Monday, October 31, 2016

EU Reform: Hard and Soft

In my previous piece on EU Reform I presented elements and the rationale of a "hard reform" scenario. The main term one hears these days is "union of sovereign nations". As I explained you cannot expect the Germans, the Dutch and the Finns to pay for your roads and bridges and claim to be a sovereign nation. Or send workers to work in another country using your own national employment terms. Let me take it further, as UK developments have illustrated: You cannot expect foreigners to freely buy your products and services but deny them the right to live and work in your country.

These are no simple issues and the whole world is at crossroads nowadays. Let's see for example who wins in the US (not just the White but in all November races). See what almost happened with CETA and Wallonia.

As I proposed in other pieces on EU Reform, "it's the Economy stupid", people want jobs and a good life and when they do not get them they start looking for scapegoats. As the UK ref showed, people who said No to Europe and foreigners tended to have low skills/education, be aged, be on welfare. And they are not just the 5% that is currently unemployed in the UK, it is 52% in total. Those people have rights too and they don't just exist in the UK but throughout Europe and the whole world (and the "West").

So let's keep these things in mind and talk about soft or softer EU Reform scenarios.But let's be aware that if Europe does not advance in a way that promotes growth and jobs/working conditions then - even if it does not try to reduce members' sovereignty - the EU will still be blamed for problems at national and local levels. CETA may have been signed but as explained in previous posts the German constitutional court's opinion as well as the forthcoming ECJ ruling on the EU-Singapore trade deal (which too goes beyond pure trade issues) are live issues.

1) Taxation:

As the French PM pointed out in his recent FT article, there is a need for convergence in tax matters and he does not mean indirect taxation - VAT. He mainly means tax rates. There is also demand for this in Germany and Germany is where 81 mio EU voters live, ie a large % of the EU27 population. Low tax rates for certain companies or sectors (be they straightforward or tax breaks) do not differ that much from state aid - subsidies, they too distort competition.

Of course member states such as Ireland are not willing to give up sovereignty in direct taxation, probably even if they get offsets for that.

Valls, the French PM, says that it is feasible for certain members to move ahead in these taxation matters. How much sense does that make, are we talking on a repeat of things in the Euro and Schengen, ie a "core"? EU members will low tax rates will still undercut others.

Plus, one must not forget that double tax avoidance and other matters of direct taxation, corporate and personal, in the EU are still governed by bilateral agreements based on an OECD model! That is ridiculous for an EU .

Thus the idea of national sovereignty in tax matters seems less and less credible in the EU. Yet a state is based on taxation, it is a basic potency of a state. Who will agree to give that up, even marginally? Wars were fought over that. Well, in VAT, members have long accepted that their VAT rates should converge, ECOFIN decides those matters not national parliaments.

2) Trade:

The EU has a sole competency in making trade deals. The reason CETA had to be approved by 34 national and regional parliaments of the member states is that it included non pure trade issues. One could think of issues to be included in EU competencies in a new EU Treaty.  But it will be complicated.

3) Employment - Labour Relations:

Mention EU minimum wage and watch for the reactions in any forum. Not only from fans of sovereignty but also from those who against a minimum wage ideologically. Is it realistic to want a common minimum wage in Spain, Germany and Hungary? Or even inside the Eurozone. Can eg the Greeks have the same minimum wage as Germans do? Of course, as in the US, there can be federal minimum wage and states can have higher ones if they so choose. If Wyoming has the same federal minimum wage as California, why not Spain and Germany? But Spain already has 19% unemployment, Germany 5%.

Let's forget EU professional wage agreements and sectoral ones for now. There are European Social Dialogues going in the EU, both horizontal and sectoral/professional, but wages are not in the agenda. Someday, if the EU still exists, they will be.

There are EU rules on safety at work, working time, firing caps per month for employers, the rights of employees when a company changes ownership and some other areas.

4) Social Security:

When you travel inside the EU you get a card that gives you access to hospitals in other member states as many pointed out when a UKIP MEP had to hospitalised in the French hospital recently. Yet that does not mean that you will not be charged eventually, it depends on your national social security system back home and your provider.

When you have worked in more than one member states and retire, member states' social security systems co-operate to calculate your pension and award to you.

Is there a need for an EU-wide social security system? Yes there is. It would perfect sense, especially for a Single Market for jobs. But it's too complicated a deal to be even considered in 2016.

5) Education:

An engineer studies for three years in the UK, five in Greece. But everyone likes EU funding for academia work, that is one key thing UK unis will miss.

6) Transport:

The EU has a common transport policy. Yet there is no one railway company that can take you from Germany to Spain and/or from the UK to Greece. There has been a lot of progress though in airline travel, you can fly to many points inside the EU with a third (EU) country's carrier.

7) Defense:

Greece spends top dollar for its defense although in crisis because if it is ever invaded it has no reason to believe that being an EU member will save it. East European countries have concerns too. France complains that its army serves de facto as an EU one. With the UK leaving there is a military vacuum.

The EU has grown to have geostrategic ambitions consistent with a powerful country in the world yet it is not a country, not yet. Far from it. An army would make sense for a United States of Europe, but how many eg Spanish or Lithuanian men are willing to die in defense of eg Bulgaria, in 2016 or 2026?

If an EU Treaty tries to create any EU army or anything resembling this they will hardcore debates all over Europe and it will top in the agenda when national ratification time comes.

Will look into more areas and these areas more analytically in forthcoming posts. Feel free to send constructive comments to (in English).

Tomorrow I will look at diverging unemployment levels throughout the EU and the Eurozone and discuss reasons for them plus look how it relates to EU Reform.

UK: A very tough strategic choice for the Liberal Democrats

The UK Liberals Democrats faced a humiliating election defeat in 2015. Nick Clegg had to resign. The electorate did not forget that a 2010 pre-election pledge for free tuition was turned into an agreement for tuition raise when in co-government in 2010-2015. Plus the co-habitation with the Tories obviously did not please their 2010 voters as 2015 proved.

In the wake from the Brexit referendum, and with a new leader, the LibDems re-gained momentum. They are the most pro EU (pro Remain) national party in the UK.

Yet, as I analysed in the previous post, their position for a second ref after the Article 50 negotiations are completed and a deal has been reached is simply not a realistic one, at least not from an EU27 point of view, even if some argue that Article 50 is not explicit about non reversal.

One can fully understand that a political party like the LibDems does not want to turn into a pro EU "UKIP", ie a party defined by a single issue. Yet, the issue is of crucial importance to the UK's future. For years, Brexit had a strong and dedicated advocate and it paid off for the UKIP. So much that it made the Tories do what they are doing now.

The 48% that voted Remain did not have a dedicated advocate. Some voted Conservative, some Labour, some for other parties. Most LibDem voters, although the party lost lots of its strength in 2015, voted for Remain. Post ref, the party has seen a dramatic surge in membership, but other parties have seen a surge too. And there was no gain in the opinion polls.

In spite of his second victory, Labour's Corbyn has not been able to lead the party in success in the polls.

As weeks and days pass after the referendum the whole country is astonished to see Theresa May turn into a hard Brexit proponent of the most populist kind. Plus many Leavers have come to realise that Leave was not such a grand idea after all.

In the coming weeks the public opinion is going to realise even more of the dangers of Brexit, hard or soft. For the LibDems to rally behind a second referendum after the negotiations, it is an unrealistic position. One should add that the ref was not binding, officially.

