John Bruton

Opinions & Ideas

Category: European Union (Page 1 of 2)

NATIONALISM AND PERIPHERALITY…..TWO PROSPECTIVE LEGACIES OF BREXIT

bonnetThis long article by Andrew Duff, a former MEP, draws on the recent House of Lords reports on the subject, to illustrate how complicated the Brexit negotiations must inevitably become. 

After 40 years of interdependence and common rule making, the UK is now setting out to reconstruct the entire apparatus of a separate nation state, with separate rules, and separate rule making and  adjudication systems. This is how Theresa May has chosen to interpret the referendum result, by ruling out any jurisdiction of the ECJ.

A nation state apparatus, that would have sufficed in the 1960’s, will not suffice for the 2020’s, because the world is much more interdependent, more interconnected, and faster moving, now than it was then.

The exercise the UK is undertaking will involve establishing a new bureaucracy, to deal separately with all the regulatory questions that previously were delegated by it for collective decision within the EU. The EU superstructure will have to be replicated in London, at some cost.

The UK may want to develop separate standards for many goods and services, but, if it does so,  UK firms will have the extra cost of complying, not only with the new UK standards, but with EU standards as well for any goods and services they wish to export to the rest of Europe.

There will thus be duplication at firm level, as well as at government level.

The only way to minimise this would be to go for a “soft Brexit”, whereby the UK would adopt EU rules, but without having a vote on those rules.

Such an option may be sustainable business wise, but it will not be sustainable politically in the medium term.

It would represent a substantial diminution of UK “sovereignty” relative to the “sovereignty” the UK now has as a full EU member. This would soon become politically unacceptable to the British people.

One can easily imagine the anger of the “Daily Mail” about the UK having to enact, and enforce, EU standards, on which the UK had had no vote!  But that is what a soft Brexit would entail.

For these reasons, a “soft Brexit” will only be a temporary arrangement, and one should  not invest all ones hopes in it.

I am coming to the view, reluctantly, that the only viable long term options are either

  • a “hard Brexit” or
  • a decision by the voters of the UK to stay in the EU after all.

The latter seems very unlikely indeed at the moment, because UK voters will not want to admit they made a mistake. They have no sentimental attachment to Europe anyway and sentiment seems to trump economics in voter’s minds nowadays.

But that could change gradually.

British people are, many for the first time, now learning about what the EU really is.

At the best of times, British people were never very curious about the EU or how it worked. Now they are required to find out, as part of the exit negotiation. It will be something of a revelation!

For 40 years, UK voters have been passengers in the EU car. Now, having decided to get out of the car, they are taking a first look under the bonnet.

They will discover how interconnected the different parts of the engine are, and how difficult it would be to link into some, but not into all, parts of the engine.

The UK will have to build its own engine from scratch now, and decide in which direction it wants the new car to travel. There was no consensus at all on the latter point on the “Leave” side in the referendum. Some want a more globalised Britain, the majority wants the exact opposite.

Ireland will be a spectator in this process.

The physical isolation of Ireland from the rest of the EU, in the event of a hard Brexit, is a problem that will need much thought at EU level, in the interests of European solidarity.

Experts in logistics, transport and communications need to be brought together at EU level, to examine how the costs of this physical isolation of Ireland can be minimised.

Commisioner Verstager, who is responsible for EU competition policy, should look at what needs to be done to ensure that states that are physically isolated from the core of the EU, like Greece, Malta, Cyprus and Ireland,  can always participate on an equal basis in the internal market.

POLITICS AND DEBT……ITALY NEEDS BRAVE LEADERSHIP

Italy and EU Puzzle Pieces - Italian and European Flag

Italy and EU Puzzle Pieces – Italian and European Flag

Crunch decisions are approaching for Italy and its new Prime Minister Paolo Gentiloni.

The really difficult decisions are not about who gets which Ministry in the new government, or even about the timing of elections, but about how to cope with the problems of some of Italy’s banks.  

On Friday last the European Central Bank rejected a request from Rome to delay a proposed private sector  led rescue of Monte Paschi di Siena (MPS), Italy’s oldest and most troubled bank.

According to the Financial Times, this leaves Italy with little option but trigger a government led bailout of the bank which will involve imposing losses on junior bondholders in the bank, many of whom are small savers rather than anonymous financial institutions. “Burning the bondholders” thus does not have quite the same popular appeal in Italy as it had in Ireland a few years back!

But the burning of bondholders, in a bank that has to be rescued by the taxpayer, is now required by EU rules, and the EU is a rule based institution. The primacy of rules, rather than of raw power, are what distinguishes the EU from other international arrangements, and are among the reasons EU membership is particularly valued by smaller countries, like Ireland.

Avoiding a taxpayer led bailout of MPS, by forcing the other Italian banks, who are better off than MPS, but have troubles of their own, to bail out MPS could infect the  entire Italian banking system and weaken confidence in it.  And all banking, like all money itself, depends on confidence. As it is, Italian banks have only half the capital they need to meet  the required safety standards.

Of course it is true that if the Italian economy was growing more quickly, its banks would not be in such trouble. The Italian economy is expected to grow by only 1% this year, well below the EU average. In fact the Italian economy is the same size as it was in 2007, whereas other countries , which are also subject to the  disciplines of the euro zone, have grown substantially since 2007, France by 20% and Spain by 15%.

This contradicts those who want to blame the euro for all Italy’s problems.

For example, David McWilliams has mistakenly claimed  that “the strictures imposed by the euro have destroyed the Italian economy”. He said that Italy’s economy grew, before it joined the euro. But it was only able to do this because it repeatedly devalued its currency. This gave temporary relief but concealed the underlying problems. Devaluation was an anaesthetic, not a cure.

Once it joined the euro, this had to stop

When  Italy’s  leaders decided to join the euro, and  set the rate of exchange between the old lira and the  new euro, they  knew  that  devaluation was impossible thereafter. This was a freely taken Italian decision.

Unfortunately Italian voters do not see things that way and blame Europe for problems that are actually home grown. For example in a poll last September, only 38% of Italians felt their country had benefitted from being in the EU, whereas 51% felt it had not .

In truth, the problems of the Italian economy predate the decision to join the euro. Government debt levels were increased during the 1980’s and were already  well above the recommended 60% of GDP  when Italy joined the euro.

Italy was already an ageing economy at that stage, with early retirement and historically low birth rates. The ageing of a society inevitably saps its growth potential, as even the Chinese are now beginning to find.

There was the added difficulty, since 2000, that the Italian consumer and fashion goods sector competed directly with goods coming from Asia, and Italy could no longer devalue  to meet this  new competition.

Italy did not adapt to this new reality.

Productivity remains poor in Italy.  For example, since 2007, Spanish productivity per hour increased by 10%, whereas Italian productivity per hour actually DECLINED by 5%. Both Italy and Spain are in the euro, so the euro does not explain this difference in  productivity performance.

The public sector in Italy is expensive and inefficient. The hourly pay rate in the Italian public sector is 40% above that in the private sector, whereas in France and Germany, the hourly rate in the public sector is below that in the private sector.

Incidentally in Ireland, hourly pay in the public sector is 25% above that in the private sector.

