Tag Archives: EU

Strong words from Merkel

It was good to see Angela Merkel today calling on her European counterparts to take serious efforts to cut their national deficits with a stark warning that the biggest threat to the economies of Europe, and specifically those of the crisis-hit eurozone is debt.

In a politically charged statement, Merkel pulled no punches, telling all attending the Davos World Economic Forum that: “Indebtedness is the biggest danger for prosperity on this continent” strong stuff indeed. But nothing compared to the sledge hammer language which she chose to use to cut through the never-ending bullshit with an emphatic statement that there was: “no crisis of the euro as such. This is essentially a debt crisis [which we must now]  overcome” and that “If the euro fails, then Europe fails“. Her comment echoed French President Nicolas Sarkozy, who earlier passionately defended Paris and Berlin saying that they would “never abandon the euro“.

Possibly the strongest words from a European leader yet on the on-going spiral fuelled by an on-going crisis of private banks and markets speculating with public currency on the basis of advice given by almost totally unregulated credit agencies.

Talking about the German economy she said that “sound fiscal policy and growth do not need to be a contradiction in terms“, and it’s a good point; let’s face it Germany’s economy is booming, it’s Europe’s number 1 exporter, even though it’s actively beginning to rebalance it’s trade deficit. It’s got Europe’s most qualified workforce, and unemployment is lower in Germany than Britain even with an additional 15 odd million people more than us.

It’s really is reassuring to see this economic strength emboldening the Germans to push for the reforms of the eurozone that they’ve wanted for some time: Germany will undoubtedly push through reforms which can only be a good thing for the EuroZone – and quite possibly for the UK too – if the coalition is bright enough to engage directly with Berlin now to advocate strong change in Europe to protect the future of the EU.

Is Ireland tilting at Windmills?

As a business owner in two countries I’m of course of the opinion that corporation taxes should be kept as low as possible wherever possible, low and simple tax schemes give businesses incentives to grow, to take on new projects, staff, materials and property: but that tax break shouldn’t ever be at the detriment of the overall economy – it should always generate revenue within the medium term.

It looked like Ireland’s gamble paid off – their ultra low tax regime attracted international brands, times were good, a lot of money was splashed about and everyone felt the benefit. Unfortunately in this time of plenty, the powers that be in Ireland didn’t have the political courage to begin to move their tax regime from one of rapid growth to one of sustained continuance.

Corporations wouldn’t have abandoned the Emerald Isle, they might have grumbled; but ultimately where would they have gone? Many of the inbound countries chose Ireland strategically as well as economically – English language being native, good gateway to Europe, not landlocked – it had so much going for it. All it needed was politicians that could accept that the ‘boom’ would have to transition to equilibrium. Yet they didn’t do that: Ireland’s politicians lived in a fantasy world of never-ending boom, maybe they took Gordon Brown’s claim at face value?

Whatever the case, it’s backfired miserably – the IMF are now assisting the EU with their audit of the Irish books and time is now running out for Ireland to accept a suitable bailout to help them balance their books while their spending cuts take full effect. This is the only way to maintain sovereignty long term: if they wait now, they’ll find themselves selling bonds in the untouchable bucket alongside crackpot banana republics.

Ireland are insistent that the low corporate tax rate brings in more than similar tax regimes in other European states, this may be the case – but with a deficit so high, unemployment rising and the housing market collapsing, taxes are going to have to rise across the board, and most importantly in places where the tax will actively bring in revenue. If unemployment is rising as sharply as the figures suggest, taxing the working citizen significantly more simply doesn’t make sense in knocking back the deficit, so Ireland are going to have to be pragmatic and look at their other streams of tax revenue.

So – all this being said. It’s shocking, although depressingly not surprising that the Indie is reporting that Ireland is now trying to ransom the people coming to bail it out with a demand that it shouldn’t have to lower it’s corporate tax rate. In characteristically brusque style Irish ministers are publicly stating that the low corporate tax rate is “certainly not up for negotiation”. With the unexpectedly early arrival of a party from the IMF, one thing we can be certain of, The big european & eurozone economies are being very patient, that patience won’t last forever – and ultimatums from politicians in Ireland are going to rapidly start to look very ridiculous.

Press reactions to Ireland & The Eurozone

Well, it appears that there is now a series of options on the table for Ireland after talks continued late into the night – more on that later today – but you’d be hard pressed to find much detail of these discussions in the UK press as the majority of newspapers seem to be rejoicing in the possibility of a cataclysm, including a particularly moronic piece from Ambrose Evans-Pritchard in The Telegraph, full of half-true hindsight and distinctly dodgy future predictions.

What’s interesting is how almost all commentators seem to be foaming at the mouth with glee about the imminent ‘collapse’ of the euro and the european project, ignoring the impact that any potential failure would have on Britain, both politically and economically.