Thus for a political party to advocate a second referendum soon or merely a vote by the Parliament is not undemocratic. May is doing a good populist move by claiming that Corbyn is frustrating the will of the people but of course she is not taking into account that the vote was 52-48 not 72-28 and that in a democracy a minority view has a permanent right to be represented, ie for a party to continue to call for Remain is not undemocratic, it's the opposite.

The LibDems have a strategic choice to make. Become a UKEuropeParty or play it safe.

The stakes for the UK as well as Marketing may point towards the former. After all it wants people to forgive it for the tuition pledge and rally behind it. In a political system such as the UK's at present, having 20% of the vote as the LibDems did in the past does not give you 20% of the seats. The Brexit issue is a grand opportunity for the party to get a major boost. Of course there are risks. But as Gordon Brown pointed out years ago, Britons have to learn how to take risks.

You cannot please all the people all the time and the LibDems managed to upset many of their voters in 2010-2015. Taking a much firmer stand on "Europe" (Brexit) is a golden opportunity to not only do what's best for the UK and its people but also draw pro Europe voters from the Tories and Labour massively. Of course they get heat from their political opponents as well as the Sun, the Daily Mail and the Express if they do so. But proposing a new ref after Brexit negotiations may sound appealing and may be convenient but it is not neither realistic nor in the UK's best interest. Frankly it's a cop out, a "political" move.

Once Article 50 is triggered in March, Brexit is the deal. What one can fight for after that will be a soft Brexit deal, there should be no illusions cultivated about that.

Sunday, October 30, 2016

Brexit does mean Brexit, after Article 50 is triggered

One has to sympathise with the plight of UK Remainers. They fought a difficult battle (albeit a tad late) for Remain and lost by a 52-48 margin after much uber populist propaganda by the other side (that had started it many years before). Plus they are now seeing May push for a hard Brexit option claiming that is what the people decided in June (not so of course).

Having said that, this is what I pointed out to some LibDems today after asking to clarify what is exactly the position of the chosen candidate in the Richmond by-election after various press reports:

Press reports have suggested that there was thinking to make the Richmond by-election a mini Brexit ref since the district voted 72% Remain last June. And that in line with that there were calls for Labour not to field a candidate. I hate to interfere with party politics but the issue is now of European significance. The concept that after Article 50 is triggered there can be a change re exit may be based on an wide interpretation of Art. 50 is very iffy. A hard vs soft Brexit choice set is of course possible then. To put it bluntly, the UK cannot trigger Article 50, negotiate divorce and then change its mind if the terms are not good. Not to mention that the negotiation as Barnier has pointed out will be on red tape issues not trade etc. That is his mandate. As an analyst I am of the opinion that Parliament should remove (via a series of two non confidence votes) May before March if Brexit is to be avoided, since after that the choice is what type of Brexit, hard or soft. That is an internal matter for the UK though, none of the business of those of us who are outside the UK or not British.

I should add that I am fully aware that this quite a tall order for Remainers, but one cannot expect the EU27 to wait two years for the UK to change its mind. Life simply does not work this way and there are potential precedents in play here, putting at stake the cohesion of the EU.

Saturday, October 29, 2016

EU Reform: Which Way Forward (Part II)?

In EU Reform: Which Way Forward I looked at some of the complications of the current situation in the EU.

Now let's look at some of the EU Reform ideas that have floated around in the last few years. I have not seen many concrete ones and a Google search did not help either.

It is true that recent years the upgrades of the EU have focused in banking and financial matters, issues which leave average citizen unaffected (directly). At the same, the ECB is buying bonds of banks in order to help Eurozone growth, causing reaction from eg Germany.

It must also be mentioned that many members are driven by an austerity (ie fiscal discipline) mantra. Growth has suffered and exports ie trade have been relied upon to do the job.

As I suggested in other posts in recent weeks, "It's the Economy Stupid", the Clinton era philosophy applies in 2016 Europe as well.

Let's see what the UK, David Cameron proposed in 2014.
A seven-point plan:
  1. Powers flowing away from Brussels, not always to it. Too generic and theoretical.
  2. National parliaments able to work together to block unwanted European legislation. Was CETA a case for it (Wallonia)?
  3. Businesses liberated from red tape and benefiting from the strength of the EU's own market to open up greater free trade with North America and Asia. The Tories seem to forget that red tape comes from national level too.
  4. UK police forces and justice systems able to protect British citizens, unencumbered by unnecessary interference from the European institutions, including the European Court of Human Rights. A la carte union.
  5. Free movement to take up work, not free benefits. That exists, intra EU migrants have to prove they have the means to support themselves and buy insurance. The UK should have been better read.
  6. Support for the continued enlargement of the EU to new members but with new mechanisms in place to prevent vast migrations across the continent. Well, members such as Germany usually phase workers from members in after seven years, the current Treaty allows them to do so.
  7. Ensuring Britain is no longer subject to the concept of "ever closer union", enshrined in the treaty signed by every EU country.

After the ref, the Polish Prime Minister Beata Szydlo said "We need to build a strong community of sovereign nations. We cannot pretend that there are no crises in the EU, it led to Brexit, we cannot not reach conclusions out of this" (Wirtualna Polska).

Also after the ref, a nine page French-German memo, ‘A strong Europe in the world of uncertainties’, was released by Poland’s TVN broadcaster. The document is said to have been authored by French Foreign Minister Jean-Marc Ayrault and German FM Frank-Walter Steinmeier.

“Germany and France have a responsibility to strengthen solidarity and cohesion within the European Union” despite “different degrees of ambition towards further integration among the member states.
Spoke of:
Bolstering common defense, migration and fiscal ties among the members
Closer cooperation on internal and external security, the migrant crisis, as well as a change in the EU’s fiscal and economic policy.

Other mentions are:

"The EU will in future be more active in crisis management,” the memo reportedly said, proposing to introduce the “European Security Compact” – a number of military means able to deal with emerging crises, including a deployable high-readiness forces, developing common military spending plans as well as investing in conflict prevention. The “European Security Compact” places special emphasis on internal security, mentioning the creation of a “European platform for intelligence cooperation,” improvements of data exchange and the establishment of an EU civil protection corps.

It called migrant and refugee influx to Europe "the central challenge for the future of our continent," saying the bloc must be able to secure its external borders while remaining committed to its humanitarian values. “Europe should stay open to what migration and mobility can contribute to our society”. "A situation in which the burden of immigration is unevenly shouldered by a few member states is unsustainable.”

On financial policy, the paper proposed a future joint budget to "promote the convergence of our economies, achieve sustainable growth that creates jobs, and make progress towards the completion of the European monetary union.” This part of the document also added that “France and Germany have a shared responsibility to build a robust monetary union that is globally competitive."

The fundamentals:

As I said to BBC World before the 2005 French rejection of the Constitutional Treaty, the Single Market is the core of the EU integration.

But as Norway and the other non EU countries that have access to the Single Market have found out, a Single Market is more than a Free Trade Area. One of the key issues, that German and French  officials were quick to point to Boris Johnson and other after the June ref is the free movement of people.

But, I argue, it is much more than that. It is about labour conditions. It is about many other areas of law. And a common trade policy. Economists have argued that a country that opens up its market to trade gains even if others don't reciprocate. But economic reality is not that simple.

The EU needs to make much more economic sense to the average company, the average worker and the average self employed citizen.

Cameron is said to have wanted to propose a temporary cap on non EU workers in the EU but to have withdrawn it because Germany was allegedly against it.