In Italy, healthcare and pensions absorb 20% of GDP, as against 12% in Ireland.

There are also severe inefficiencies in Italy’s commercial sector caused by lack of adequate competition. The transport and energy sectors are particularly costly.

There is a lack of competition in the legal system. The Italian courts are the third slowest in the EU. For example it takes 500 days to get a case into court. This means that it is difficult and costly for Italian businesses to enforce contracts and collect debts owing to them. Court delays have also contributed to the increase in non performing loans(NPLs) in the Italian banking system. NPLs are now 18% of all loans, as against 6% in 2007.

A Competition Bill, which would have helped resolve some of these problems, was watered down in the bargaining between the Senate and the Lower House.

Renzi’s constitutional reforms, which would have reduced the power of the Senate, would have dealt with that problem. Unfortunately they were rejected by the voters.

The Gentiloni government, like that led by Renzi, has a  majority in the Lower House, but will  now face an increased risk of  any reforms it proposes, being bogged down in the  Senate, because the Senate  will feel empowered by the referendum result.

The electoral arithmetic may have changed, but the arithmetic of Italy’s debts has not.

Leaving the euro would actually increase the nominal value of those debts, because the debts would still be owed in euros, but the money to pay them would have to be raised in a new, and probably, less valuable Italian currency.

Resolving Italy’s problems will require statesmanship of a high order in Rome, Brussels, Frankfurt and Berlin. Ireland overcame a similar crisis since 2010, and the willingness here of all sectors of society here to meet the painful challenge quickly , and leave politics aside till later, may provide a model that Italy could follow.

THE MECHANICS OF BREXIT AND ITS EFFECT ON IRELAND

 

cropped-irish-flag.jpgI am deeply honoured to have been invited to speak here today in the company of your President, John Comer, and of the Minister for Agriculture , Michael Creed.

I worked with the Minster’s father, Donal Creed, when Donal was spokesman on Agriculture for Fine Gael, and I was the then secretary of the Party’s Agriculture Committee. That was 1969, long before we joined the Common Market.

I remember many meetings with ICMSA at that time, and was always impressed by the seriousness and realism of the way in which your organisation represents its members and agriculture more generally. The fact that your President, John Comer, comes from Co Mayo is evidence of the broad national reach of ICMSA.

I have been asked to talk about Brexit. Everything I say will be a personal opinion, not representing anyone else.

Everyone would like to know what form Brexit will take, and how it will affect Irish farmers, and the rest of the country too. Unfortunately, it is next to impossible even to begin to answer that question until we first see what the UK will actually look for. Only then can we begin to speculate in an informed way about how the negotiation might go.

In what I say today, I will try to describe the mechanics of the three negotiations that will probably take place

  • the negotiation of a Withdrawal Treaty.
  • the negotiation of Treaty covering the Future Framework of relations between the EU and the UK and, possibly
  • the negotiation of an Interim Agreement, to apply after the UK has left the EU, but before a full Future Framework Treaty has been finalised and ratified

TWO NEGOTIATIONS….ONE ABOUT WITHDRAWING, THE OTHER ABOUT THE FUTURE

Article 50 of the EU Treaty says

Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”

AGREEING GUIDELINES ON THE EU SIDE

It is important to note here that it will be the Commission that will do the actual negotiation with the UK, but it will do so under guidelines agreed by the Heads of Government of the 27 Member states meeting in the European Council. It will also have to bear in mind that the final deal will have to approved by the European Parliament  too.

Given that the European Council operates by unanimity, and that its members are heads of government and each of them have countries to run at home, agreeing these guidelines will take time and be difficult.

Any one country can object to any part of the guidelines.

There are wide differences between EU member states in their sensitivity to developments in the UK. It is to be expected that

  • some will emphasise a continuing right for their citizens to live and work in the UK,
  • others will emphasise trade with the UK, and yet
  • others will emphasise how the make gains for their businesses from the exclusion of UK competition(for example in financial services).

THE FUTURE FRAMEWORK FOR EU/UK RELATIONS

It is also important to note that Article 50 says that the proposed Withdrawal Treaty shall take account of the” framework” of the withdrawing states” future relationship” with the Union.

There is no guidance in the Treaty as to what this “framework” document might say.

In their Referendum, UK voters were asked if they wanted to leave the EU, but their views were not sought on the sort of framework for future relations they would approve.

Nothing appeared on the ballot paper about

  • access to the EU market for UK produced goods or services, about leaving the European Economic Area (which includes several non EU countries) or about what UK voters would want the agreement with EU to say about
  • the status of UK citizens already living in EU countries after the UK has left
  • the status of EU citizens already living in the UK or about
  • the future rights of EU or UK citizens to live and work in one another’s  jurisdictions or to avail of social services while there

DIFFERENT PROCEDURES FOR CONCLUDING THESE NEGOTIATIONS

Article 50 continues

“ That agreement  (for the withdrawal of a state) shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.”

So while the Council guidelines for the negotiation require unanimity, the actual approval of the final withdrawal Treaty can be done by qualified majority.

But there is a time limit because Article 50 goes on to say

“ The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period. “

This two year time limit applies to the Withdrawal Treaty, but there is no time limit for the negotiation the Framework for future relations.

If , within two years of the sending by the UK of its article 50 letter seeking to withdraw from the EU, a Withdrawal Treaty has not been agreed by the UK on one side, and a qualified majority  on the EU side, the UK is simply out of the EU, with no rights at all on the EU market beyond those enjoyed  by any state anywhere in the world.

This is a real doomsday scenario, but it is a realistic possibility, because the gaps in the negotiating positions between the UK and a potential blocking minority of EU states (26.3% of weighted votes representing at least 35% of the EU population) are very wide.

But, at least, the withdrawal Treaty can be approved on the EU side by a qualified majority (73.9% of the weighted votes  representing 65% of the EU population).

Agreeing the terms of the Framework agreement with the UK, of which the Withdrawal Treaty must “take account ” will be even more difficult, because this Future Framework Agreement will probably have to be unanimously agreed by ALL 27 EU states and their parliaments, unless it is a very narrow agreement covering only trade in goods.

If it is wider than this, it is likely to be deemed a so called “mixed agreement”, which is an agreement that includes matters where the competence is shared between the EU and the member states.

A ROCKY PATH TO RATIFICATION FOR A FUTURE UK/EU FRAMEWORK DEAL

In this case, every member state parliament, as well as every member state government, will have to approve the Framework agreement with the UK.

This is what happened with the recently concluded EU Agreement with Canada, which, as you will remember, was threatened with a veto by Belgium, because under internal Belgian constitutional arrangements, all five subsidiary parliaments in Belgium must agree to any international treaty signed by Belgium, and two of them did not agree.

A similar threat to an Agreement with the UK could come from a decision to call referendum  in a member state.

For example, the future of an EU Agreement with Ukraine has been put in doubt by its defeat in a referendum in the Netherlands, requisitioned by a petition of only 300,000 signatories out of a total population of 17 million, and on a turnout of slightly above the minimum required 30%.

It is easier nowadays to organise petitions online, so this could be another threat to a Framework Agreement with the UK, not just in the Netherlands, but in any other countries with similar petition/referendum provisions.

