The Eurocrisis isn’t just Financial.
The Eurozone crisis has managed to morph from a plain old currency crisis to a debt crisis, an economic crisis and now, a full-blown political crisis – although no-one seems to have noticed…….. and it’s not just the Eurozone:
In the United Kingdom, people are making increasingly indiscreet noises about the Prime Minister’s leadership capabilities and the Chancellor’s questionable competence, as the cold hand of political instability makes a (so far) half-hearted grab for No 10. Currently it looks as if there is already a swing to the right. Nigel Farage and UKIP no longer look like a bunch of extremist Right-wing loonies and as they gain respectability and seats, they will pose a genuine threat to the status quo.
Here’s a quick Grand Tour:
Greece’s political problems are well-documented and this is where the recent polarisation of national politics began with the success and increasing support of the right-wing Golden Dawn Party. Greece is on its knees.
In France there’s the scandal of a Minister and his secret Swiss Bank account with the consequent investigation of all Ministers – shades of the UK’s MP expenses outrage. President Hollande is keeping a very low profile because , let’s face it….he came to the table without any ideas. His mere presence has allowed Marine le Pen and her Right-wingers to re-emerge blinking into the sunlight, ready to build on her father’s legacy.
Germany’s Bundeskanzlerin Merkel is no longer odds-on to win her autumn election and so, in order to placate her detractors, countries such as Cyprus are being put through the debt-wringer and effectively having to bail themselves out! All in the cause of extra Brownie points for the Merkelator.
Many are anticipating more resignations from within the Cypriot government. Michalis Sarris, the Cypriot finance minister who negotiated Cyprus’s bailout agreement with international creditors has already gone.
Portugal’s Constitutional Court has kicked into touch some of the austerity measures imposed on the country by the Eurozone moneylenders. Now the politicians are wondering about how to plug the fiscal gap and Prime Minister Coelho may resign.
Belgium took 535 days to form a government after its last election and now has a 6-party Cabinet.
Italy is struggling to form a government and will most likely hold another election after President Napolitano comes to the end of his tenure as Head of State on May 15th. Goodness only knows what the reaction of not only the Eurozone but of the Markets would be should Silvio Berlusconi (again) rise from the dead! Italy’s political scene has become so surreal that ONE QUARTER of the vote in the recent election went to a protest movement headed-up by Beppe Grillo – a comedian!
Spain’s politicians, including its Prime Minister are mired in corruption scandals – and now there are anti-Royalist demonstrations as a direct result of the king’s daughter being implicated in a government financial rip-off. Mind you, affluent Spaniards have already pulled about $100 billion out of their Spanish bank accounts. They started running early. It’s only a matter of time before the Basques and Catalans start to make their separatist noises.
The difficulty is that one would normally expect the emergence of the Right to be counterbalanced by a strong showing from the political Left. But what Europe has are weak governments , compounded by even weaker oppositions. No European political party in government has over 50% of the vote……. and the less said about the European Union’s politicians, the better! They seem to have elevated ineptitude into an art form.
Currently, Britain’s Left is being driven by Ed Miliband and the New-Old-New-Who-Knows-Who-Cares Labour Party. They earn their salaries through the medium of being critical. They have shown themselves to be totally bereft of a coherent, cohesive strategy and will be directly responsible for the future success of UKIP.
Leadership (or a lack of it) within Germany’s Social Democratic Party will be the main factor which could give Merkel another few years of power. If that happens, the rest of the Eurozone should begin to consider itself as no more than a motley collection of Vassal States……there to do Germany’s bidding. Unless of course, Germany accepts George Soros’ advice and leaves the Euro.
France does not enjoy having a Socialist President and it is right to be sceptical. President Hollande is now totally ignored by Merkel and is doing what he does best – he keeps out of the way as Germany tightens its stranglehold.
Hollande could have been the Eurozone’s great hope but unfortunately is way out of his depth. France now has a negative bond rating by all three rating services and has lost much of its international respect. It’s precarious banking system is just waiting (like many others) to go “pop!”
The Main Event this year will be Merkel’s re-election so the Eurozone states must not expect any major policy changes until then – and when she wins? More of the same – but without the compassion!
What of Europe’s medium to long-term future? Without some sort of political quantum leap, it will inevitably descend into a collection of Third World states but with running water, TV and a banking system totally independent of its economy and probably with its own flag.
Eurozone Meetings Merrygoround
This week, Angela Merkel meets Herman Van Rompuy, Mario Monti meets Francois Hollande who also meets David Cameron.
The new Meeting Season seems to indicate that Eurozone leaders have decided that meeting in plenary will be punctuated by the new craze of meeting in pairs.
I thought that it may be useful to compute how many meetings 0f TWO, could be managed by 20 politicians.
They are: the 17 Eurozone leaders + Van Rompuy + Barroso + Cameron = 20.
So, how many meetings would 20 politicians generate if they met in pairs?
Using the formula n!/(r!(n-r)!)……… (n = number of leaders and r = 2, as they meet in pairs)
The total number of “pair meetings” achievable by 20 politicians is 20!/(2!(20 – 2)!) = 190
We have to double that, because they each will want to meet twice so that each one has TWO meetings with every one. (One Home and one Away).