The EU, the European Commission, has the REFIT programme:

"Each year, the Commission launches a set of simplification initiatives within its REFIT programme – drawing on input from individuals, businesses, NGOs, national authorities and other stakeholders. Simplification can take a number of forms.
Changes are made to existing law:
  • codification: all amendments made to a piece of legislation over the years are incorporated into a single new act, reducing volume and complexity
  • recasting: similar to codification, but in this case the legislation itself is amended at the same time as previous amendments are incorporated to form 1 consolidated text
  • repeal: unnecessary and irrelevant laws are removed
  • review/sunset clauses: laws are reviewed or automatically removed after a given period
  • revision: laws are modified to keep them up-to-date
  • directives are replaced with regulations, so that all EU citizens are subject to the same rules and national governments can't add extra requirements
  • laws still in preparation are withdrawn if they become obsolete due to scientific or technical advances or if they are no longer in line with new policy objectives
  • legally binding laws are replaced with lighter alternatives such as voluntary agreements (self-regulation, co-regulation)"
REFIT is very important and should be expanded. But ove-rlegislation and red tape also come from national and sub-national laws in the EU (much like the US). So when public opinion says its wants more sovereignty, it means the right to produce red tape at national level? There are major economic benefits that can come from removal of both EU and national red tape and this must not be left to national and sub-levels, is Wallonia a red tape free region or is globalisation their only concern, for example?

Nationalists have found an easy target in the EU. As the UK example shows, it is very easy to blame the EU (and migrants too) for most if not all evils and that means not only Eurosceptic citizens and parties but media too. Sorry to say, but the BBC played a part over the years in Brexit, not only the Sun, the Mail and the Express. Pro EUer Britons (aka Remainers during the campaign) relied over the years on the European Commission offices in the UK as well as the other institutions to speak out for Europe. The same happens in most if not all other member states.

So is there a way forward that will not cause rejection of the new Treaty by national parliaments or electorates?

In his recent FT article, French PM M. Valls argues inter alia for convergence of tax rates and says it could go forward with just the members that agree. Some media have speculated that a two tier may be in the making, with Euro, Schengen and other common features such an a common tax system (or elements thereof) leaving the non Euro, the Visigrad 4, Greece and may others, eg Ireland in case it does not want to give up its low taxation of companies, in tier 2.

Indeed, that an option. But it will increase the intra-institutional problems of managing two EUs with the same decision bodies.

Hard Reform (as in Hard Brexit):

A much more radical option, albeit remote, exists. To make a new Treaty "take it or leave it", ie states that reject it to have to move into the EEA out of the EU. Sounds too radical, but with 27 members instead of 12 or 15, the EU could afford to make such moves. After all, its main competitor, the US, has a population of 320 mio where the EU27 is at 443 mio. Thus the EU could afford to lose another 123 mio in addition to the UK 65 mio and still be competitive against the US and a strong force in global trade especially if the states that leave (and go to the EEA ie still in the Single Market) have a low GDP/capita. The UK's exit has made this "nuclear" option a bit more feasible, albeit still remote. But that is one solution to the Gordian Knot that the EU has become. And Germany and France may be tempted to pursue such an option if negotiations about the EU's future become too unreasonable, keep that thought in mind.

What is more clear is that the EU has not used it weight as much as it should have. It allowed propaganda to claim it is undemocratic when the exact opposite may be the case. Thus we have come to the absurdity of talking about a union of "sovereign" states. That is hogwash. You have sovereignty if you are in the WTO trade system but when you have a Single Market and want to create a Single Economy that is lip service. What you do need to give the citizens of the members states is say in the policy making but at the end of day, as was the case in the UK ref, 50.1% is the rule (unless there are constitutional rights at stake). There are 81 mio Germans in the EU and every one of them has the same political rights as an individual Luxembourgeois or an Irish or Greek or Hungarian or Maltese.  If 40% of Hungarians (but 98% of those who bothered to vote) do not want non EU people in their midst, then they do not have to be in the EU. Or, to use an even more recent example, if the Polish government wants to do away with the constitution, then the rest of the EU does not have to take it (see article 7 of the Treaty). These may sound harsh, but as Boris Johnson has been told one cannot have the cake and eat it too.

The logic is not ideological but practical. The EU needs a single economy in order to have growth and jobs, a real Single Market and that means a common trade policy, less national and EU red tape, common labour standards and EU labour law, a common minimum wage, a common tax system and many other common features, including a common refugee and immigration policy. Social dumping can take place outside the EU. You cannot employ people in Germany and pay them Greek or Romanian wages, you should be able to pay them lower if they accept it, but at or above minimum wage and collective bargaining agreements, EU ones. Then maybe the Germans, the Dutch and the Finns will accept to have a real federal budget (US style) and fund real and effective regional policy in less developed regions. But forget sovereignty, you cannot have sovereignty and expect the Dutch and the Germans to pay for your roads, your airports, your bridges etc. in a union of sovereign countries.  Greece has found that out the very hard way since 2009. You think the experiment was a random one?

If 50.1% of the EU population wants fiscal discipline, aka austerity, that's the policy. V. Schauble has to defend the economic interest of his national voters, not the Greeks' or the Portuguese. If he was Min Fin of Europe, then his scope would be the EU taxpayer and voter, even better if there is an EU tax system as in the US.

Sovereignty is one thing, national identity and national interest are another. A real US of Europe would remove the former (sovereignty) but not the latter.

This Hard EU Reform scenario will most likely not happen, but use it as a reference one in your thoughts about EU Reform.

More "Soft EU Reform" ideas in a post tomorrow.

Friday, October 28, 2016

United Republic of Ireland and Scotland

Today, in an online discussion re how well EU nationals feel in Scotland, I was informed by British friends that Scotland is technically a country.

If it is country, then it should get out of England's grip and turn into the most attractive member of the EU. The EU needs an enthusiastic European member that speaks EN. If Nicola plays this right, she can have commitments of relocating to Scotland by companies (industry and services) before a new indy ref takes place. 

I hope they are doing that as we speak, the opportunity is too great to be missed.
In fact, here's an idea. Scotland could become part of the Republic of Ireland and thus auto join the EU, no need for application. United Republic of Ireland and Scotland (URIS), it will be an EU and international hit.

EU Reform: Which way forward, after Wallonia?

Wallonia has given in and the EU-Canada CETA deal will be signed. But the decision of the German constitutional court that allowed the deal but said that member states (Germany) can decide to call it into question exists. So is the upcoming decision of the ECJ (European Court of Justice) as to which portions of the EU-Singapore deal are "trade", and thus can be voted on only by the EU, and which not, and thus require approval by member states' parliaments.

Wallonia claimed that its veto was driven by concern about globalisation. It was driven by its Socialist majority, which has been in power for quite a long time. The region, South Belgium in effect, has been the poor relative in Belgium's economy since the demise of mining and agriculture in the region.  While Flanders has prospered based on services and the role of  the Antwerp port in EU trade as well as light tech, Wallonia has not. Ryanair got aid to fly to Charleroi. Wallonia exports arms.

Wallonia has become a test case not only for the EU's future trade but also the future of the EU.

Some MEPs in Brussels/Strasbourg have claimed that there is no reason for member states to have a word in trade matters, even mixed. This flies in the face was a lot of people around the EU who want less Europe. They want powers returned to the member states. Eg the Visigrad 4 (Poland. Hungary, Czech Rep and Slovakia). Front National in France, the five stars (Grillo) in Italy, AfD and others in Germany, etc. Many just want no More Europe, no new Treaties.

Some EU leaders have come in favour of an EU army.

