Tag Archives: Europe

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.

Cathy Ashton’s record.

When she was catapulted into her new position almost all of us scratched our heads at how Cathy Ashton – or should I say Baroness Ashton of Upholland could possibly be qualified to be not only Britain’s European Commissioner but also High Representative for Foreign Affairs and Security Policy of the European Union. I, and it seems most of the rest of the country, seem to have missed her illustrious career in foreign affairs and diplomacy: but it’s probably unfair to say that it was a last ditch attempt by the dying Labour government to ensure some continuance of presence… but then again perhaps not.

Of course, on appointment there was much hullabaloo about how Cathy Ashton was a dedicated public servant who’d serve our requirements in Europe with the ‘upmost dedication’ – a phrase that along with ‘the prime minister has every confidence’ is about as subtle as a bell crashing out of the belfry. So it will come as a surprise to some, and no surprise to others, that the Daily Mail is reporting that our dear commissioner has missed four out of ten “key” meetings in Brussels, essentially leaving us ‘without a voice at the top table’. Digging a little deeper into the statistics and it would appear that the two roles Ms.Ashton currently holds aren’t compatible with further revelations that half the meetings she has attended have been abandoned by her before they ended – and presumably before any conclusions had been reached, and it seems that our European neighbours are getting a little bored of her swanning out of meetings as commissioner to go and act as an ineffective voice on the international stage.

It is about time that Cameron, who claimed he was committed to strengthening our position in Europe look to replace her as commissioner without delay allowing her to concentrate all her efforts on her international role as presently she’s failing to do either role well, and convienently has an excuse for poor performance whichever way she turns.

As a broader point the position of High Representative for Foreign Affairs and Security Policy of the European Union should be thought through more thoroughly – it is, potentially, a really powerful position. An opportunity for the European Union to assert a real international voice for the whole continental union on issues which often affect us not just nationally but as one continent of people. This is especially true when flexing our muscles against China, Russia and America where traditionally individual states might be tempted to scupper European needs for short term national need. Indeed played properly, with full support of the EP and EC the High Representative could be a powerful player in the role of the European Union as a global superpower: by many of the guides to being a super-power the EU already ticks the boxes, it would certainly work in the favour of Britain, Germany and France, so why reign it in?

The door to do this is open now, it won’t stay open – given time China and Russia are going to be real powers, not just in military might, but economically in direct trade, energy and natural resources, and like it or not european nations are going to have to deal with these nations: which individually would definitely be on their terms and not on those of the individual nation states, but supranationally, the EU could really flex it’s muscles and act as a powerful balancing lever in the next 100 years.

The EU is not funding Elton John.

Eurosceptics across the media have been up in arms recently, touting yet another inaccurate story that our taxpayer contributions to the EU had directly paid for an Elton John concert held in Italy – “gross wastage”, they screamed – “just another example of how ‘european’ funds are wasted” they grumbled, almost all of them wrapped up with “get us out of this union”.

So I noted with some glee this morning that the organisers of said concert have been ordered to pay back the 720,000 € (£613,000) they used to stage the event without delay. The money was reported as having come from the European Union as finance for the regional development of Campania… a good example of EU waste you might say, but that’s not quite the whole story.

You see the funds don’t come directly from the EU: funds for regional development are distributed first to the individual nation states – it’s a cludged system, and one that is almost solely responsible for the commission’s auditors not being able to sign off the accounts for so many years. The Commission simply signs off on the gross national amount, after which the responsibility for distribution is entirely driven nationally.

Indeed, this waste of funds, and the following demand for repayment only followed a complaint by Mario Borghezio, an Italian MEP from the Northern League party, who brought the attention of the commission onto this issue, describing the use of the funds [as a waste of EU cash which was] “shameful“.

This wastage is currently under debate both within the Parliament and the Commission as it’s been acknowledged for some time that certain national governments were fiddling the books. You’re probably also thinking, well we all know where to point the finger, Greece, Spain, Itally… well yes, at least two those have been highlighted, but so is the UK. In fact the UK is being used in the same sentence as Greece and Spain as being one of the worst offenders!

The UK government defends the improper distribution and poor accounting of EU funds by pointing out that the huge amount which is now being demanded back by the EU “had been accrued over six years“.

