John Bruton

Opinions & Ideas

Month: July 2011

WINCHESTER

Winchester Cathedral – Paul Gillett’s photo
Finola and I spent a few days this week in the vicinity of Winchester in England. At one stage in history, Winchester was a more important city than London and had a bigger population. Alfred the Great is buried there. The cathedral dates from 1079  and  is the longest  cathedral in Europe The  bishops palace is where Queen Mary stayed prior to her marriage in the  cathedral to King Philip of Spain.
Finola visited the house of the famous author, Jane Austen, which is preserved exactly as it was when she lived there in the nineteenth century. It has a beautiful garden.
I visited the racing stables of Jamie Osborne at Lambourn.   Jamie is a former National Hunt jockey, who is now a very successful trainer of horses for flat racing. I met Jamie once before, when he rode the late Charles Haughey’s horse ,Flashing Steel to victory in the Irish Grand National at Fairyhouse. I was Taoiseach and had the task of presenting the trophy to the winning owner

Google Leaders Forum

Speech by John Bruton, former Taoiseach and former EU Ambassador to the United States,  at the Google Leaders Forum at the Google Headquarters, Barrow Street , Dublin  at 10am on Thursday 21 July.

THE EURO ZONE CRISIS IS A CRISIS OF EUROPEAN POLITICS
The crisis in the euro zone is, first and foremost, a political crisis. Our institutions may be European, our problems may be European, our future may be European, but our political thinking, and the scope of our vision, is still stubbornly national. This is as true of so called “core”, as well as of so called “peripheral “, countries. 
Our politics has not caught up with our economics. Our politics is national, but our economics is European.
As  Lorenzo Bini Smaghi, a member of the Executive Board of the ECB said recently that ,as a result of the euro, for practical purposes,
“we already have a political union”,
 among the euro area countries. This is because the  banking and monetary systems of those countries are so inter twined that we all sink or swim together.  The difficulty is that our political thinking, and our political institutions in the EU, have not caught up with this reality.
Let me illustrate what I am talking about. The crisis has two dimensions.

THE BANKING DIMENSION
It is a crisis of banking, and it is a crisis of sovereign debt.
I will refer first to the banking dimension of the crisis.
When the arrangements for the euro were first put in place, in the Maastricht Treaty of 1992, the European central Bank was given responsibility to manage monetary policy.  But it was also given explicit responsibility for the “prudential supervision of credit institutions”. That would have involved in supervising and preventing the reckless lending to, and borrowing by, the Irish banks. The ECB never exercised, and in some respects was not allowed to bring into force, its Treaty based prudential supervision role of the banks. It confined itself to monetary policy.
 It was only after the crisis had already taken place, that the European Banking Authority was brought into being , to exercise the very responsibility the ECB had been given back in 1992, but had never exercised.
 This omission happened for nationalistic political reasons.
France did not want the ECB, an institution based in Germany, to exercise prudential supervision over French banks. I imagine that France was not alone in this. Central Banks in other euro area countries probably felt they could manage their own banks without  the ECB looking over their should.  We now know how wrong they were. If the ECB had exercised its proper responsibilities for prudential supervision, the present extent   French bank exposure to Greek sovereign debt might not have happened, and everybody, including Greece and France, would be better off. Even today some banks in major European countries are resistant to European stress tests for nationalistic political reasons.
 

THE SOVEREIGN DEBT DIMENSION
The other dimension of the crisis, the sovereign debt dimension, was also influenced by politics.
The decision taken by the ECOFIN Council, in November 2003, not to act on the  European Commission’s recommendation regarding excessive deficit procedures against France and Germany was also a political decision, not an economic one.  It was supported by Ireland at the time, perhaps because Ireland itself had earlier rejected a Commission recommendation to cool down its economy.
 The Commission’s decision to accept the setting aside of its recommendation on the excessive deficit procedure against France and Germany was a display of political weakness on its part.  This political weakness would not have been so great if candidates for the Presidency of the Commission did not have to ingratiate themselves  with powerful member states  to be  appointed, and if the European Parliament had not been as aggressive in  seeking to enhance itself at the expense of the Commission.
As a result of that November 2003 decision, the whole Stability and Growth Pact was subsequently  altered to make it weaker, and less automatic, and the Commission went along with that. At least nobody resigned in protest. 
This weakening of the controls meant that the authorities were not as tough with Greece over its false public accounts, and its spiralling debts, as they should have been.  As Lorenzo Bini Smaghi put it recently,
“There is limited awareness in the domestic political arena that governments are also responsible for the monitoring of the other members of the euro area, in particular in respect of the Stability and Growth Pact, and for ensuring that they abide by it”
So if Greek finances are a mess today, that is in part due to a failure of supervision in the past by the Irish, German, French and other euro area Finance Ministers, who did not take their responsibilities seriously enough under the Stability and Growth Pact.