Is there way for some consensus or a majority towards one direction? The same, less or more Europe? Who wants a repeat of the Lisbon Constitutional Treaty debacle of 2005 (France and the Netherlands voted it down).  The EU has had its share of badly formulated Treaties, a result of very late night horsetrading. Nice was one of them.

The EU has come a long way. The Single Market (started 1/1/1993) was a major step forward from a mere Common Market. So was Schengen that allowed for removal of border controls. Maastricht was too (1992). It defined Economic and Monetary Union (EMU) and led to Euro a decade later (now adopted by 19 out of the 28).

But lets start from the fundamentals. The EU has and will continue to have a major setback. Lack of the common language (sur-le-terrain). There are 23 officials languages. That affects the cost of doing business as well as mobility of workers.

The 28 states of the EU (27 soon) have very distinct histories. Some used to be colonial powers. Italy and Greece used to "rule" the world, a very long time ago. There are strong national identities as well as regional ones (see eg Belgium or Spain). Can there a European identity?

Well, my theory is that in this day and age, one criterion of nationality is: Do feel that decisions (political) take account of your POV and needs?

Wallonia did not think CETA took incorporated its concerns over globalisation. Greeks complain that feta cheese was not included in the list of products with protected origin. Scots complain that they will have to leave the EU while they voted to remain. In many countries it is felt that decisions made in the capital do not take account of their needs. In the US Trump got a boost arguing his was anti-DC establishment. Yet in the US, everyone considers themselves American.

It would be easier to unite Europe if there was a common enemy. In the past, competition with the US did some of that.

When interest rate decisions are made in the ECB in Frankfurt, do they take into account the needs of all the Eurozone or mainly its larger economies? In Germany, the lander are represented in the Senate (Upper House). In the EU the regions have their own body, the Committee of the Regions, but is that the key to their representation?

Some have said that Europe would be easier to manage if states were roughly of the same size. One cannot of course expect Germany France and Spain to be separated into regions to move the EU forward.

So is there a way forward? One that will engage most of 450+ mio citizens (EU28 minus the UK)?

Well, people from all over the EU are represented in the European Parliament. Some countries elect their MEPs on a national ballot some regionally. That means that some areas do not have their own rep in the European Parliament. But even if the did, could one person in 800 make a difference?

Some ideas will be posted in Part II tomorrow.

Roundup: Which way forward?

Wallonia has given in and the EU-Canada CETA deal will be signed. But the decision of the German constitutional court that allowed the deal but said that member states (Germany) can decide to call it into question exists. So is the upcoming decision of the ECJ (European Court of Justice) as to which portions of the EU-Singapore deal are "trade", and thus can be voted on only by the EU, and which not, and thus require approved by member states' parliaments. A separate post re trade will be posted.

In the US, Clinton seems headed for a win. The issue is what happens with the Senate and the Congress. Hillary was expected, like Obama, to have to deal with GOP majorities in the both houses, but the Donald effect could change that.

In Greece, the Tsipras left of center government was dealt a blow when the county's highest court ruled that the license granting law for national TV stations was unconstitutional.

The Russian fleet was not fueled by Spain, in the end. The Spanish government's action would have been a breach of EU strategy that Spain had agreed to. The cancellation came from the Russian side. Spain has a transitional government headed by Rajoy, a conservative, following two election deadlocks. It has 19.5% unemployment, second only to Greece (23%) in the EU.

Nissan has agreed to produce two lines of cars in the Sunderland plant. PM May hailed that decision as a sign that post Brexit Britain is Open for Business. News reports claim the company has received Brexit Refief assurances in case its made in the UK cars face tariffs in the EU27.

Zac Goldsmith's decision to quit his Richmond seat as a Tory in protest of a Heathrow expansion decision by his own government and re-run as an independent has prompted a Brexit battle for the new seat. 72% of local voters voted for Remain in June and the Liberal Democrats have tried to make the by-election a Brexit poll. And while they were calls inside Labour not to field a candidate in order to support a LibDem pro Remain candidate, the main candidate for the LibDem nomination (takes place this weekend) said that the Leave decision of June must be respected! Messy indeed.

The Guardian has revealed the content of a Theresa May speech in May at Goldman Sachs in which she mentions grave concerns re the economic effects of a Brexit. The PM's office replied that this was then, now May will implement the will of the people. She has also accused the opposition leader of frustrating this will. Note that according to Brexit ref exit polls, 33% of those who voted for Leave did so to curb migration. That means that around 17-18% of voters actually want freedom of movement between the UK and the EU curtailed. So, why is May making end of free movement the cornerstone of her Brexit policy. No one has explained that.

Feel free to send comments to May be added.

Monday, October 24, 2016

Is this May's plan? A Brexit Theory.

According to press reports UK gov people go around Brussels saying that all cards are on the table re a Brexit deal.

Given May's conference speech, no one believes them of course.

There is only only one logical explanation (other than they have lost their marbles):

May plans to start negotiating hard Brexit to please those she has to, in her party and the electorate, but at some point, when public opinion realises the costs (companies have already relocated, etc), she gives up the goal, quits and possibly calls for an election (or a new Tory leader is chosen). Then a soft Brexit is negotiated.

Unlikely indeed, but it's the only rational explanation.

Brexit: First divorce, then relationship.

Michel Barnier made it clear for those who had not grasped it.

His mandate is/will be to negotiate the exit logistics of the UK from the EU, not a trade/econ EU-UK deal. That is a separate matter. And could take years.

Upon exit, no later than two years after Article 50 is triggered, thus in the spring of 2019, the EU-UK trade system that will apply will be the WTO one. Chances of a trade deal by then are, frankly, nil.

Which begs the question: The UK civil service, parties' think tanks and other think tanks had not thought all this forward? Paints a bad picture.

Are you a European?

The following text was posted in the New Europeans (NGO) group on Facebook:

Ladies and gentlemen, chers camarades, we have been had (who "we" is I will explain). And we have not seen the worst of it yet.. It can get much worse. That is why we must rally behind organisations like the New Europeans and others like it (do they exist?) before it's too late for other things too.

The recent post about how many non EU nationals (and their descendants) feel about us was an eye opener. I do not live in the UK and was not aware of that.

For years and years we knew that many in the UK did not want Westminster overshaddowed by Brussels. Let's say, fair enough (it's not, but let's say so), We also knew that some did not like foreigners. But thought they were UKIPes ie 10-15% of the population, max. We also felt allegiance to non Europeans. Turns out that many were routing against us, thinking we have an unfair advantage due to the EU.

Who are we?

We are people who consider ourselves European. What is that?

We are people of all nationalities (including of course British and not excluding people born outside the EU) who not only want to sell products and services and buy products from all over Europe (many others want that but just that) but see Europe as our land and although we may live all our lives in one member state we have no problem living in Latvia, Portugal, Bulgaria, Cyprus, Norway or Austria or working and living with someone from these parts of Europe. We do not look down upon Bulgarian or Romanian homeless or "maids" as some others do! And we wish everyone from Asia, Africa, etc who wants to be in Europe could.

Who is against us, as it turns out?
A) Those who define themselves via their race, their nationality, their region, their village.
B) Those who want to export to others as long as they don't have to live with them.
C) Those who feel allegiance to their former colonies (and I am not talking just UK here, I am referring to the whole Europe).
D) Those who want the votes of A to C.
E) Migrants who see our EU free movement rights as unfair (they have representation in parliaments, we don't).

We have lost a major battle in the UK in June (although the ref was not about migration per se).

We had lost another battle when Commonwealth citizens were given the right to vote in the ref and we were excluded.

We lost another battle when the motion for the right to remain was rejected.