The UK could not really object to this happening because the UK itself, on 23 June, used a national referendum to make a decision affecting the whole of Europe in a profound way.

COULD THE UK CHANGE ITS MIND?

Could the UK change its mind, when it discovers that things are not turning out as its voters, and those politicians who favoured leaving the EU, hoped they would?

Article 50 says

“ If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

Article 49 requires the unanimous agreement of all existing member states, and of the European Parliament, to the readmission to the European Union of a member state, just as it would to a state applying to join for the first time.

In other words, the UK, seeking to rejoin the EU after having left, would be in exactly the same position as Serbia, Montenegro or Turkey is today.

A more interesting question is whether the UK, having written its Article 50 letter in March 2017, could decide, say in late 2018, just before the two year time limit  would expire in March 2019, that it wanted to withdraw the letter, and stay in the EU after all , on the existing terms?

This is not an easy question to answer.

Article 50 doesn’t say that notification once given can be withdrawn, but nor does it say that notification can’t be withdrawn.

The prevalent view is, perhaps, that notice can be withdrawn prior to actual withdrawal from the EU but the position is not clear. If revocation of an article 50 notice was not accepted by all other EU members, the Court of Justice of the European Union would have to decide the point.

This may all sound a little fanciful  at this point, but it is possible that, by late 2018, the UK might have a different view on EU membership to the one it had on 23 June 2016.

It would certainly have to organise another referendum, which could be difficult given the rigid two year deadline for complete exclusion, in the absence of an agreed Withdrawal Treaty.

But if the discussions on the Framework Agreement were going really badly, or if  the economic costs of separation were just proving greater than expected, and if prospects did not look like improving, a majority of MPs might decide to consult the voters on the possibility of taking back the Article 50 letter.

Already there is some sign that UK opinion has shifted slightly since the 23 June Referendum.

Asked in a Eurobarometer  poll last September, three months after the Referendum, whether they thought the  UK benefitted from being in the EU

  • 56%  in the UK said they thought the UK had benefitted, an increase of  5 percentage points on the previous poll and
  • only 34% said they thought it had not, a drop of 2 points on the previous poll

If that trend were to continue, things could look different in the late 2018 or early 2019.

But it would be very difficult politically to change course. National pride would be hurt.  Telling voters they made a mistake is rarely a winning political strategy……even though voters do sometimes make mistakes

CONTENT OF WITHDRAWAL TREATY

Let me now turn to what I think will be the content of the two negotiations

First ,the Withdrawal Treaty negotiation and

Second, the Framework of Future Relations negotiation

My understanding is that the Withdrawal negotiation itself is likely to cover quite a narrow, but very contentious, range of issues.

These will probably include five broad topics

  • What the UK will have to pay to leave,  what will be the UK share of any remaining financial commitments dating from its time as a member, covering matters such as pensions of EU officials , other obligations outstanding, less the UK ‘s share in EU assets
  • The mechanics and costs of moving EU institutions, like the Banking Authority and the Medicines Agency, out of the UK and into an EU country (perhaps Ireland)
  • The Rights of EU citizens already living in the UK, and UK citizens already living in an EU country. The rights of future migrants from the UK to the EU, and vice versa, will be for the Future Framework negotiation
  • The relationship of the UK with the WTO after it has left the EU

+ Special situations concerning the land boundary between the UK and the EU, as in Ireland and at Gibraltar. It is good that this being dealt with upfront, and not just buried in the wider Framework negotiations. But, obviously, the content of the final Framework deal, if there is one, is bound to affect what happens on the Irish border.

While these five issues are, on their face, straight forward, the UK contribution to the EU budget was elevated into a big issue in UK politics over the past few years. False statements were made before the referendum about the amount the UK would get back by leaving,  and a gain of £350 million a week was promised by some who now hold high office in the UK government.

So this could become a very difficult discussion.

CONTENT OF FUTURE FRAMEWORK TREATY

The Future Framework negotiation will be a much wider one and will take in matters of direct relevance to ICMSA members, such as

  • whether the EU Common External Tariff will have to be levied on agricultural products coming into Ireland from the UK, or Northern Ireland
  • how the origin of imports from the UK will be verified to ensure that they are not dumping third country products on our market,
  • how veterinary and food safety standards will be verified, and how and by whom smuggling will be suppressed.
  • whether geographic indicators will be recognised
  • if there will be a tariff free quota to allow existing trade levels to continue or if all trade will bear the appropriate tariff

The tariff issue will be particularly difficult in the food sector, because this is the sector in which the EU has the highest tariffs, and restrictions, on third country imports in order to protect the incomes of EU farmers.

Everything depends on what sort of food and agriculture policy the UK decides to follow outside the EU. Will they go for a “cheap food” policy like they had before they joined the EU 40 years ago or will they retain current supports for farmers and rural life?

There is no indication so far as the what choice they will make, at least after 2020.

Negotiations about product  safety, rules of origin, and related issues will arise with all products and services, even those to which no tariff applies, because once it has left the EU, the UK will be free to depart from recognised EU standards.

If the UK rejects the jurisdiction of the European Court of Justice, as Prime Minister May says she will, there will no longer be a referee to interpret the rules of the shared market, and all markets need a referee.

If one wants to assess the likely complexity of a Future Framework Agreement the UK and the EU will have to negotiate with one another, one has only to look at the content of the Agreement the EU has concluded  with Canada.

As well as tariffs and trade, that agreement had to cover

  • product testing and standards….would each side recognise the other side’s tests for every product or would there be duplication?
  • mutual recognition of professional qualifications….a huge field
  • the right of EU and UK firms to sell goods and services to government entities in one another’s jurisdictions
  • protection from discrimination against EU investors in the UK and vice versa
  • access to fishing grounds

The EU and the UK negotiators will not only have to reach agreement on the substance of how these matters are to be handled, but  they will also have to agree a procedure for settling disputes about interpretation, because the UK, outside the EU, will not accept the rulings of the European Court of Justice (ECJ)

But probably the most contentious issue in the Future Framework negotiation will be right of people to emigrate to the UK from the EU, and vice versa.

Control of Immigration was not, initially, one of the UK’s complaints about the EU.

The Blair government actually opened the UK to  central and east European EU immigrants, in 2004, before it was obliged to under the Accession Treaties for those countries.

But, during the Referendum campaign, immigration became the central debating point ,and leaving the EU was presented as the way of “taking back control” of immigration.

The case was over stated.

Of all immigrants moving to the UK in 2014,

  • 13% were UK citizens returning home.  
  • 42% were EU nationals emigrating to the UK. But the biggest number,
  • 45%, were non EU nationals moving to the UK.

The UK already had full “control” over 45% of all immigration which came from non EU countries, and the Minister who exercised that control then, the Home secretary, is now the Prime Minister.

But in politics, perception is sometimes more important than reality, and immigration from the EU is perceived to be a problem by UK voters.