Therefore 20 politicians can generate 380 meetings – if they confine themselves to meeting TWO at a time.
That of course is on TOP of the monthly Eurozone Crisis Meetings, EU meetings and special meetings – for instance, when Spain decides to take the €500 billion we all know it needs or the next time Greece is (once again) about to go down the Grexit toilet.
We can see therefore that any attempt to solve the European Crisis would only serve to interfere with what is already a very heavy meeting schedule.
Today’s EU letter to Van Rompuy & Barroso
The letter reproduced below is signed by 11 European leaders. It is addressed to Herman van Rompuy and José Manuel Barroso, although the real audience is the entire European Union.
As I’ve pointed out before, in Euroland, there has been a noticeable increase in the use of a very strange new language . It has been used by European leaders during their various pronouncements over the last couple of years.
The rhetoric adopted by current Euroean Commissars is frighteningly similar to the Soviet-style nonsense spouted by dead-eyed Party apparatchiks of the 1960s. It is the empty “old-school” Party-designed exhortatory language of the now-extinct Soviet official.
In common with the good old Berlin Wall days, these pre-written Euro-statements appear to promise much but actually, say nothing.
It is a very long statement of the obvious and in keeping with EU tradition , there is overuse of the word “must” rather than the word “will”.
This looks very much like a preamble to many , many meetings but it is noticeable that neither Germany nor France has signed it.
Herman van Rompuy
President of the European Council
José Manuel Barroso
President of the European Commission
20 February 2012
A PLAN FOR GROWTH IN EUROPE
We meet in Brussels at a perilous moment for economies across Europe. Growth has stalled. Unemployment is rising. Citizens and businesses are facing their toughest conditions for years. As many of our major competitor economies grow steadily out of the gloom of the recent global crisis, financial market turbulence and the burden of debt renders the path to recovery in Europe much harder to climb.
Europe has many fundamental economic assets. But the crisis we are facing is also a crisis of growth. The efforts that each of us are taking to put our national finances on a sustainable footing are essential. Without them, we will not lay the foundations for strong and lasting economic recovery. But action is also needed to modernise our economies, build greater competitiveness and correct macroeconomic imbalances. We need to restore confidence, among citizens, businesses and financial markets, in Europe’s ability to grow strongly and sustainably in the future and to maintain its share of global prosperity.
We discussed these issues when we last met. It is right that we discuss them again. Building on the conclusions we have previously reached, it is now time to show leadership and take bold decisions which will deliver the results that our people are demanding. We welcome the steps being taken, nationally and at the European level, to address this challenge and look forward to agreeing further concrete steps at our next meeting, with action focused on eight clear priorities to strengthen growth.
First, we must bring the single market to its next stage of development, by reinforcing governance and raising standards of implementation. The Commission’s report to the June European Council should set out clear and detailed actions needed to enhance implementation and strengthen enforcement.
Action should start in the services sector. Services now account for almost four fifths of our economy and yet there is much that needs to be done to open up services markets on the scale that is needed. We must act with urgency, nationally and at the European level, to remove the restrictions that hinder access and competition and to raise standards of implementation and enforcement to achieve mutual recognition across the single market. We look forward to the Commission report on the outcome of sectoral performance checks and call on the Commission to fulfil its obligation under the services directive to report comprehensively on efforts to open up services markets and to make recommendations for additional measures, if necessary in legislation, to fulfil the internal market in services.
Second, we must step up our efforts to create a truly digital single market by 2015. The digital economy is expanding rapidly but cross-border trade remains low and creativity is stifled by a complex web of differing national copyright regimes. Action is needed at the EU level to provide businesses and consumers with the means and the confidence to trade on-line, by simplifying licensing, building an efficient framework for copyright, providing a secure and affordable system for cross-border on-line payments, establishing on-line dispute resolution mechanisms for cross-border on-line transactions and amending the EU framework for digital signatures. We should build on the recent proposals of the Commission, without reopening the e-commerce directive, to create a system that balances the interests of consumers, businesses and rights holders, and spurs innovation, creative activity and growth. We must also continue our efforts to build modern infrastructure to provide better broadband coverage and take-up and extend and promote e-government services to simplify the start up and running of businesses and aid the mobility of workers.
Third, we must deliver on our commitment to establish a genuine, efficient and effective internal market in energy by 2014. All member States should implement fully the Third Energy Package, swiftly and in recognition of agreed deadlines. Energy interconnection should be enhanced to help underpin security of supply. Urgent action is also needed, nationally and where appropriate collectively, to remove planning and regulatory barriers to investment in infrastructure to release the potential of the single market and support green growth and a low-emissions economy. We look forward to the Commission’s forthcoming communication on the functioning of the internal market, which should include an assessment of the degree of liberalisation and energy market opening in member States. We also commit to making concrete progress towards the development of a Single European Transport Area and establishing the Connecting Europe Facility.