What is more, we had been losing battles every day for years and years when much of the press was doing daily propaganda against us.

We think/hope the EU27 is not going to give the UK Single Market access unless freedom of movement is retained. Are we sure? Have we actually read CETA to see if it does not create a precedent, for example?

We lose battles across Europe every time someone like LenPen or PVV or AfD gains one more voter. Let's not underestimate their effect as we did with the UKIP (on the Tories). You think eg it is inconceivable the CDU makes a right wing turn? Have you read Hollande's real opinions re foreigners in the recent book? Or Jupe's and Sarkozy's new views? 

We do not want a Europe of sovereign nations as the French PM wants (see his recent FT article), we want Europe. That is why we are Europeans. We want an open Europe.

The battles I am referring to are Advocacy-Public Affairs battles and Europe is our field not just the UK. And of course we must go grassroots. And stand up and be counted. Not use boring data to make our case (we learned by the ref campaigns how effective that is), speak to the hearts. We need to convey our vision. All across the EU and beyond.

Otherwise let's get used to a re-emerging medieval world.

PS. Look how low in foreign born population the UK was in 2013 compared to other OECD members.

Sunday, October 23, 2016

French PM complains the French army is de facto the EU's army, does not want US of Europe

The EU's 27 leaders have already started discussing about the future of the European Union and the UK PM complained she was not invited.

France's Socialist PM Manuel Valls presented some of the main points of what the French government wants in an article in the FT.

He complained that the French army is acting as a de facto EU army and wants the EU to do more, as EU , for control of the EU borders and security inside the EU (remember te terrorist incidents in France).

He wants a US type (ESTA)  but at the same does not want the EU to become federal like the US.

He is also against the intra EU posting of (EU) workers because they bypass member states' national labour standards.

He also wants corporate tax rates among the member states to converge and says that if not all member states agree that should established with those that agree. That of course will require Treaty changes because income, personal and company, is not a competence of the EU. So in effect he is proposing something like a Taxation Protocol (such as the Social Protocol the UK vetoed at Maastricht in 1991 and thus became valid for all except the UK, later Blair's UK joined in). What is not clear at all is what incentive members that agree will have to agree to such a change. Eg Ireland. Give up its low corporate tax rates that attract US and other companies in return for what? And that shows not only the inadequacy of piecemeal approaches to the EU as well as the tight spot the EU is in.

Please see other recent posts on what the EU needs.

Valls talks of EU financing of digital and tech innovation as a means to give the EU more growth. Too little and probably mis-targetted. In my opinion the EU economy must start to work better as system  and that requires systemic improvements not piecemeal approaches.

Valls also thinks the CETA agreement between the EU and Canada is good for the EU (currently blocked by a veto by Belgium's Wallonia) and wants a US-EU deal that benefits the EU, thus implying the one negotiated is not. One has to note that neither Trump nor Clinton are very pro free trade.

Of course each member state is putting forward its own key requests out of a potential change in the EU Treaty. Previous Treaty changes not only suffered from rejection by member states but also from a piecemeal approach.

The Visigrad 4 (Poland, Hungary, Czech Rep. and Slovakia) want less Europe (less EU).  The process to Treaty revision will be long and hard because after all Euroscepticism is higher than recent times.

One has to keep in mind that M. Valls is a Socialist and after next year's Presidential election the President will most likely not be a Socialist (Hollande) and thus M. Valls will not longer be a PM.

Friday, October 21, 2016

Wave Goodbye to Global Street

In October 2012 I was sitting on the ledge of a store in Oxford Street, London, watching the world go by. Literally. In 30' or less, you could experience a parade of people from all continents, more impressive than the Olympic Games parade (and w/o flags). I called it "Global Street".

With an immigration policy more open than the US and probably any other country in the world (feel free to e-mail me to correct me if you have data that another country was more open in its immigration policy, I am not aware of one), due to its EU membership and a liberal non EU immigration policy, the UK was for years the "new America" (what America used to be before Ellis Island closed down).

Now it is not anymore (you have been reading in the news why and also consult other posts if you haven't).

So what country is now going to be the heart of real globalization (because you cannot have globalization without free movement of the human capital too)? Any ideas? There is a market opportunity for a country to become that. It will draw investment and business too, like the UK did (and will lose now). Of course, English has to be part of the package, because English is the lingua franca and that makes it even more difficult for a country to implement (see eg Germany).

What Theresa May has done and is doing to the UK is sad but to be fair it is merely taking the UK out of the leadership position it had in true globalization. Immigration policies like the one Tories are cooking up (they started before the Brexit ref re non EU migration, a 35,000 threshold for employment for non EU economic migrants) are the norm in the world, sadly. And many countries have worse ones. We are nowhere close to true globalization. And even further due to the new UK.

Thursday, October 20, 2016

He wants his Britain back

A British friend wrote:

"After parents being told by schools to fill in forms to identify their kids as 'foreign born', the home office suggesting firms should keep a tally of non Brit employees, HMRC cutting off online tax returns unless you have a UK passport and landlords being threatened with imprisonment for renting to unregistered 'foreigners' I simply don't recognise my country any more!
It's more like China or North Korea than what used to be Great Britain.
I want MY country back!"

To be fair, these things may not be unprecedented, but they mark a very different Britain than the Open Britain my friend was used HIS Britain to be.

He is a liberal democrat, of course.

Brexit: The Bottom Line

The UK ref result showed that there is a large % of Britons who lack the education and skills to be employed or well employed and have been feeling left out of the open economy that Britain had become.

Funny thing for a country that claims to have good unis. The main problem is secondary education of course.

And the result is that May, 18 points ahead in the polls, is creating for them a Britain the goods and services of which few will buy.

Lobbying, Public Affairs or Advocacy?

In the US, they call it lobbying. When the White House burnt was destroyed by a fire, the US [resident was staying in a DC hotel and representatives of interests hang out in the lobby and the corridors to talk to him and his aides, hence the term lobbying.

In Europe, it is referred to as Public Affairs. That applies mostly to companies and associations.

Causes and NGOs tend to use the term Advocacy.

Is there really a difference?

Well, let's start from the basics. Legislation, laws, affect us all. They determine what we cannot and can do. As citizens and as economic operators. In other words, they set the framework for our lives. Laws are drafted by civil servants (lets refer to them as policy makers) and they are approved by legislators.

In principle, all have the right to have a say on draft law as well as policy papers that precede them (called White and Green papers in the UK and the EU). If  the opinion comes with a rationale attached to it, so much for the better.

In Brussels, thousands of people every day go about the business of public affairs and advocacy. What do they actually do?

They monitor legislative proposals that are either being drafted or in the EU's complex legislative pipeline. They inform their companies and other organisations around the EU (and outside the EU) on what is happening. That allows for the impact to be examined. Then they form opinions, official or not, and try to pass them on to the policy makers and the legislators.

In my book, lobbyists use connections - friends in the right places to affect policy. Public Affairs relies more on marketing. Advocacy uses anything they it can think of, including demonstrations and media stunts. That is because advocates tend to use public opinion much more than others do.

When I was working at a well known European business organisation in Brussels, I used to think how much time we spent deliberating opinion papers on draft laws and how little to market them. I used to envy for example Greenpeace for using many PR tools that business normally does not.

I believe that policy makers and legislators have not only a right but also an obligation to hear the opinions of citizens. All of them. And that is why I have written that a lobbyists' register is unfair, because full time "lobbyists" tend to register and thus the casual opinion holder is kept out of face to face meets with the policy makers and legislators. Instead, all meets and topics of any meeting of policy makers and legislators should be recorded in a "diary" and the compiled database should be publicly available. That is if transparency is to be really pursued.