GERMAN CONSTITUTIONAL CONSTRAINTS ON FURTHER EU INTEGRATION CAN ONLY BE OVERCOME IF THE EU BECOMES MORE DEMOCRATIC
There is another important issue that must be addressed. That is the attitude of the German Constitutional Court which requires that transfers of authority to the European Union be explicitly and individually approved by the German Bundestag, because it feels the EU itself is insufficiently democratic.
In its judgement on the Lisbon Treaty, it said that
             “an increase in integration(in the  EU) can  be unconstitutional (in Germany)l if the level of  democratic legitimation (in the EU) is not  commensurate to the extent and weight of the supranational power or rule”  at  EU level
And it added that, for it, the  test of democratic legitimation is whether
            “the allocation of the highest ranking political offices”
  is by means of
            “competition of  Government and Opposition”
  In a free and equal election .
 Essentially, the question it posed was,
Can the people vote the EU government out of office? At the moment, they cannot.
 Even though the European Parliament is directly elected, the Court did not believe that the EU yet passed that democratic test.
 The Court was therefore very reluctant to agree to further EU integration, beyond that proposed in the Lisbon Treaty, without a qualitative improvement in democratic governance at EU level.  But the difficulty we now face is that, to make the euro work, we are probably going to require more integration at EU level, at least among the states that are in the euro.
 I am certain this issue of whether there is sufficient democracy at EU level will arise again in any appeal to the Court against the proposed closer integration of Germany in responsibilities to, and for, the rest of the euro.  Such an appeal will take place and has the potential to destabilise financial markets unless something is done to forestall the problem. I really do not believe that it would be wise for EU leaders  to sit and wait  to see what the  German Court might say . Its jurisprudence  is already published in its judgement on  the Lisbon Treaty.
I have long advocated a simple remedy to this problem.

ELECTING AN EU PRESIDENT DIRECTLY
 During the Irish Presidency of the EU in 1996, I commissioned a study on the possible direct election of the President of the European Commission by the people of Europe in a free and equal election of all the people of the EU.
   The European Council could decide, without changing the Lisbon Treaty, that in future it will only nominate as President of the European Commission,  as  President of the European Council, and/or as President of the Eurogroup, a person who has  won a majority of votes in an EU wide  election for that post, held  on the same day as the  European Parliament election.
That would create a similar level of democracy at European level to that  we each enjoy at national level.
The present crisis is an opportunity, not only to deal with long ignored  fiscal problems, but also an opportunity to make  the  European Union even more democratic.

THE EUROPEAN UNION MUST DEVELOP A PATRIOTISM OF ITS OWN
The European Union will only survive the dramatic changes that the twenty first century will bring if the citizens of all EU states develop a common sense of European patriotism, alongside their national patriotisms.  Appeals to monetary self interest and rational calculation alone, will not be enough to keep the Union together in face of a new world dominated by Asian economic power.
 European patriotism, like national patriotism, is not something that will arise spontaneously. It has to be fostered by the use of symbols, and appeals to people’s emotions, by political leaders who make a conscious decision to do so.
  I do not believe Europe’s citizens will become really proud of the Union unless they each feel, that they, personally, have a direct stake in the Union. That is why I favour a direct EU wide election of a person or persons to lead EU institutions.


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Note for Editors;   John Bruton is currently one of the vice Presidents of the Fine Gael party. He is also a member of the board of the Centre for European Policy Studies.  He was a vice President of the European Peoples Party for many years and is currently associated with its affiliated think tank, the Centre for European Studies.

