these issues. What if some sort of new "federalised" Europe did emerge from the Eurozone crisis? Would that lead to reduced senior European attention on these problems (and therefore an easier hand for Russia to play)? Or might new options form for an outer ring of European integration, in a way which might be less zero-sum from Moscow's point of view and so offer some creative ideas for resolving these conflicts?
Day Two focused on the security dimension and the role of NATO. There is something dispiriting about conference sessions on NATO and the ritual expression of hopes that by spending less and less on defence European countries somehow maintain military credibility. Julia Smith (adviser to Vice-President Biden) nonetheless gave an interesting account of just how much Washington continues to coordinate policies with Europe. Perhaps all is not quite yet lost?
The less said about the rambling lunchtime discussion on Afghanistan, the better.
The conference concluded with a lively session on Russia/Putin. Something about the tone of this session struck me as not quite right, with Moscow foreign policy expert Artem Malgin (MGIMO) isolated in fending off harsh criticism of Russia's leadership and policies from other panel members. Yes, there is plenty to complain about in Russia under current management. But you need to be smart about it. Arguing that Russia looks like "Nigeria with oil and missiles" is insulting/patronizing/annoying to both Nigeria and Russia.
Estonia’s President Ilves reappeared in the audience and did not enhance his reputation for statesmanship by asking a pointed polemical question about the way Russia used bribery to get its way. Lilia Shevtsova (Moscow Carnegie Endowment) sparkled in attacking anti-democratic trends in Russia, but suggested that Western leaders who took Russian money after they left office themselves might, ahem, be part of the problem.
Bobo Lo (leading Australian analyst and writer on Russia/China) had most of the best lines. He made the telling and convincing point that Russia's current approach to foreign and economic policy was incoherent even in its own terms. Thus Russia's envy for the Chinese economic model completely missed the point that much of it was bottom-up, market-based growth. Likewise Russia time and again failed to use its undoubted diplomatic muscle to get sensible outcomes in places like Syria and thereby build a different, more flexible and modern form of global influence.
Good event, scope for improvement in intellectual and organizational focus. Fine seasonal Latvian mushroom soup. My thanks to the organizers for inviting me and to the Radisson Blu Elizabete hotel team for quickly locating my spectacles as left in my room when I checked out.
Engage Charles Crawford as