It would also help if all public affairs and advocacy sides published their opinions. Many do. Plus we of course have consultations by eg the European Commission where citizens and organisations submit their written opinions/views.

That of course makes for a very complicated legislative process. And the only people who keep their eyes on the ball are policy makers, legislators and public affairs and advocacy professionals. Because the nitty gritty is too complex for even most journalists to keep up with. That is one of the reasons the average voter feels left out.

But what makes advocacy so different is that it has the culture of creating messages that are appealing to the media and the public opinion out of "boring" policy and legislative issues. And that is something many public affairs professionals would like to do too, if they were culturally permitted to.

The timing for that is good, because what the EU and most countries want is to produce more growth and employment and who knows how this is done better than the companies, small, medium and large. They create the GNP and the jobs, at least in the current political-economic system in Europe.

The EU without the UK: Careers

The ref result (Brexit) has certainly caused a need for companies to readjust strategy.  Those that using the UK to produce inside the EU Single Market have good reason to re-adjust their plans. So do companies that using the UK as their European QHs.

Workers in the EU have good reason to do the same.

There are good reason why EU nationals have been job hunting in the UK.

a) Language
b) Location of EU production facilities and European HQs.
c) Other reasons

all leading to a very exciting and competitive market for jobs, especially executive ones.

A recent job advert for Communications Manager in a UK heavy regulated industry quoted a salary of 80,000-100,000 GBP. Where in the EU can you get that kind of salary. Not that many job markets.

The way Brexit is progressing, it seems a good scenario that new entrants in the UK job market from the EU will have to fulfill the same type of conditions US and Canadian (for example) workers do: Find a job of 35,000 of more.

For experienced professionals, especially in management, that is not a great hurdle to overcome. But it may be for younger ones.

Plus, a key strategic question is whether these jobs are going to remain in the UK or move to other EU locations or simply cease to exist.

The answer to that question is not easy (readers with some expertise on this issue, e CEOs or HR pros, are welcome to send me their view,

Most of the jobs though are for the UK market. A Marketer hired in the UK manages the product for the UK market, an HR pro deals with in the UK operation, CEOs are "country managers". Inter-national posts in Marketing and HR exist but they are relatively small in numbers. Some corporations have European level senior managers, some regional ones some both. But the teams are comparatively small. Same in PR and Finance. A regional CEO traditionally has a Finance and a Marketing "adviser".

Are these teams based in the UK right now? Again, informed readers are invited to send me their views.

Consultancies may have to move, to be close to where the decisions are made at European level. Amsterdam seems a good choice, many multinationals have European HQs in the NL already.  Some in Belgium.

If one takes a look at executive jobs advertised on LinkedIn and job sites (Monster, Stepstone,  etc) one sees that most exec ads outside the UK require the national language. A good number does not.

My guesstimate is that Marketing and Finance (corporate) are more mobile. In PR and HR the requirement to know the national market is stronger. And Sales of course.

To executives/managers who speak English and German and French and Dutch and are willing to relocate, Brexit will probably not cause much trouble.

But where the executive jobs will go, that is to be seen.

I have not addressed the issue for City and Finance people. Will analysts, traders and fund management  move to Germany? Luxembourg?

For non executive jobs, I will do a separate analysis.

But one thing is for certain, 5-10 years from the now London and the UK are not going to be the employment paradise it has been for many years until the Brexit ref.

PS. The above are going to also affect UK business schools and other uni programmes.

Monday, October 17, 2016

What happened to beautiful Greece?

A recent article in a German newspaper suggested Greece should be given a last debt haircut and be left to float outside the Euro.

According to Greek press reports, a prominent IMF executive recently claimed that Greece is "beyond repair".

A member of the EU since 1981 and the Eurozone since 2003, Greece decided not to leave the Euro after the deficit and debt crisis started in 2009 and do an unprecedented "internal devaluation" instead. In effect it was supposed to emulate currency devaluation inside a currency zone, ie bring down salaries, prices of goods, services and assets such as real estate, thus rendering the economy more competitive. Note that Greece had never had a trade surplus at least since it joined GATT (now WTO) in the late 1940s.

So how was Greece surviving all those years before the crisis? Well, there was a large volume of money sent from abroad (diaspora), tourism and shipping. When Greece joined the EEC and its Common Market, imports from the other 9 at that time grew due to the removal of tariffs and quotas. Even more imports came as the EEC expanded and the Single Market made intra-EU trade easier.

Why did Greece's exports to the rest of the EEC/EU not rise significantly due to EEC membership? Because the bulk of its industry was (and still is to this day, largely) inward looking and un-competitive . One of the reasons is Greece's geo location (without land borders with the rest of the EU) and sheer transport distance from the EU's lucrative German market. But we will come back to the factors of Greece's lack of competitiveness.

The internal devaluation programme, coupled with a re-adjustment programme, was decided the Greek government and the IMF, the European Central Bank and the European Commission. It included reform of the public sector, market liberalisation (opening up of activities and professions) and other things. In return it replaced the debt from the bonds by debt to the IMF and the Eurozone states. It also gave Greece money to survive because it was running a budget deficit was more than 10% at that time (3% is the Eurozone limit).

The programme overshot and caused the GNP to drop 26%! And unemployment rose to 18% in 2011 and 27% in 2013! These figures are worse than the US Great Depression.

In 2016, unemployment is 23% (No. 2 Spain's is 19.5%). Salaries, pensions and real estate prices have taken a dive. Product prices have stabilised but did not drop of course. Greece managed to have a trade surplus year in spite of the EU-Russia embargo in 2014, partly due to the decline of imports because of the drop in consumer demand.

Many attribute Greece's problems to political corruption. That is too simplistic an explanation. Greece's competitiveness status, as is the case with all economies, is a net result of many and complex factors. Over-legislated, fully bureaucratic, too dependent on the public sector for employment and sales (via procurement), too SME in composition, the Greek economy is maybe Division 4 in the European league. Firms are too small and too busy operating in red tape Greece to have enough energy left for exporting, intra and extra EU. It has been way easier to be an importer than an exporter in modern Greece.

In 2015 the PM gave people a referendum on Juncker's proposals re the Greek economy and people rejected it 62-38 but most Greeks are pro EU and pro Euro. Many think that if Greece was to leave the Euro, people would not be able to buy basic food and medicine since, they claim, "Greece imports everything" thus "everything" will become too expensive or simply not available when the new currency starts devaluing after a Euro exit. They are looking at what is happening in the UK and saying "Imagine what would happen here".

So whatever happened to all those EU funds that Greece has received from the EU as "regional policy' since the 1990s? A lot went to training but most went to roads and other infrastructure. But much of this modern infrastructure has too high user charges for the average citizen and company in crisis Greece! Many in Greece have retired early but unemployment benefits last only 12 months and are approx. 400 Euros, after that you get zilch. So how do most of the 23% unemployed survive? Good question. You see people dumpster diving in crisis Athens, you did not before 2009.

Is Greece "beyond repair"? Should it be given a new debt haircut and be left to drift away from the Eurozone? Will there be a huge rise in exports to kickstart the heart of the economy and the job market if Greece abandons the Euro? Is Greece in coma or recovering 2009-present?

You can debate the issue in the Eurodebates Facebook group:

420,000 Greeks have emigrated since the crisis started.

One third of the remaining Greeks are now living below the poverty line due to joblessness, depressed wages and other factors. No one knows exactly how many are homeless. Pray for them, in any case.