The EU side has taken a firm line on this. There will be no participation of the UK in the EU Single market without free movement of people to work. If capital is free to move, people should be free to move too. No Single market without free movement. Discrimination on the basis of nationality is excluded within the EU, and a state should not be able to leave the EU, introduce such discrimination, but still have all the other benefits of access to the EU market. If that option were the open, others EU members would be inclined to follow the UK out of the EU.

The fact that there must be unanimous agreement, by all 27 EU countries, to the Future Framework is relevant here. Countries like Poland will not be keen on a breach of the free movement principle.

WILL AN INTERIM DEAL BE NEEDED IN 2019?

I think it should be clear, from all I have said, that finalising a Framework Agreement with the UK within the two year time frame will be so difficult as to be almost impossible.

The Agreement with Canada took six years to negotiate and it was much less complex than any agreement with the UK would be.

So what happens, in late March 2019, when the 2 year deadline is reached, if the Withdrawal Treaty has been agreed, but  if the Future Framework negotiations are still going on, with no certainty whether they are going to succeed or not?

In this case, some form of interim agreement with the UK might have to be reached. This might involve the UK leaving the EU, losing its voting rights, but still retaining full access to the EU market until a final Framework Agreement was reached.

There will be almost as many knotty questions to answer about  that sort of an Interim Agreement as there would be about a Final Agreement.

For example, what contribution would the UK  then continue to make to the EU budget?

Would there be a time limit on the Interim Agreement, and could it be extended?

Would the UK accept the jurisdiction of the ECJ during the Interim?

Would an Interim Agreement have to be approved by the parliaments of all 27 member states?

Does the EU Treaty allow for such an Interim Agreement?

CONCLUSION

My conclusion from all of this is that the decision of the UK Conservative Party to have a referendum on EU membership, without a clear alternative being known, was unwise because it will lead to a huge diversion of time and talent away from more constructive purposes.

Since the Referendum, the UK government has, retrospectively, interpreted the vote to mean a decision to leave the EEA, and leaving the European Customs Union, things that were not on the ballot paper, and are not required by its wording at all. That is undemocratic.

Brexit poses disproportionately great challenges to Ireland. It will require us to build new and stronger alliances in every EU country, and to do that we will need to understand the interests of other countries almost as well as we understand our own. We must not make the mistake David Cameron made of thinking that an understanding with Germany will deliver what we want from the EU. In the EU, every country counts.

………………………………………………………………………………………

Speech  by John Bruton,  at the AGM of the ICMSA at 4pm on Monday 28 November in the Castletroy Park Hotel, Limerick

 

ITALY……..EUROPE’S NEXT BIG CHALLENGE

Screen Shot 2016-08-08 at 17.31.08Now that the UK has decided to leave, the next big problem facing the EU is the constitutional reform referendum in Italy later this year.

In April the Italian Parliament has passed a package of constitutional reforms.  They were designed to improve the efficiency and stability of the Italian state, and reduce the ability of the Italian Senate to bring the government down.

Although  the package passed, it did not get  the required  66% majority in both Houses  to come into  immediate effect.

The only way the package can come into effect now, is if it is approved by the Italian people in a referendum.

The Prime Minister, Matteo Renzi, decided that this referendum will take place this autumn, and he has gone further and said that, unless the people approve the proposals, he will resign.

David Cameron’s recent failed  referendum gamble makes this look now to be  a more risky decision than when it was taken.

The proposed constitutional  reforms  include

  • reducing the size of the Senate
  • reducing the power of the Senate  both  to block legislation that has been passed by the Chamber of Deputies, and to bring down the government
  • reducing the power of Italian regional governments

Major reforms of the Italian state are urgent because the debt of the Italian state is 130% of GDP, and the state has to find resources for an ageing population, and influx of refugees, and bank rescue.   The Senate has proved to be an obstacle to some reforms.

Reforms are needed to increase the overall productivity of the Italian economy.  This  requires

  •  a simplification of the tax code,
  • less taxation of work and more on property,
  • simpler public administration and
  • a simpler and more efficient courts system.

State owned enterprises also need to face  more competition, as do some professions and retailers.

Before it joined the euro, Italy was able to devalue its way out of short term problems, as the UK is doing now. But devaluation  enabled it to avoid making big and difficult reforms.

Since it joined the euro, Italy has reformed its previously unviable public pension system, a task Ireland and the UK have yet even to discuss seriously. So Italy’s underlying ability to make big reforms should not be underestimated.

The polls on how Italians will vote in the referendum are very volatile.

The proportion in the “Don’t Know” category ranged from 19% to 42% in the two most recent polls.

Furthermore Prime Minister Renzi’s party lost ground in recent city elections, including in Rome.

Renzi’s main opponents are the “ 5 Star” Movement, who make their policies, and select their candidates, by polls over the internet. They reject the idea of career politicians and prefer politicians to be amateurs, who do the work on a short term basis. This sentiment is similar to the rejection of the opinion of “experts” and “elites” in the recent UK Referendum.

The trouble with amateur politicians is that, while they may have good ideas, they may lack the necessary technical ability, and staying power, to see their ideas through to full and effective implementation.

Italy is the 8th largest economy in the world. It has an excellent quality of life, and a great reputation.

Unfortunately its state system does not work well and there is not enough political consensus to put things right. This is not a weakness that Italy can afford. It needs a strong and effective state.  A rise in the price of fuel, or in international interest rates, could cause a big crisis for Italy, unless it has a state that is capable of making and fully implementing difficult decisions.

That is why Prime Minister Renzi’s referendum is so important for Italy, and for Europe.

 

 

THE EU IS A FRAGILE, VOLUNTARY, UNION THAT CAN ONLY WORK IF THERE IS GIVE, AS WELL AS TAKE

cropped-European-Union-flag-006.jpgThere is no denying that the Brexit decision is a blow to the EU. There is a real risk now that the 27 EU countries will start pursuing national interests at the expense of the common EU interest. If they do, everyone will lose.

The 27 EU states need to act resolutely to strengthen EU wide democracy, to ensure respect for EU rules, and to show that the EU can do business efficiently with the rest of the world.

The European Union is not a monolith. It is a voluntary Union of 28 states, with no independent tax raising power.

It operates on the basis of rules, which its 28 members must freely respect. If they fail to do so, the EU ceases to mean anything.

These rules are made under the authority of the EU’s Treaties, which have been ratified by all member states, and the Treaties can only be amended if all 28 states agree.

The more members the EU has, the harder it becomes, by a form of geometric progression, for the EU to amend its Treaties.

A club that has no power to change it basic rules will eventually fossilize and die.

The EU’s 28 members are, in theory, sovereign equals, regardless of differences in population or wealth.  But voting weights do recognise differences in size, on all issues where unanimity is not required.

The EU makes trade deals on behalf of its members, using the extra bargaining power that its size gives it. But because it negotiates on behalf of 28 states, not just one, it can be harder for the EU to finalise a deal that it would be for one state, negotiating alone.

In the case of some Trade deals, it is sufficient  for them to be ratified by the European Parliament alone.

In others, all 28 national parliaments must ratify too. In these cases, the EU has much more difficulty being an effective trade negotiator.

RESPECT FOR RULES BY MEMBER STATES IS AN EXISTENTIAL NECESSITY FOR THE UNION TO SURVIVE

If one or more member states get into a habit of failing to respect EU rules or directives, the EU ceases to be operational, particularly if the states failing to respect the rules are bigger states.