Let’s be blunt, the failure of the Euro would cause a financial firestorm, it would rock markets worldwide, and the blast-wave that would roll over the City of London, and then onto the wider economy of the UK would huge. Just consider there are more Euros traded in London on a weekly basis than exist in the rest of the Eurozone put together: The City contributes 14% of the total tax coffers; a significant proportion of which is earned on Euro investments and trades and the last time I looked this inward trade to the The City alone made the amount that every anti-europe commentator drags up about how much we pay into the EU every year look like pocket change.

Tea Party-esq ramblings from Little Englanders’ are horrifically ignorant. The idea that we are not inextricably linked to Europe in finance and trade and that we’d ‘do just fine’ alone on our little island against the might of China, the USA and Russia (all of whom it should be noted employ protectionist policies whenever it suits) is naive in the extreme.

It’s funny really because the view in the press is not the view I hear in my daily life. I should say I’m not surrounded by europhiles, quite often it’s quite the opposite – but none of the people I meet in my personal and business dealings have the rabid anti-europe sentiment that the press portray the British public as having. That said – one thing is clear: whether we agree with it or not, we will pay to bail out Ireland one way or another – and what’s patently clear is that if we stand by and watch the eurozone fall apart we’ll pay even more dearly than any of the Little Englander’s could ever imagine.

Ireland needs to act, now.

Basil comes a cropper. © BBC.

Basil comes a cropper. © BBC.

Many commentators are reacting to the news that Ireland and the European Union are talking about economic support as some sort of great shock – I’m really not sure why: Ireland’s recent austerity budget should have been a sure sign that they were in deep trouble. The cuts they made were not those of economy, rather they were those of widespread panic.

Of course the admission from Dick Roche that Irish banks were facing “serious liquidity problems”, and his almost flippant statement that “[I don’t think] the appropriate response to that would be for the European finance ministers to panic.” has of course had the exact opposite effect. With a ring of Mr O’Reilly promising Basil Fawlty that all will be well; the Irish economy looks set to firmly hit the buffers when it finally uses up the money it has presently loaned at some point midway through next Spring.

Media outlets are of course fanning the flames, with the meeting today between European Union finance ministers in Brussels being described as ‘crunch talks’; and while undoubtedly the first agenda item will be the state of Dublin’s finances, it shouldn’t be forgotten that this is actually a regular monthly meeting – not an extraordinary quorum specifically called to negotiate bailing out Ireland.

But while it’s sure to be the star item on the agenda, quite what they’re say about Ireland remains a mystery: elements of the finance committee are sure to push for early action in the form of a bailout with the stability of the Euro being the key focus. Over the weekend a story filed by Reuters appeared to justify this assumption, with reports of a deal to shore-up that stability of the Irish economy [for the good of the euro] valued at an amount between 45€ billion and 90€ billion already underway.

With the ultimate bailout fund entirely dependent on how much trouble the Irish banks are really in yet to be revealed, it’s no real wonder that panic both political and on the markets is setting in – as it’s that ultimate amount that’s likely to be the figure that either scuppers or saves the Irish economy. A combined French, German & British dislike for taxpayers funding Ireland’s ludicrous bank assurance guarantee (which fully covered all losses, and not just those of the private citizen), is set to cause friction for the European finance committee bearing in mind Angela Merkel & Nicolas Sarkozy’s agreement a month ago for a new mechanism for securing sovereign debt, restructuring this debt in a way which would place private investors (most notably international bond holders) at risk for investing in countries that were heavily indebted or fiscally unbalanced.

The whole story though, is not yet on the table. It should not be forgotten that British and German banks are massively exposed to the Irish economy. Der Spiegel reported that during the European bank stress tests this summer, some of Germany’s biggest banks were revealed to be holding an estimated 101 billion euro ($138 billion) in Irish bonds. while British banks are exposed to a further 110 billion euro ($150 billion or £93.7 billion). Worryingly for both Britain and Germany a significant amount of that exposure is in taxpayer supported banks including RBS and the struggling Hypo Real Estate (which Frankfurter Allgemeine Zeitung reported as holding an estimated €10.3 billion portfolio in Irish debt).

Stuck between a rock and a hard place, the financial powerhouses of Europe may have to swallow any plan for letting Ireland take the pain, the exposure closer to home most likely being seen to be too damaging economically and politically, but mark my words: any bailout will come with a litany of caveats. David Cameron will have nowhere to hide as under the noses of the coalition talks that followed this year’s election, then Chancellor Alastair Darling committed Britain to any future European bailout. He won’t however be alone, Angela Merkel is already leading the battle cry, and won’t be likely to stop if German taxpayers take yet another hit for bailing out a profligate nation to ensure the long term stability of the Euro.