More and Leaner Europe and the EU's Sacrificial Lamb

In the past three posts I have argued that:

a) If the EU was growing faster and had less unemployment then there would be fewer Eurosceptics.
b) The road to more Europe is paved with argumentation on growth and jobs not values and EU defense considerationĪƒ ("The economy stupid!").
c) More Europe is needed in income tax matters and other matters that will make the EU economy more "single".

Something has to give though. In any every great campaign, such as the Greeks' to Troy, there has to be a sacrificial lamb.

On the quest for more Europe we may have to do that.

A good candidate is the European Commission!

Doing away with the European Commission would please many Eurosceptics, since this institution is the epitomy of "Brussels" and the "unelected EU bureaucrats". Of course the European Commission is a small public service, the city of Birmingham alone has more employees! Plus the Commissioners are chosen by elected governments and approved as a team by the MEPs. But that matters little. Sacrifices have to be made. The goal is more Europe, we need that.

We need more Europe but that does not mean a more bureaucratic or an over-legislated Europe. We have too many laws, be they EU or national. We need fewer laws in a Europe that grows more.

So assume that we do away with the Commission. Can we actually do that? Can we live without a DG for Employment, a DG for Trade, a DG for Transport, etc? Who will do those tasks?

What tasks? The tasks of analysing EU policy needs and coming up with policy proposals.

There lies the trick. We will still have technocrats doing that but for example as a Secretariat of the Council of the EU. People will not continue to work en masse in Brussels but will be split up around the capitals. Yes, you guessed it, what we really need to do is break up the Brussels Bubble, the hated symbol of EU federalism. And we should do so in order to promote more Europe, ie federalism! Tricky, huh?

Plus we need to stop transfer of EP meetings from Strasbourg to Brussels. In fact we should start having EP Plenaries around the EU!

So here are some elements of the sneaky plan:

a) Europe ministers of the member states serve as members of the EU government. They do not have fixed 5 year terms, why should they?
b) We do not need a Juncker, Tusks will do and they will be appointed by the PMs but approved by the EP.
c) We should not elect MEPs, the MEPs should be chosen via some system from among the national MPs.

Why? Because Eurocrats and MEPs get and are separated from the national levels. They have become the Bubble. The new Bubble must cover the whole EU.

The Council would initiate draft EU laws and the MEPs would vote on them. A lot of that can be done via telework, so that MEPs stay in touch with the national realities, spend as little time as possible in an EU Bubble.

Complicated? Not really. Plus this type of thing will give Eurosceptics something to feast on while the EU engine federalises tax systems and other elements we spoke about in the three previous posts.

The idea is more but a leaner Europe. We have nearly created a DC in Brussels and that has cultivated the ground for European Trumps. 

Look at how the Eurogroup works. Lean and mean.

A policy aim would be to remove EU and national legislation from the EU and a special task force could be set up, temporarily, for that. Comprised of national civil servants, mostly at least.

That task would be huge and to push it forward we need a brand new policy machine.

Do I really mean this whole idea?
Not really, but it was worth presenting it as food for thought.
The EU will probably remain as it is, Bubble and all, and will not do anything for income tax issues or other things that can help the EU economy grow and create more and better jobs and thus a more popular EU. And who knows where we will all be five years from now.

Saturday, October 15, 2016

What Europe (really) needs (Part III)

What Europe (the EU) needs is a performing economy. An economy with high growth and low unemployment. Vibrant demand for good and services, good wages and much more. Potent export skills.

The EU is doing well. But not well enough, as we discussed in previous parts. Not well enough for Europeans to be content.

The EU Single Market came about on 1/1/1993 after an immense legislative exercise that set the framework for it. Trade of goods and services has no barriers, no border controls, no customs, no national product standards, etc.

19 of the 28 members share a single currency and economic stability constraints (eg re max allowable budget deficit).

The EU has a common trade policy and in addition to WTO membership (members are WTO members too) it has trade agreements with many countries that offer better terms than WTO rules do.

EU exports but the EU also imports. Goods as well as services. And workers.

Why is EU the not growing at 3, 4 or 5%?

One could argue that there is not "room" for such growth nowadays, either internal or via exports. Export genius Germany is growth at about 2%,  Why is average unemployment  at 8.1% and not at 5% or less?  Why are people forced to accept mini jobs when they want proper ones? Why are social security systems costing so much and benefits are being cut to achieve better public finances?

Are companies in the EU, large, medium, small and mini, satisfied with the current situation? Independents?

To a large extent, they are not.

If you talk to very small firms and independents in the US you will hear that it is not easy doing business in the US "Internal Market" of 50 states either. There, too, states have their laws, their sales tax rates and their own professional qualifications (as nurses who wanted to go work in Katrina stricken states found out, for example).

So what can the EU do to have a better economy and make its people and companies happier?

Lets keep mind that:
a) Income taxation for person and companies is a national competence and problems are dealt via bilateral agreements based on an OECD model.
b) VAT rates are not uniform, there are brackets and each state chooses its exact ones.
c) Companies that do not  just trade but have operations in more than one EU states purchase social security nationally, there is EU wide state insurance agency.

One way for the EU to grow is to adopt a more protectionist trade policy. But member states such as Germany will not agree.

Ireland and others will not agree on an EU wide corporate tax regime.

There is no EU wide policy on migration or an EU INS.

Products and services sold in the EU Marker have to be labelled and provide consumer info in 23 languages.

These are the main areas where systemic improvements can be made in the EU economy.

Yet, all these toy with the national sovereignty of the member states.

Do the Dutch want to have the same social security system as the Spaniards and the Greeks?

Do the Greeks and the Italians want to have the same tax system (and tax rates/brackets) as the Germans or the Swedes?

Economies of scale is one of the arguments.

An EU wide tax agency and an EU social security agency could economise enough costs to pass the savings on to the people.

Have you also noticed that the TV stations you watch, the electricity company, the water supplier and other services and goods you buy do not have common provider in more than one state? Why is that? Do we realise the cost of that? Financial (direct) as well as economic?

To make the European economy better we need European companies, European independents, European workers, European consumers, European taxpayers, European social security clients, European water drinkers, European electricity consumers. We need them. An issue is how to get them with the least further loss of the feeling of sovereignty.

Let us not forget way before the Brexit ref, the French narrowly accepted the Maastricht Treaty, the Danes voted on it twice, the Irish re-voted on Treaties a couple of times and the French and the Dutch rejected the EU Constitutional Treaty in 2005.

In most EU states the number of Eurosceptics is at an all time high. Some may change their mind if the see concrete economic benefits from more Europe some will not.

But the battle needs to be fought on economic and employment/jobs arguments not the ones used now. In that sense, It's the Economy ....!

One way to please Eurosceptics is to offer them concessions in other areas. Eg, the European Commission could be reformed and depend more on detached national civil servants, maybe it should be up to the Council or the EP to initiate legislation. After all, one could argue that Europe needs less legislation and fewer laws, be they EU or national. Because over-legislation and red tape is a key area that holds back growth and job creation. But these topics will be addressed in tomorrow's post (A Leaner Europe).

Feel free to join
my PublicAffairsEurope Facebook group to discuss this issue if you are a Public Affairs professional
my Eurodebates  Facebook group if you are a citizen.

Friday, October 14, 2016

It's the European economy stupid (What Europe needs Part II)!

Does Bill Clinton aide's old motto apply in Europe as well?
Of course it does.

The EU28's growth performance has not been too bad in recent years. But they could have been better and Draghi is trying to his part with ultra low central Euro rates by the ECB.