Recently France has threatened to flout an existing EU directive because efforts to amend it, in a direction France wanted, are being blocked by the national parliaments of 11 EU states.  In response the French Prime Minister, Michel Valls, is threatening not to implement the existing directive, which would completely undermine EU rulemaking.

Michel Valls said

“If it is not possible to convince … France will not apply this directive.”

That is a direct threat to the EU from a founding state. It is really dangerous

COMPROMISES BETWEEN NATIONAL INTERESTS NEEDED IF EU IS TO DO TRADE DEALS

Likewise, if it becomes too difficult for the EU to complete trade agreements because a few states within the EU hold up the agreement in order to advance a national interest, then the EU’s utility as a trade negotiator fades away.

This was an argument  advanced by some of  those who favoured Brexit, namely that the UK could negotiate its own deals more easily outside the EU, without having to wait for 27 other countries to agree. That thesis will be put to the test soon.

Commission has conceded, under pressure from national government facing early elections, that the Trade deal with Canada must, not only be ratified by the European Parliament and the  28 government, but by the 28 national parliaments as well. This is a risky decision.

If the EU’s deal with Canada fails because one or two national parliaments fail to ratify it, years of work by Canadian and EU negotiators will go down the drain. Other countries will begin to doubt if negotiating with the EU is worth their time. The Brexit advocates will have won part of their argument.

A lot more is at stake here than the content of the agreement with Canada.

TREATY CHANGE MUST ALSO BE POSSIBLE

It has become accepted wisdom in every EU capital now that Treaty change is off the agenda. This is because  of

+The requirement to have a referendum in Ireland on a Treaty change involving a transfer of sovereignty
+ the voluntary decisions of France and the Netherlands to have referenda on certain EU matters, in the Netherlands case  even on a minor agreement with Ukraine.
+ the expectation that a Treaty change would be preceded by a cumbersome  Convention.

The net result of all of this is that the EU will not consider Treaty changes, even ones that might make it more democratic.

If that remains the case, the EU will eventually freeze up, because it will not be able to respond  to new circumstances, and its member states will have to look to other, less democratic or transparent institutions than the EU, to advance their collective interests. One could even see NATO being called into service for more broadly defined “security “ purposes.

Some may argue that Treaty change in general is not urgent.  I agree there is no need for a comprehensive review of the Treaties, so soon after the Lisbon Treaty came into force.

But a Treaty change to respond to concerns that emerged in the UK referendum campaign, for example changes to make the EU more visibly democratic and accountable , should be possible.

For example, Treaty changes could be envisaged to

  1. Have  the President of the European Commission be elected directly, in a two round election, by the entire electorate of the EU. 
Have the President of the Euro group be similarly elected by  the Euro zone countries
  2. Give National Parliaments of the EU, if a minimum number agree, a power to require the Commission to put forward, for consideration, a legislative proposal within the EU competence in the Treaties.
  3. National Parliaments already can delay EU legislation, so why not allow them make a positive proposal?

UK GOVERNMENT FIRST STEPS NOW

Now that the UK has voted to leave the EU, the first step has to be taken by the UK Government.

It must decide what sort of relationship it wants to have, trade wise, with the rest of the world.

At the moment, that is governed by agreements negotiated, for the UK, by the EU.

If the UK simply leaves the EU, all those agreements will  fall, as does UK membership of the World Trade Organisation(WTO). Agreements with dozens of non EU countries, will have to be negotiated again, at the same time as negotiating  with the EU. A lot of work.

Basically the UK government will have to choose choice between three options

  • Leave the EU and, like Norway, apply to join the European Economic Area (EEA),
  • Negotiate a new special trade agreement, like the agreement Canada or Switzerland has with the EU
  • Leave the EU without any trade agreement and apply, as a separate country, to join the WTO

The EEA option could be put in place quickly and would not disrupt trade all that much.

The EEA is a readymade model for external association by a non member with the EU. It could be taken down from the shelf, so to speak.  But, as an EEA member, the UK would still have to implement EU regulations and contribute to the EU budget. It would not allow curbs on EU immigration. The EEA option has been dismissed by “Leave“ campaigners, but it does involve leaving the EU, and  complies  with the literal terms of  the  referendum decision.

If the UK experiences severe balance of payments problems over the summer, the EEA option may become attractive. The UK already has a big balance of payments deficit anyway and capital inflows may be inhibited by the Leave vote. The EEA option would buy time, and would not preclude leaving altogether eventually.

The second option, a special trade deal, would be much more difficult.

It would require a detailed negotiation on every type of product or service sale between the UK and the 27 member countries of the EU, including across our border.

Such an agreement would take years to negotiate (probably 7 or 8 years), because it would be subject to domestic political constraints, and political blackmail attempts, in all EU countries, each of whom  would have to ratify it. If it proposed curbs on immigration from the EU, the EU countries affected  would make difficulties with other aspects of the deal, as a bargaining counter.

It is unlikely that a Trade Agreement would allow the UK to sell financial services into the EU. Indeed it would be in the interest of EU countries, that might hope to attract financial services, to make sure the UK got few concessions .

The third option…leaving the EU with no agreement… could come about, either because that was what the UK chose, or because the negotiations on a special trade deal broke down or were not ratified by one or two EU states.

It would require the application of the EU common external tariff to UK or Northern Irish products crossing the border into the Republic.

Average EU tariffs are around 4%, but on agricultural goods the mean tariff is 18%. The imposition of these tariffs is a key part of the Common Agricultural Policy, which protects the incomes of EU farmers. We would have no option but collect them at customs posts along our border. All forms of food manufacture and distribution within the two islands would be disrupted.

The disruption of the complex supply chain of the modern food industry would be dramatic and the knock on effects impossible to calculate.

A similar effect might be felt by the car parts industry, which is subject to tariffs, and is important to some parts of England.

Meanwhile the remaining 27 countries of the EU, and the EU institutions, will have a lot of thinking to do too.

They need to respond decisivly to the (false) claim that the EU is not democratic.

All EU legislation has to be passed by a democratically elected European Parliament, and also by a Council of Ministers who represent the democratically elected governments of the 28 EU countries.

The members of the European Commission must be approved by the democratically elected European Parliament.

But there is room to further  improve  EU democracy.

I  would make two suggestions ,

  • The President of the European Commission should be directly elected by the people of the EU in a two round election , at the same time as the European Parliament Elections every 5 years

2.)To create a closer link between National Parliaments and the EU, a minimum of nine national parliaments agreeing should be sufficient to require the Commission to put forward a proposal on a topic allowed by the EU Treaties . National Parliaments can already delay EU legislation, so they should be free to make positive proposals too.

That said, the EU should avoid over promising, and should not allow itself to be blamed for all the problems people face in their daily lives.

The EU is not an all powerful monolith that can solve the problems caused by technological change and globalisation. It is just a loose voluntary confederation of 28 countries, with no tax raising powers of its own. Nor is the EU responsible for debts mistakenly taken on by its members.