Fourth, we must redouble our commitment to innovation by establishing the European Research Area, creating the best possible environment for entrepreneurs and innovators to commercialise their ideas and create jobs, and putting demand-led innovation at the heart of Europe’s research and development strategy. We must also act decisively to improve investment opportunities for innovative start-ups, fast-growing companies and small businesses, by creating an effective EU-wide venture capital regime which allows venture capital funds to operate on a pan-European basis, assessing a proposal for an EU venture capital scheme building on the EIF and other financial institutions in cooperation with national operators, and agreeing a new EU-wide programme, modelled on the Small Business Innovation Research scheme, to promote more effective use of pre-commercial public procurement to support innovative and high tech businesses. Reforms to create an effective and business-friendly system of intellectual property protection remain a very high priority.
Fifth, we need decisive action to deliver open global markets. This year we should conclude free trade agreements with India, Canada, countries of the Eastern neighbourhood and a number of ASEAN partners. We should also reinforce trade relations with countries in the southern neighbourhood. Fresh impetus should be given to trade negotiations with strategic partners such as Mercosur and Japan, with negotiations with Japan launched before the summer, provided there is progress on the scope and ambition of a free trade agreement. The deals that are currently on the table could add €90 billion to EU GDP.
But we must go further too. We need to inject political momentum into deepening economic integration with the US, examining all options including that of a free trade agreement; seek to deepen trade and investment relations with Russia, following its accession to the WTO; and launch a strategic consideration of our trade and investment relationship with China, with a view to strengthening our economic ties and reinforcing commitment to rules-based trade. Recognising the benefits that open markets bring, we should continue our efforts to strengthen the multilateral system, including through the Doha Development Agenda, strive for multilateral and plurilateral agreements in priority areas and sectors, and resist protectionism and seek greater market access for our businesses in third countries. Above all, we must reject the temptation to seek self-defeating protectionism in our trade relations.
Sixth, we need to sustain and make more ambitious our programme to reduce the burden of EU regulation. We welcome the commitments made by the institutions to reduce burdens on small businesses but urge further and faster progress across the EU institutions while maintaining the integrity of the single market and the Union’s wider objectives. We should assess the scope for ambitious new EU sectoral targets and agree new steps to bring tangible benefits to industry. We should also make a very clear and visible statement of our intention to support micro-enterprises and ask the Commission to present detailed proposals to achieve this, including possible amendments to existing legislation. We also ask the Commission to publish an annual statement identifying and explaining the total net cost to business of regulatory proposals issued in the preceding year.
Seventh, we must act nationally and, respecting national competences, collectively to promote well functioning labour markets which deliver employment opportunities and, crucially, promote higher levels of labour market participation among young people, women and older workers. Special attention should also be given to vulnerable groups that have been absent from the labour market for long periods. We should foster labour mobility to create a more integrated and open European labour market, for example by advancing the acquisition and preservation of supplementary pension rights for migrating workers, while respecting the role of the social partners. We should also take further action to reduce the number of regulated professions in Europe, through the introduction of a tough new proportionality test set out in legislation. In this context, we ask the Commission to convene without delay a new forum for the mutual evaluation of national practices to help identify and bring down unjustified regulatory barriers, examine alternatives to regulation which ensure high professional standards and assess the scope for further alignment of standards to facilitate mutual recognition of professional qualifications.
Finally, we must take steps to build a robust, dynamic and competitive financial services sector that creates jobs and provides vital support to citizens and businesses. Implicit guarantees to always rescue banks, which distort the single market, should be reduced. Banks, not taxpayers, should be responsible for bearing the costs of the risks they take. While pursuing a level playing field globally, we should commit irrevocably to international binding standards for capital, liquidity and leverage with no dilution, ensuring that EU legislation adheres to Basel 3 standards to ensure financial stability and meet the financing needs of our economies. Banks should be required to hold appropriate levels and forms of capital in line with international criteria, without discrimination between private and public equities. We also call for rigorous implementation of the G20 principles on banking sector remuneration in line with existing EU legislation.
Each of us recognises that the plan we propose requires leadership and tough political decisions. But the stakes are high and action in many of these areas is long overdue. With bold and effective action and strong political will we can recover Europe’s dynamism and put our economies back on the path to economic recovery. We urge you and the European Council to answer our peoples’ call for reform and to help restore their confidence in Europe’s ability to deliver strong and sustainable growth.
We are copying this letter to colleagues on the European Council.
David Cameron, Prime Minister of the United Kingdom
Mark Rutte, Prime Minister of the Netherlands
Mario Monti, Prime Minister of Italy
Andrus Ansip, Prime Minister of Estonia
Valdis Dombrovskis, Prime Minister of Latvia
Jyrki Katainen, Prime Minister of Finland
Enda Kenny, Taoiseach, Republic of Ireland
Petr Nečas, Prime Minister of the Czech Republic
Iveta Radičová, Prime Minister of Slovakia
Mariano Rajoy, Prime Minister of Spain
Fredrik Reinfeldt, Prime Minister of Sweden
Donald Tusk, Prime Minister of Poland