THE EU SPORTS PLATFORM

I chaired a meeting on the EU Sports platform in Brussels last week. Among those addressing the  Platform were
-Sean  Kelly, former President of the  Gaelic Athletic Association and currently a member of the European Parliament, 
-Herman Rutgers ,of the European Health and Fitness association,  which represents fitness clubs, and
-Matthew Philpott, of The European Healthy Stadia Network, which seeks to impart a healthy lifestyle to those (mostly men) who regularly attend sports events in stadia .
The EU Sports Platform brings together sports bodies, large and small, from all over the Union, to discuss common problems and opportunities. Football and rugby were, of course, represented, but also Sailing, the Scottish sport of Curling, Shooting,  Golf,  Sea Angling, Ice Hockey, deaf sports, Gaelic Games  and many more.
The EU has recently acquired a responsibility for sport under the Lisbon Treaty, but this is supportive of and complementary to the main responsibility which remains with member states and with the  sports organisations themselves.

Issues discussed included rates of VAT on sports equipment, transport of sports equipment, television rights, child protection, mutual recognition of sports training qualifications, and the London Olympics.
We were told that only 40% of Europeans take regular exercise and that 2/5ths of the EU population is overweight. Sean Kelly said the EU should set itself the objective of having 100 million more people take part in sport or regular exercise in 2020 than do so now. That would bring the share of the population taking regular exercise up to 60%.

A VERY IMPORTANT GLOBAL FORUM

Former Irish premier John Bruton  is interviewed by Xinhuanet during the 2011 Kubuqi International Desert Forum held in the Kubuqi Desert, Inner Mongolia Autonomous Region of China, July 9, 2011. (Xinhuanet/Chen Jingchao)

I  delighted and honoured to take  to take part in this Kubuqi International Desert Forum here in Qixinghu,  Ordos,  Inner Mongolia, on  the  vitally important topic  of desertification, and to  share a platform  with so many distinguished guests, notably Mr  Liu Yandong, politburo member  of the CPC Central Committee, Mr Wan Gang, Minister for Science and Technology,  Mr Bater, Chairman of the Peoples Government of Inner Mongolia,  with  Mr Soo Sung Lee, former Prime  Minister of South Korea and with  Mr Mohan Munasinghe , vice  Chairman of the UN Intergovernmental  committee on Climate  Change.
This is the third Forum to be held and it has won worldwide recognition as one the most important gatherings of its kind in the world. This Forum is considering how advances in technology can be used to halt and reverse desertification, and thus directly to alleviate poverty, and in some cases, to prevent starvation. 
The speakers you will hear are amongst the foremost experts in the world, from places as far apart as Oregon State University in the United States,  the state forest Administration of the Slovak Republic, the Burundi Ministry of Trade, The Ministry of Natural Resources of the Baikal Region of Siberia,  and the Ministry of Environment of Nepal.
I have learned much from the work I, and other visitors, have been shown prior to today’s Forum meeting. The work of planting trees to prevent the advance of the desert, the river basin protection work, and the botanical research , are most impressive.

STOPPING THE DESERT, CONSERVING WATER AND MITIGATING CLIMATE CHANGE

They set an example for other parts of the world, including my own continent of Europe, which also face the problem of desertification, and of water conservation.
 I note that 5000 square kilometres of the Kubuqi  desert have been planted with  trees in the past 20 years.   This not only halts the advance of the desert, but it also sequesters carbon and thereby mitigates climate change as well.
 If, by international agreement, a realistic global price could be placed on carbon emissions, enterprises like this here in Inner Mongolia would become even more profitable, and more  widespread.
 Coal is a hugely important part of the economy of Inner Mongolia and I believe you have doubled  coal output within  a five year period.
Carbon Capture and Storage at all coal plants will , sooner or later,  be   necessary if  we are not to  face a global  catastrophe as a result of the release of  carbon into the  atmosphere through coal burning, but carbon  capture and storage  is very expensive,  and will impose significant  costs on families by adding to their energy bills. 