If the losers of globalisation and technological change are to be sheltered from misfortune, it is for the 27 states, not the EU itself, that has the taxing power to redistribute money from the winners from globalisation  to the losers.

The UK has not been particularly generous in this regard.  Its welfare system is modest, and its investment in productivity improvement has been poor.

In some respects, UK voters  have just mistakenly blamed  the EU. for the effects of the  omissions, and under performance, of successive UK governments.

THE OFFER TO DAVID CAMERON….IS IT REALLY A “REFORM”?

The-UK-and-EU-flags-010The concessions the UK is winning to encourage its citizens to vote to stay in the EU could make the EU even more complicated than it is.

They could slow down decision making still further, at the very time when problems are becoming more, not less, urgent. This would not be “Reform”. Yet David Cameron says he wants the keep the UK in what he calls a “reformed European Union” Already the UK is

  • exempt from joining the euro,
  • exempt from the common border rules of Schengen, and
  • does not have to take part in EU activities to combat crime(although it can opt into these on a pick and mix basis).

It is a semi detached member of the EU, which makes it harder for the UK to exercise leadership in the EU.

Now the UK is seeking, and may be granted at a Summit next Thursday, new concessions. These concessions are being sought because UK public opinion is convinced that the EU is undemocratic and should be curbed. They are convinced the only locus of true democracy for the UK is Westminster. The truth is that neither the EU, nor Westminster, is a perfect expression of democracy.

In Westminster a party can have an overall majority of the seats with only 37% of the vote.

In the EU, while the members of the European Parliament and the Council of Ministers, who make the decisions each have democratic mandate, the people of Europe have only a very indirect vote on who is to be the President of the European Commission. EU voters, unlike Westminster voters, do not have a sense that they can throw the EU government out of office. But, instead of focussing on how to make the EU level governance more democratic, UK negotiators have concentrated on enhancing the capacity of the 28 national parliaments to block EU law making.

Given that the UK is a global player, one would have expected it instead to focus on making global and EU wide governance more democratic, rather than slowing things down or simply repatriating powers to the national level.

NEW OBSTACLES TO EU LAWMAKING ARE NOT “REFORM”

As part of the package devised to respond to UK requests, EU rules are to be changed to allow 55% of national parliaments to apply to have an EU law blocked before it has been properly considered by the Council of Ministers and the European Parliament. This “Red Card” power is to be exercised within 12 weeks of the law having been presented at EU level.

This blockage is supposed to be grounded on a claim that the EU law breaches to principle of “subsidiarity”.

Subsidiarity is a philosophical concept, around which there can be so many differences of opinion, that it does not constrain this blocking mechanism being used for reasons of pure political opportunism. One could easily envisage an EU law, that had been introduced to open up the EU market for legal services, being opposed virulently by lawyers in every member state.

Or one could imagine an EU law, to open up the energy market across borders, being opposed by high cost producers in a number of states. As it is, the lawyers and the energy companies can, and do, already fight such laws in the European Commission before they are presented, and then in the Council of Ministers and the European Parliament while they are being debated, voted upon, and compromised in and between Parliament and Council.

Now, to allay UK worries, a new field of operation is being opened up for the lobbyists who want to stop an EU law…the 28 national parliaments of the EU.

EU lobbyists will now be tempted to open offices in the capitals of all member states, so that they can be ready to lobby on behalf of clients to persuade members of national parliaments to use of the Red Card to stop a future EU law a client might not like.

Parliamentary majorities can change and many EU countries are governed by coalitions or minority governments, so one could envisage EU lobbyists seeking to exploit domestic inter party rivalries, or domestic instability, to win support for the use of a Red Card by a national parliament. All national parliaments are equal in this system, so the 55% blocking vote could come from countries that represent only a small minority of the EU population. It is therefore surprising that the UK, which is a big country, is championing this mechanism.

It is surprising for another reason.

The UK is primarily an exporter of services rather than goods. It is in the area of services, rather than goods, that the EU Single market is furthest from completion.

Therefore services is an area where the EU will need to pass the most laws to sweep aside national restrictions on competition from other EU states.

As a services exporter, the UK would have much more to gain than to lose from EU Services liberalisation legislation. Yet it is the UK which seeking a red card that would make it easier for opponents of liberalisation to delay and block EU liberalisation legislation!

PREVENTING THE EURO ZONE ACTING QUICKLY IN A CRISIS IS NOT “REFORM”

Another proposed concession to the UK could also complicate EU decision making on economic and financial matters.

Here the UK concern the is about rules being made to govern the euro, which might inhibit UK financial operators making full use of the euro zone market. On the other hand, as we have learned from the crisis, banking problems in one jurisdiction infect others very easily. UK and US banks were exposed by the Greek crisis and did not complain when EU action protected their interests!

The EU authorities may have to act very quickly if there is a new banking crisis. The EU banking union is not complete, especially as far as deposit insurance is concerned.

Yet to satisfy the UK, it is now proposed that a member state, like the UK that is not in the euro zone, be free to appeal a proposed EU law, which is proposed to safeguard the euro, to the European Council (where it may be able to veto it)

This is despite the fact that it is also proposed, in the special package for the UK,

  • that non euro members are to be freed of any financial obligation for euro area costs, and that,
  • in non euro zone countries, supervision of banks be a “matter for their own authorities” according to the text.

The proposed procedure would allow a non euro member, like the UK, to delay an EU law that is needed, in the view of the states that are in the euro, to safeguard their currency or the ensure the solvency and proper supervision of their banks, in the interests of customers and depositors.

It is unclear what happens when the appeal is brought to the European Council.

The European Council usually decides issues by unanimity, so one could envisage an urgent EU law to safeguard the euro or the euro zone economy being vetoed there by the UK, which was not even in the euro.

This is giving the UK power without responsibility.

The proposal for the UK does say that “member states whose currency is not the euro shall not impede the implementation of legal acts linked to the functioning of the euro area and shall refrain from measures which could jeopardise the attainment of the objectives of the economic and monetary union”.

But these are all matters of judgement on which it may not be easy to find unanimity, especially when time is short, and national interests collide.

BRITAIN SHOULD RAISE ITS SIGHTS…THE ONLY WAY TO WIN THE REFERENDUM

For the past two millennia, Britain has had a vital interest in the peace and prosperity of continental Europe.

It has gone to war many times to preserve it.

English is the language of EU governance. The EU Single Market is a modern application of the ideas of Adam Smith.

Two hundred years ago, when European states were much less interdependent than today and was recovering from the Napoleonic Wars, the then UK Foreign Secretary, Lord Castlereagh, persuaded the European powers to make, in his words, “a systematic pledge of preserving concert among the leading powers and a refuge under which all minor states may look to find their security”.

While his views on Ireland were mistaken, Castlereagh’s views on Europe were not. Rather than seeking a series of further exemptions, and so called “reforms” that will slow further an already complex EU lawmaking system, David Cameron should follow Castlereagh’s example and set out his country’s own comprehensive vision for the peace and prosperity of Europe.

Then he might give himself a chance of winning the Referendum he has chosen to have

POPULISM REACHES ITS LIMITS

Alexis Tsipras
Because of its Classical past as the founder of democracy, Greece was treated more tolerantly, than other countries would have been, when, during the nineteenth century, it defaulted several times on its commercial creditors.