Unemployment averages are between 10.1% (for the Eurozone) and 8.5% (for the whole of the EU). But rates vary a lot among the member states.

I propose that people are not satisfied with the current economic situation.

For example:

They want better salaries, more and better clients in addition to better public services. Public finances in many member states have been tightened for years now. Belgium, running a 2.8% deficit, is the most recent country with a government in crisis. The Spanish have for months now been trying to form a new government, after two elections.

UKIP, Front National, AfD, The 5 star movement and PVV are among the Eurosceptic parties in Europe that are doing well.

Many citizens complain that their taxes or social contributions are being used to fund the poor, migrants, non EU and intra EU, as well as other member states (eg the Greeks).

Many complain that migrants, non EU and intra EU, are taking their jobs and/or keeping salaries low.

Members states complain that others (eg Ireland) are offering too low tax rates and take business away from them.

Citizens and member states complain that they are paying too much towards the EU budget and financing public works in other member states.

A Eurocrat friend who read my analysis that the UK is going lose the Single Market for just 800,000 EU foreigners' jobs told me, privately, "let them lose it for not knowing what teamwork is about". It is true that British governments have not displayed much EU team spirit neither have many UK citizens.

But what is to be said of the 98% of 42% of Hungarian voters who turned up at the polls and rejected the EU refugee plan?

Or of some Germans and Dutch tourists who have refused to pay restaurant bills in Greece or at Greek restaurants in their own countries claiming "you owe us money".

Do these kinds of things happen in the US? Maybe they do, but not that we know of.

But how are EU citizens who have the types of complaints listed above going to accept "more Europe"? Is it possible?

I argue that if the EU was growing by let's say 4 or 5% or of course more per year, many would.  Of course many would still be concerned about "directives from Brussels" but less.
If the EU was making everyone effectively better off, they would be more pro EU. When the pie is small people argue for the pieces.

So far, what the EU leaders have called for is more Europe in defense matters. Who dares talk of an EU tax system or an EU social security system, for example.

The EU has a common trade policy but most people do not pay much attention to that (some do, eg about the EU-US deal).

So how is the EU going to make more money for all?

The EU spends money on regional policy, training, even has a fund for helping people who lose their jobs, but that is not what we mean.

Tomorrow: Ways the EU can make more money for all

Thursday, October 13, 2016

What Europe needs

While still recovering from the shock of the UK referendum result and trying to deal with the UK's demands re its post Brexit status, the European Union of 27 rest is trying to figure out its future.

I have often described the EU as road construction and maintenance work in progress.. The EU is a project that has been under almost continuous construction since its founding (as EEC). The result is that it has never reached a completion stage.

Eurosceptics not only in the UK but also in the other 27 would argue that the EU has gone too far and needs to either move backwards or dissolve - call it quits.

Public opinion around the EU has in recent years become more eurosceptic and there is good reason for that.

a) Although it involves many people from the member states, either government officials or representatives of business, trade unions and other interest groups, for most of the citizens and companies Brussels is indeed a remote Bubble. Add to that the very complex and lengthy legislative processes of the EU (directives and regulations).

b) Fiscal austerity proponents at national levels as well as the EU level have promoted an agenda that has greatly affected people's lives. Brussels gets blamed for much of that, directly and indirectly.

What the EU needs in growth and growth. And, of course, competitiveness. In theory, that is a win-win proposition. Growth benefits everyone, business, employees, media (ad revenue), other parties and of course politicians, especially the ones in government. In practice, not. Many benefit from troubled times.

How is Europe going to have more growth?

By having an EU structure that works better, not at the EU level only, but at all levels.
A structure that makes more economic and employment sense. If that happens, then the EU will gain much more popularity than it enjoys today.

Is that type of EU more federal than today's EU? Hm. Yes and No.

I will come back to ways the EU can make more economic and employment sense.

Wednesday, October 12, 2016

UK: Is it worth losing the EU Single Market over 800,000 workers?

Reading the recent Brexit related speeches by May, Rudd and Davis an informed reader cannot help wondering what the anti free movement fuss is all about.

Stats show that only 2.1 million foreign nationals in the UK are a result intra EU free movement ie EU nationals. That is around 30% of total migrants and a mere 3% (roughly) of the population.

Plus according to stats, at least 1.3 million UK nationals live in the rest of the EU.  That means a net "import" of maximum 800,000 workers as a result of the UK's participation in the four freedoms of the EU Single Market.

The benefit is tariff and quota as well as customs free access of UK goods and services to the Single Market, for goods a 42% of total UK exports. Never mind the benefits of the City as part of the Single Market for capital. Add to that the urge for companies to leave a non Single Market UK and you have a clearer picture of free movement costs and benefits.

Thus the UK can well leave the EU and still be in the Single Market via the EEA or if Norway vetoes it via a special deal.

The rest (the non EU) migration has nothing to do with EU membership or the Single Market one.

This is a point that soft Brexit proponents need to keep reminding the government as well as the UK public opinion not only before Article 50 is triggered but also during the negotiations.

Monday, October 10, 2016

May's Labyrinth

Theresa May's conference speech made waves. Especially her citizen of the world comment directed at multinationals and elites.

Combined with speeches by David Davis and Amber Rudd, the Tory government released an image that shocked, both inside Britain and outside.

Not only did a signal that a hard Brexit was the aim but an anti-global one as well.

As ex LibDem MEP Graham Watson pointed out on Facebook the certainty May's speech emitted was that companies were better off outside the UK.

Rudd's proposal that companies would have to publicly declare the ratio of foreign staff in the UK came with the qualification "I am not  racist but".

Davis warned that migrants who do not add value to the UK would not be welcome. Critics were quick to point out that migrants are more prone to work and burden the system less.

Merkel and Hollande were quick to point out that a hard Brexit would not give the UK access to the Single Market. Merkel also pointed out to German industry that pressure from European business associations to keep the UK in the Single Market without free movement should be resisted.

The rationale is clear. If the UK gets a Single Market deal without free movement, everyone will start wanting their own a la carte EU.

A UKIP MEP even pointed out that the government's anti immigration proposals went "too far"!

LibDems pointed out that there is no specific mandate re immigration given by the referendum result. That all it said was EU exit, nothing about migration or EEA membership.

So why is May, allegedly an ex-Remainer, adopting such a hardball stance?

Obviously, her government's position will take voters away from UKIP. But it my lose many to the LibDems.

Is she catering to the ultra anti EU side of her party?

Is it a negotiation tactic?

So far, the EU has been adamant. No free movement no Single Market.

42% of UK exports go to the Single Market, 14% of its exports to the UK.

And what about free movement of capital and of services.

Is it surprising that the proposal for have companies declare their ratio of foreign staff has been taken back?

May is on a dangerous path. She is making companies puzzled in addition to scaring EU nationals in the UK. Is this the pro business party that the Tories used to be?

The UK industry needs the Single Market, at least in its present structure of goods produced. It cannot afford a trade deal of the Serbia-EU type.

Is May going to continue to cater to the anti-immigration, anti-establishment vote?

It's a long way to the March triggering of Article 50 date.

The financial markets' reaction to May's speech is indicative of the situation.

To be fair, May's policy proposals on immigration are not unprecedented in Europe and the world. But when a country with a rather liberal view of the world and open to migrants decides to radically change course, what May got is what she should have expected.

The UK's economic model needs the European HQs and production facilities of companies. So far, May's words are damaging this model. What does her cabinet really have in mind.

Probably, nothing. And that's the problem.

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