This story is developing… as and when details come in I’ll write more.

Schäuble lets rip at further US QE

Many that follow both politics and international markets have been concerned about the US and the UK’s quantitive easing or ‘stimulus packages’ over the last few months. To cut to the heart of the matter it’s printing money to sustain a bubble with the hope that rather than popping the bubble might slowly deflate – history has shown us time and time again that it doesn’t work long term and all it does is create secondary bubbles which fail to provide a stable base for the economy.

Over the last few weeks German economy minister Rainer Brüderle has been pretty outspoken about this, so it’s with glee that I notice German Finanzminister Wolfgang Schäuble today shooting from the hip with language that could be described as distinctly undiplomatic, as he laid into the United States’ decision to approve as a huge economic stimulus measure that he considers harmful to German trade and industry. In a statement made at the BMW Foundation event in Berlin he said the Federal Reserve’s attempts to stimulate the US economy with a $600 billion cash injection “did not make sense” and that “with due respect, my impression is that the United States are at a loss, to now say, ‘we’re now going to have another $600 billion,’ will not solve the problem.

This assault added to opinions he made public on Thursday on both ZDF’s Berlin Direkt, in which he stated that the US Federal Reserve had “[already released] an endless amount of money” into the US economy with “horrendous” results, and to ARD, where he stated that the Fed’s stimulus would “create additional problems for the world

But is Schäuble right? Well in my view another stimulus package is unwise, it feels like a desperate attempt to inject further liquidity into the US market when the core problem isn’t liquidity but a toxic mixture of an uncompetitive manufacturing sector, weak foreign trade, over-burdened mortgage markets and a general lack of market confidence. The most likely effect of this ‘stimulus’ will be a hit on the already weakened dollar dragging it still further down: the result of which will undoubtedly make European (and especially German) goods significantly more expensive across the Atlantic and it shouldn’t be forgotten that many german brands consider the US to be a critical export market. Any change in the Dollar would be likely to directly, and seriously, impact the German economy: an economy which if we’re frank is already too deeply linked to an over-balanced exports market.

So far no other voices in the European Union has been quite so sharp in it’s criticism of American economic policy, but where the German’s lead others will no doubt follow. Schäuble has already vowed to take the issue up with the US at a G20 meeting in South Korea next week; lets hope other European economic ministers do the same to try and temper the US governments extreme reactions to local political pressure.

Life Change?

Life, life’s an interesting one – it throws you curveballs, it shakes you up and it spits you out; it’s even worse when you get stuck in your own rut, the change life chucks at you can seem even more difficult: that’s why I’ve always tried to make my own way; not fall into ruts.

At the moment it feels like a rut is forming, not just locally either – but the whole country, I’m not sure I want to get stuck in the UK while house prices are still unconscionably high, while living costs are still giving us the title of ‘rip-off’ britain, and while the UK still sits on it’s hands watching the rest of Europe come ever closer together.

I’m seriously considering just upping and offing – emigrating, leaving for pastures new… bring it on.

Addressing the Elephant in the room

It’s been an interesting few weeks politically – no not here, here in the UK it’s been as dull as ditchwater – but over the channel in France & Germany there’s a revolution of language underway which looks set to spark a strongly worded and possibly strongly actioned change in the way these two European giants handle immigration and multiculturalism.

It’s not a new argument admittedly, but it’s unusual in the extreme for centrist politicians to be voicing their concerns about immigration in such strong terms, and in the French case with such strong action.

Immigration has been a political football in the UK and Europe for many years, the general consensus for the last decade has been that it’s a play thing of the right, and the marching drum of the far right –  that there’s always a ‘more sensible’ way of dealing with it than by demanding integration and by toughening inward border controls, and that we’ll all eventually get on under the great banner of multiculturalism.

The truth however has been rather different in practice – and while it’s difficult to agree with many of the broad brush soundbites that certain characters are so fond of, it is time for an adult debate immigration and for concessions from both sides of the argument that the multicultural experiment has perhaps failed in more places than it’s succeeded, and it would seem that the debate will start in Germany.

Since a  string of controversial comments in June from the former Bundesbank board member Thilo Sarrazin, linked to the publication and launch of his latest tome Deutschland schafft sich ab – Wie wir unser Land aufs Spiel setzen, or “Abolishing Germany – How we’re putting our country at jeopardy” debate has been raging: and while politicians from all sides initially condemned Sarrazin’s position the conversation has spread, with polls showing growing public support for a much tougher stance on immigration and integration.