That history created bad habits of mind. Now its creditors are the taxpayers of other countries, who are less tolerant, and less conscious of their intellectual debt to Plato and Socrates.

The present Greek debacle is the result of a clash of political cultures.

On the one hand is the culture of the European Union, where every decision has to be mediated through complex institutions representing 28 different countries, each with its own political culture, and then often has to win the assent of the European Parliament and of an independent European Central Bank. 

Theatrical gestures and moments of brilliant eloquence count for little in this world. Building a good track record, with good civil service staff work to back it up, is what counts in the EU political culture.

EU bailout decisions also have to be approved by the IMF, a global body, most of whose members and clients are far poorer than the Greeks. This creates an additional layer of interests which Greece must try to satisfy, as well as its EU partners.

In this setting, credibility and patience are vital to success. The new Greek government did not have patience, and soon it lost credibility as well.

In stark contrast with what was needed, it seems to me that the Greek Government is made up of people who come from a revolutionary tradition, where it believed that progress will come from a harsh rupture with the past, and whose proponents envisage a nationalist or socialist utopia, once that rupture is complete.

The Greek government are also people who have little or no previous experience of government, and who have thrived politically by agitating against the existing order, without the necessity of explaining how things would work after they had obtained power, and they had to survive and govern in the complex interconnected reality, that is the global economy of today.

That the Greek electorate would elect such people to office is explained by the desperation in to which they had been led by the irresponsible policies pursued by successive Greek governments since the 1980’s, who tried to win the votes of Greeks by promising them a standard of living that was not matched by their productive capacity, and by the mistaken decision to take Greece into the euro before the results of these bad policies had been properly rectified.

The problem is that the activities of the new government made things much worse than they were when they took office.

By creating doubt about whether they would honour the debts incurred by their predecessors, the new government created a crisis of confidence, and this loss of confidence led to a suspension of normal commercial activity. By looking for debt relief, before reforms were implemented they put the cart before the horse.

The underlying problem of Greece is a lack of productivity and export potential, but the Greek government, and to a great extent the EU authorities too, continue to ignore this. Greece’s productivity problem will take years to solve, not least because Greece is an elderly society. The structural reforms urged by the EU will help, because they will clear the clogged arteries of the Greek economy and allow talent to be reallocated to where it can do something productive. But the ageing of Greek society will remain an intractable problem.

As a result of the drama generated by their new Government, Greeks, instead of focussing on ways to invest to make more money, became in recent months obsessed instead with protecting what they already had. Whereas the economy was on a path towards modest growth, when the old government left office, it quickly plunged back into recession as money was withdrawn from the Greek banks, thereby further weakening Greece’s ability to meet its ongoing expenses, and to pay its debts as they fell due.

The timing of the Referendum, AFTER Greece has already run out of money, and on a proposal that has already been withdrawn, could not be worse. It compounds the panic and uncertainty. It is probably in breach of the Greek constitution. Apparently the Greek constitution does not allow referenda on fiscal issues, and the bailout offer contains many elements that are fiscal.

If ever there was a case study that shows how important it is to have political leaders who understand and face up to their responsibilities, and who deal with the world as it is rather than as they might wish it to be, it is to be found in Greece today. The lessons for Ireland are too obvious to require to be spelt out.

I wonder how Paul Krugman and others, who were so free with their advice to the Greeks in the early months of the crisis, are advising the Greeks to vote in the referendum on the 5 July.

CLUB DE MADRID IN FLORENCE…

A SPEECH BY ROMANO PRODI

I am attending a meeting of the Club de Madrid, an organisation of former heads of government working to promote democracy, in Florence this week. The question being addresses is whether, after the 1990’s when democracy was spreading widely in the wake of the fall of Communism, democracy and human rights are now in a phase of relative decline again.

The opening keynote speech was made by Romano Prodi, former Italian Prime Minister and European Commission President, who gave an excellent speech.

He reminded us that having a market economy, as China does, does not guarantee democratic government. The dispersal of power, which is essential for a market economy, can help democracy, but it does not assure it. The Chinese” model” could become a challenge to democracy.

He worried that, if democratic governments fail to deliver acceptable economic results, democracy itself will come to be questioned. 

This is a particular risk in the European Union, where

   +  the ageing of societies,
   +  the absence of structural reforms, and
   +  the rigidities caused by the incompleteness of the euro zone,


are contributing to slow growth and high unemployment, especially among young people.

In some countries, democracy suffers from perpetual electioneering, and from too many veto points which prevent necessary changes being implemented.  Short term thinking predominates as a result.

Romano now teaches in universities in China, and he remarked that, whereas ten years ago Chinese were constantly asking questions about the European Union, they no longer do so. Their questions focus now on the lesson to be learned from Thucdydies, the ancient Greek historian, who wrote about the risks of war when a rising power meets an established one (Sparta and Athens). Clearly the Chinese see such risks as between themselves and the US.

A REPORT ON THE STATE OF DEMOCRACY IN EUROPE

We have before us a series of reports on the state of democracy and human rights in different parts of the world. The reports were prepared with the help of the Bertelsman Foundation. The scope of the study includes 

+  the fairness and openness of elections,
+  the rule of law and separation of powers,
+  internal democracy in parties,
+  strategic thinking within the governmental system,
+  efficient use of human and material resources
+  anti discrimination laws


Generally speaking, the Nordic countries came out best. There were some problems in southern Europe. Among post Communist countries, the Baltic states and Poland had the best record. The situation was somewhat more difficult in the Balkan area.

 WORRYING TRENDS IN HUNGARY…..CONCENTRATION OF POWERS

The countries to come in for the most severe criticism were Hungary, and to a lesser degree Turkey. The findings in regard to Hungary are the most alarming, given that it is a full member of the EU. 
In respect of Hungary, the report says

“The government  has tried to monopolise political power by taking control of a number of independent agencies and supervisory bodies and had undermined the judiciary’s independence”

It adds that Hungary’s new media laws

“strengthened government control over the media by vesting a Media Council, exclusively composed of persons affiliated with the Government party, with control of media content  and the granting of broadcasting licences”

These matters deserve the attention from the European Union institutions.

THE GROWTH OF SUPPORT FOR POPULIST PARTIES….

UNDERSTANDING THE NEED FOR RESPECT, AND FOR RECIPROCITY, ARE THE KEYS TO THE FUTURE OF THE EUROPEAN UNION.

What have the following in common?

+ The Scottish 45% YES to break up the UK….+ The Growth of National Front in France….+ English anti EU sentiment and support for UKIP…. + The strength of Tea Party  and the polarisation of politics in the  USA and + The growing support for anti immigrant parties in Sweden, Denmark, and the Netherlands.


They have this in common. All these parties want to withdraw from some international commitment or other, and shut the doors of their nation to outside influences. 

What support for these parties shows is that an introverted and recessive Nationalism is on the rise again. This is a reaction against globalisation by those who have benefitted less from it than others did. 

It should be noted that all have benefitted from globalisation through cheaper food, clothes, and cheaper communications. But some have benefitted much more than others, and the “others” are expressing their disgruntlement through votes for these populist parties.