WATER IS SCARCE IN CHINA

Water is a vital resource for China.
According to the World Bank, the amount of water available per person in China is  only a quarter of the world average.
Power generation from coal is a heavy user of water.
I have heard of one estimate that 40% of the future increase in water consumption in China will be due to its use in coal fired power generation.  Northern China has 40% of China’s population but only 15% of its water supply, so this represents a big challenge. It also make the work to conserve water, and combat desertification, central to securing the economic future of the whole country.
Reafforesting the desert mitigates the effects of carbon emissions and thus reduces global warming problem. Unlike carbon capture and storage, it will not add to the energy costs to be  borne by  families. In fact, by protecting food production capacity, it eventually contributes to lower food prices than would otherwise be the case.
China is home to half of all the energy intensive industry in the world. As a result, China became a net importer of coal in 2007. Power generation will account for 68% of China’s additional coal consumption.

A GLOBAL AGREEMENT COULD HELP CHINA ACHIEVE ITS GOALS

 Ensuring that the climate damage of all this power generation is minimized will require a global agreement, perhaps including the banning of certain practices. That may be easier to enforce than purely   market based approaches.
 If China is making big and costly efforts to minimize emissions, it should not find itself  undercut on  global markets by  other countries, who are less  scrupulous or  who think they will are less affected by climate change than China will be. 
While decarbonising power generation through carbon capture and storage will be immensely costly, it is technically becoming more feasible.  Decarbonising transportation, particularly air transport, will be even more difficult and we not even begun to do anything at all about that.

HERBS FOR HEALTHCARE

As someone who has a deep business interest in the development of Traditional Chinese Medicine, I note that you have   developed herbal medicine, drawing on desert resources. The pollution free  growing  herbs for medicine, on ground that was previously unproductive, shows how traditional knowledge ,dating back thousands of  years, can be  supplemented by  the most modern  agricultural techniques and the most advanced  soil science. Congratulations on this work. It is all the more important because of the big increase that has  taken place in the price of herbs used in  Traditional Chinese medicine
I am also very impressed by the way you have developed desert tourism.  This resort attracts 300,000 tourists a year.  Just as I hope to see many more Chinese tourists coming to Europe,  and to  my own  green island of Ireland in particular, I hope many Europeans  will come   as tourists to the  resort you have  developed here in the  desert. They will be interested to see that the carbon dioxide released by the hotel is reabsorbed by the rare plants growing in the Desert Plant Centre.

THE CAUSES OF DESERTIFICATION

 Desertification happens when land, that was previously capable of supporting life, is turned into infertile sand by erosion.  This   is a problem in all the continents of the world, except Antarctica.
Deserts , worldwide,   expand by about 50000 square kilometres  per  year, and desertification threatens the livelihoods of a billion people in  110 countries.  In Europe, Spain is particularly affected.
Desertification is a particular problem in China.
 During the 1990s, the Gobi desert grew by an area equivalent to half the size of Pennsylvania.  The immediate cause was wind eroding a soil that has become so dry and loose  that it is prone to be blown away.   Sandstorms from Northern China reach as far as Korea and Japan.  Ironically, flooding can also lead to desertification by physically loosening soil.
One Chinese study suggests that soil becomes prone to erosion for the following reasons

1.)    Overgrazing (30%). The number of sheep grazing here in Inner Mongolia trebled in the 1980s, and that reduced the  amount of  grassland  by almost  two thirds. I am told that a plague of rats also contributed to the problem.

2.)    Excess land reclamation of unsuitable soil (27%)
3.)    The collection of firewood (33%)
4.)    Water misuse (10%).   Excessive irrigation can make soil salty and infertile.

The pressure of providing food and fuel for an increasing population can lead people to overuse land in a way that eventually leads to the destruction of its fertility.
 We have also got to conserve water, because water demand is increasing rapidly. Urban societies consume more water than rural ones.  Meat production requires much more water than grain production, but as people get richer, they eat more meat.

THE SOLUTION……. PLANT TREES, MANAGE GRASSLAND, CONSERVE WATER
The solution is to be found by 
      planting trees,
      managing grassland better and
      conserving water in river basins.
Curbing bad practices and initiating good practices requires effective political organisation.  It requires sacrifice and imagination. In the past ten years, China has begun to reverse the process of desertification.  This is a magnificent achievement.
I am sure it was not easy.
 Practices that cause desertification are often profitable in the short term, and practices that halt desertification will usually impose costs and losses in the short term.
The losses will often fall disproportionately on some groups in society, while the longer term gains will often  be  reaped by  others, who will have undergone none, or few,  of the  costs.