Indeed in early September a poll carried in the Bild tabloid, conducted by the respected pollsters Emnid, revealed that 18% would vote for a party headed by Sarrazin, who only a few weeks earlier had been forced to resign from his powerful Bundesbank position for the media storm that his comments had caused. 18% in a land of coalition government is a figure that will get any politicos’ attention, so it’s perhaps not surprising that there’s been an element of band-wagon-jumping from some politicians; but far from it being the usual suspects on the margins it’s the heavyweight nature of those now jumping into the debate with both feet that’s capturing international attention.

The Bavarian state premier Horst Seehofer suggested a ban on immigration for Turks and Arabs because of their “difficulties” with integration, roundly abused at the time, but since then, several conservative politicians have been joining his ranks. It’s a difficult question: how do you have a discussion about multiculturalism failing without upsetting the components of the multicultural society? Regardless – the box is now open: and there is no putting the stuff inside it back. We can only hope that the conversation remains adult, that cheap political point scoring doesn’t become the standard.

Europe has fought over different cultures before, it’s a problem that many perceive as unsolvable, many more believe it’s contentious and essential to solve in one way or another. With the potential of new threats caused by population movement, climate change, economic upheaval and the constant issue of illegal immigration and cross-border crime, EU institutions, national governments and individuals – all of us – are going to have some tough decisions to face in the coming months and years on this particular topic.

Apple out of tune with the European single market?

Back in the heady days of the dot com boom we were endlessly told that we were witnessing a revolution, e-commerce sites and services would make international borders a thing of the past; the old worries of buying and importing goods and services would be a thing of the past; interestingly politics beat e-commerce to this in the European single market – a good thing I think we can all agree, but it seems that the more borders we break down the more artificial ones corporations with vested interests and their dedicated corporate lawyers seem to put up

Take for instance the iTunes store, an example of a digital company taking a traditional industry and dragging it kicking and screaming into the digital age: the music industry is practically luddite in it’s views, but iTunes, at least on the face of it would seem to have made it an open e-commerce industry allowing the users to buy anywhere in the world, but it’s not quite that simple. Try buying a track in Europe however and you might find that something you can buy in the UK isn’t quite so available 23 miles across the channel in France, or literally a hop skip and a jump across a border from Italy to Austria, making an utter mockery of the European Single Market, and making life frustrating in our ever more connected world.

It’s a true sign of the luddite nature of the music industry that the combined bureaucracy of the European Union is having to be brought to bear to strong-arm music licensing and distribution companies to sell their products to consumers in accordance with the laws of the lands they’re selling in. But for anyone that travels, or sits as an ex-pat or just happens to be based across borders it’s really great news that The European Commission competition commissioner Nellie Kroes is going to be bringing together industry executives with Apple’s Steve Jobs, Mick Jagger – presumably representing the musicians union/combined interest and the CEO of eBay, a firm which really has cracked pan-european trading to work toward bringing the true goal of a single market to the digital world, no matter what the excuses may be from companies still intent on keeping artificial borders alive in order to buck the market in their favour.

Unity Day

German Reunification

German Reunification (Photo via Wikipedia)

Today is unity day – it’s 20 years ago today that Deutschland was stitched back together, and although perhaps not as famous in visual terms as the fall of the wall – the official date of reunification is marked today for various historical reasons.

It’s always nice to be able to say, “I was there” – and I remember it well, I remember the endless fireworks of this day and the fall of the wall earlier  in 1989, I remember the god-awful trabants and the sudden politicisation of tone: some people made a real and conscious effort to talk about ‘Germany’, whilst others clung doggedly to West Germany.

Contrary to popular myth now, many people didn’t welcome reunification warmly – yes there was widespread belief that it was ultimately the right thing, but many people were (possibly rightly) afraid of what the ‘ossies’ might bring: some to this day still are – And while it’s fair to say that East & West Germany still have some very different ways of doing things.

Like any other nation in Europe it has problems it wishes and needs to resolve, all told though unification has heralded a period of strong economic and cultural growth, and Germany is now more respected and (legitimately) stronger politically than it’s been in it’s entire history. Long may this continue!

Germany becomes Eurosceptic

There’s an interesting article today on ConservativeHome that puts forward a case that Germany has become Europe’s second eurosceptic nation, typical ConHome spin I hear you scream, but reading the German press and talking to friends in Germany it would seem not to be the case – there really is a genuine groundswell of annoyance and dismay with the European Union, a system which many Germans are now rumbling is unfairly biased it’s decisions toward latin nations for too long: a view that’s been long held by many in the UK – especially when it comes to the ludicrous con that is the CAP.

Now would be a very good time for our new coalition to stand strong with Germany: they’re our nearest neighbour in many ways: our cultures have so much in common and our position in Europe is similar economically – we’re both reliant on world trade (for Britain financially and for Germany in exports). Standing with Germany now would be a superb opportunity to force long needed reform on the EU which for so long has limped from one kludge to another.