These parties want a repatriation of powers to the national level, and even complete withdrawal from international bodies like the WTO, the European Union, and the European Convention on Human Rights.

People supporting these parties say they do not understand how Brussels works, or how Westminster or Washington works. But do they really understand any better how their local council works ? 

This is why I am unconvinced that concession of their literal demands would actually remove the discontents that lie behind support for these parties. 

For example, I am not convinced that an elaborate system of federalism within UK, or UK withdrawal from the EU, would actually assuage the anger being expressed through UKIP votes. The experience of post Franco regional devolution in Spain is not completely reassuring.

In Scotland, the younger and the poorer sections of population   were the most alienated, and voted most strongly for Scottish independence . This is despite the fact that public spending per head, on which poorer people depend more, is already higher in Scotland than it is in England.

It is £10,152 per head in Scotland, as against £ 8,529 in England. On those figures, complete fiscal would worsen the position of poorer Scots.

A SENSE OF BEING RESPECTED IS WHAT IS MISSING

I believe these vote reflect a sense of not being listened to, of not being respected, than they do a demand for particular constitutional or institutional changes. 

Do Scots feel respected, and listened to, in UK? 

Do working class voters of the National Front, UKIP, and the  Tea Party voters feel respected by metropolitan elites?

I fear the answer in “No” in all cases

FEAR OF THE FUTURE

Fear of what may happen in the future drives people in the direction of populist solutions, and parties.
States have made health promises and pension promises that will become unaffordable, as the proportion of the population that is elderly grows. Meanwhile, many private  pension schemes are underfunded.

Another pervasive fear is that of redundancy in mid life. In such a circumstance, it is difficult to know what new skills to go for, and it is equally difficult to move to another city to find work, after a certain age.

ANTI IMMIGRANT SENTIMENT

These fears feed anti immigrant sentiment.
Immigration disturbs bucolic image some people have of their ideal national environment….forgetting that, if they actually lived in their ideal environment, they would probably find claustrophobic and boring.

There IS  also competition for low skilled jobs, and immigration DOES drive some wage rates down
But automation and labour saving devices are devaluing all forms of low skilled work anyway, and probably are more important drivers of income inequality,

INEQUALITY OF INCOMES

The growth in inequality in incomes is also a factor in the growth in support for populist parties.

Inequality is driven by many factors.

It is driven by technology . Technology replaces low skilled workers, while increasing the rewards of the higher skilled people, or insiders, who control the technology.
One should not ignore the importance of celebrity in causing inequality. Celebrity brings disproportionate increases in relative income. Celebrity footballers, and celebrity CEO’s, represent the same phenomenon. A firm’s stock price is driven partly by the reputation of its CEO and that means a well known CEO can command a higher salary package.
Inequality is also driven by access to financial leverage, and assets that can be used for leverage. Thus high financial sector incomes evoke particular concern.
These are all issues that need to be dealt with by national governments, through the tax system.

But they should not be used to justify turning away from the EU or from the benefits that globalisation has brought.

THE MEANING OF NATIONAL IDENTITY 

We are not going back to a world of Empires in which Europeans, or people of European ancestry, could make the rules of the game to suit themselves.
We can perhaps limit the pace of immigration, but we cannot stop it.
So we need updated civic education of ourselves, and of immigrants to our shores, on questions like

“What does it mean to be British?”
“Can one be British, Scottish and European all at the same time?”
“What does it mean to the Irish and European, but of African ancestry?”
” What are the values that underlie these statements?” 

RECIPROCITY

We also need to work out the practical implications of reciprocity as a principle of international relations.

Let me illustrate this by reference to debates now taking place in the UK.

If EU citizens immigrating to UK to work are to have restricted access to state benefits, how might that affect the entitlement to health service of the 2m UK citizens living in other EU countries? 

If the UK want access to an EU Single market to sell its goods and services does that means accepting  common EU standards for those goods and services….even fiddling rules on thing that seem  not to matter…unless we all recognise everyone else’s standards regardless which could be bad for consumers?

In particular, the UK wants a single EU market for services…..but services are provided by people, and these people may need to travel to another country to provide those services….which gets you back into the immigration debate 
If Britain wants a veto on certain EU laws, rather than have them decided by majority, 27 other countries will also have to get that veto too.

If , as some Conservatives propose, the UK withdraws from the European Convention on Human Rights, what effect will that have on the hard won agreement on policing in Northern Ireland, which depends on access for police complainants to the EHCR? Is the plan just to take England out of the EHCR, or to take Northern Ireland out as well?

DEMOCRACY IS THE KEY TO RESPECT

If the EU is to survive, EU citizens need a sense that they can cast a vote to change the men or women at the top in the EU, in the same way as they can change the people at the top in Dail Eireann, in Westminster, in Birmingham city council, or in their local tennis club.

It is not that citizens want to get into the details….but they do want a vote on the EU’s direction of travel

Globalisation has been taking key decisions above the level of individual states for a long time. That is nothing new. But the time has come to make it more democratic.

The International Telegraph Union dates back to 1865

The International Court in the Hague dates back to 1945

Traditionally the  rules, governing bodies like these,  were negotiated in private in the form of inter state Treaties, between diplomats, and later interpreted by judges. 
Elected people were often only involved at end of process in saying a simple YES or No to result, by ratifying the Treaty or not. 

The EU is different.

In the EU, politicians in the Commission initiate laws, and politicians in the European Parliament and the Council decide if these laws will come into effect.

In this sense, the EU is MORE democratic than virtually all other international organisations in the world….but it’s not democratic ENOUGH

I believe the direct election of the President of the European Commission by the 500 million people of the EU, not simply by the 28 heads of EU Governments, is needed. 

Only in that way will we  create a well informed democratic EU public opinion. That would be the best answer of all to the populists.

WHY EUROPE NEEDS TO GET ITS ACT TOGETHER

Gorbachev’s advisor Alexander Arbatov, said , in 1989 at the time of the collapse of the Soviet Union, to a western diplomat

“we have done you the worst of services, we have deprived you of an enemy”

Since then, the lack of perceived external threat has led to weak economic management in Europe, to an unnecessary war in Iraq,  to increasing debt,  to weakened military strength, and to the making of insincere promises that could not be fulfilled when to going got tough.

Now, that period is over. 

We now see, thanks in part to ill considered promises of eventual NATO membership to Ukraine and Georgia, that those countries have suffered pre emptive annexations of parts of their territory by force by Russia. The UN Charter and the Helsinki accords on territorial integrity of states have been binned.

In Eastern Ukraine we are now witnessing I recently heard a US general describe as “a new kind of warfare”.

Meanwhile, the growing strength of China’s navy distracts US from Europe, and European and US interests are diverging because the US is  becoming energy self sufficient, whereas Europe is not.

And productivity in Europe is lagging.

According to the OECD, EU labour productivity is  growing at 0.6% pa, while productivity in the rest of the OECD is growing at  1.2% a year.

CONCLUSION

Rather than contemplating separatism, Europeans should be thinking about our precarious position in the 21st century world, and uniting to do what we can do about it.


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