A VITAL ROLE FOR GOVERNMENT

 Acknowledging these difficulties honestly is important. Compensating the losers, at least in part, is also important if reforms are to be implemented in a good and cooperative spirit. This is something that can usually only be done by Government.  The private sector, whose natural and proper goal is profit maximization, is not able to redistribute gains and losses across society as a whole, and over time,   in a ways that ensure the best long term outcome.
One of the reasons the United States has such difficulty coming to a global agreement on climate change is that its citizens distrust Government as such, and thus do not want to see their own Government taking resources form some people and giving them to others, even in the interest of combatting  climate change.  This is also one of the reasons the United states continues to wastefully deplete its water resources.
In the European Union, the public does not have the same problem with Government action as such, but the European Union consists of 27 sovereign states, who are pooling sovereignty on a voluntary basis. So the distribution of burdens between different states is liable to become subject to nationalistic disputes. This will become acute if countries, many of whom already have precarious fiscal positions, find themselves having  to pay fines,  because they have exceeded  carbon emission limits that they agreed to previously. 
DISTIBUTING COSTS AND BUILDING TRUST….SIMILARITIES TO EUROPE’S TASK IN PRESERVING THE EURO
No matter what ones political system is, these distributional issues are acutely political , and can only be resolved  by the use of political  skill,  and by persuading people that  they can trust their neighbours enough to make  sacrifices for them,  in the confident  expectation of being allowed  to share  in rewards later.
 In essence, that is also the problem at the heart of the difficulties the EU is experiencing with euro and Greece. A problem of trust, and a problem of distribution of burdens.  So combatting desertification and climate change, and preserving the euro, have something in common!
The world population is now 7 billion and will eventually reach 9 billion. We cannot afford to lose fertile food producing land if we are to avoid famine.  That is why this Forum is important to the world as a whole.

Speech by John Bruton, Former Prime Minister of Ireland, and  current President of the Irish International Financial Services Centre ,  in Qixinghu,  Inner Mongolia ,China  at  9.30 am on    9 July 2011  to the Kubuqi  Desert Forum

DUST BOWLS AND DESERTS —- HAVE WE ANYTHING TO LEARN FROM CHINA?

I am going to China this week to take part in a conference in Ordos, in Inner Mongolia, on desertification.  Desertification happens when land, that was previously capable of supporting life, is turned into infertile sand.  This   is a problem in all  the continents of the world, except Antarctica.
Deserts , worldwide,   expand by about 50.000 square kilometres  per  year, and desertification threatens the livelihoods of a billion people in  110 countries.  In Europe, Spain is particularly affected.
Desertification is a particular problem in China.
During the 1990s, the Gobi desert grew by an area equivalent to  half the size of Pennsylvania.  The immediate cause is wind eroding a soil that has become so dry that it is prone to be blown away.   Sandstorms from Northern China reach as far as Korea and Japan.  Ironically, flooding can also lead to desertification by loosening soil.
One Chinese study suggests that soil becomes prone to erosion for the following reasons
  •    Overgrazing (30%)
  •    Excess land reclamation of unsuitable soil (27%)
  •    The collection of firewood (33%)
  •    Water misuse (10%).   Excessive irrigation can make soil salty and infertile.
The pressure of providing food and fuel for an increasing population can lead people to overuse land in a way that eventually leads to the  destruction of its fertility.
The solution is to be found by 
  •       planting trees,
  •       managing grassland better and
  •       conserving water in river basins.
Curbing bad practices and initiating good practices requires effective political organisation.  In the past ten years, China has begun to  reverse the process  of  desertification.
The world population is now 7 billion and will eventually reach 9 billion. We cannot afford to lose fertile food producing land if we are to avoid famine. 

We have also got to conserve water, because water demand is increasing rapidly. Urban societies consume more water than rural ones.  Meat production requires much more water than grain production, but as people get richer they  eat more meat.

COPYRIGHT JOHN BRUTON & CONTENT