In case you missed that, it’s a tacit admission by the UK Government that they have been holding on to money that they shouldn’t have for six years. Money that was either not spent or spent incorrectly on regional development, the common agricultural policy, infrastructure and energy projects, cultural activities and a thousand other areas of supranational interest funding by the European Union.

MEPs are now calling for a need to get tough with nation states and the european bodies that don’t follow the rules: the EU needs to get it’s books in order if it is to have any mandate for future projects which are underway – the most obvious way of doing this would be to make national commissioners directly responsible for the funds which their country takes: it ensures that another ‘super-agency’ does not need to be created to distribute funds directly, and the whole european machine would have someone to hold directly accountable should the funds not tally. So far only  Sweden and the Netherlands have shown the political will to do this, having their commissioners sign off directly on received funds each year.

If you’re not lobbying your MEP yet – make sure you do: the wastage of EU funds is one of the most pressing issues facing the union, doubly so as national and international budgets tighten.

It’s not all bad news though. There was some good financial news for the EU in the recent budget report, with a statement from the auditors that the individual European organisations had finally got their their act together, and that individually the accounts of each organisation made sense and could be approved. If we can now get the national distribution correct, we’ll be well on our way to being able to approve the global accounts, which will no doubt do great good in being able to approve year on year spending for the union as a whole.

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.

So, yeah…

A few days ago I may have mentioned something about emigrating: it’s something a lot of people say when they’re fed up with a situation; many never mean it, others simply don’t follow through – that’s really not the case here: I mean it – I’m up, off, and outta here.

You see, I was fortunate enough to grow up in Europe, West Germany to be exact, it’s the place I’ve always thought of as home, the formative years when you form bonds, attachments and habits were all spent in Nordrhein-Westfalen, and having recently been back to my ‘home town’ of Gütersloh, I realised just how much I’d missed it – not just missed though, but how much I thought of it as a home town compared to Stamford, Peterborough, London or anywhere else.

It’s not just local attachment though, it’s a question of quality. The quality of life is significantly higher, the opportunities which are presented in that area for travel, new experiences, work and building a life are enormous. I’m sick of being couped up in the UK: I want to travel in Europe – I want the freedom to just jump onto the autobahn and go shopping in Dutch markets, go walking in the Harz mountains, go tobogganing in the Alps, drink in the culture of Venice, Salzburg, Wien, Berlin, Köln or just go to a different country without having to think of it as an excursion with passport clasped in hand. Let’s face it the only way to do those things in the UK is to start taking extended weekends or holidays, my job precludes being able to take that amount of time out – and I’ve just had enough of it – I want my life back, and moving to a place that makes it easier to escape makes a lot of sense.

Of course those of you who read the political posts will know where I stand on Europe – I really do roll my eyes at the attachment to the Pound, the constant interference in our daily lives of a thoroughly inept and at times disreputable civil service and government. The ludicrous and frankly luddite situation of having to enter Europe – a continent we’re all officially citizens of with a passport and customs control – and the sheer hassle of getting anywhere that’s remotely interesting without having to pay extortionate train fees for the Chunnel or having to slog down to Dover for my preferred choice, a leisurely P&O ferry and a decent car all take their toll on me. I want to be in the heart of Europe – not just personally, but professionally.

So the planning starts now… If there’s one thing I’ve learnt about moving in the UK it’s that planning is key, the more organised you are the better: and moving into a foreign country even with prior experience needs military precision; we know many things about what we want. We love Köln, right in the heart of NRW it’d make a great base: it’s got great shopping, a compact city centre with good public transport, a good gay scene and a busy ex-pat community. It’s close enough to the border to make the UK a not entirely tiresome drive and it’s got good links to all of NRW and the rest of Germany, a quick hop across the border to Holland or Belgium, and only a matter of minutes on the autobahn before you start to hit some really beautiful scenery.

So that’s the beginnings of a plan to emigrate. I’m looking at this as a long term plan, rent first see what happens and then look at settling down. I want to make the move this year coming: 2011 – disengaging from the rat race of ludicrous rents and house prices, rip-off britain, x-factor and all the other stuff that sets my teeth on edge, escaping to cheaper living in the heart of europe only a car drive away from mountains, glaciers, rolling hills, vineyards and more. Bring it on.

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.