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Big changes on the way after UK election?

There’s never been a British general election campaign like this one! With just over a week to go before the May 6 election day it seems from the opinion polls that big changes could be on the way.

Here the Brits stand, midway between a Continental tradition of coalition government with multiple parties, and a US-style presidential battle between party leaders. The talk in Britain is of a hung parliament with no clear majority, of coalitions and of new voting systems. For some this is a threat (“look at Belgium!”), for some a promise (“look at Germany!”).

It’s the televised debates between the party leaders which have transformed this election. Nick Clegg, relatively unknown in Britain, former member of the European Parliament, member of Leon Brittan’s cabinet in the 1990s and now leader of the UK Liberal Democrats, was given his chance to shine. In an electorate still bitter at the parliamentary expenses scandal Clegg was able to distance himself and his party from the two parties which have dominated British politics for the last 60 years and to channel some of the indignation of the public in his favour.

His appeal to younger and sceptical voters seems to be particularly telling. We’ll see after the third debate next Thursday April 29 whether the Liberal Democrats can sustain their poll rating which puts them on level pegging with the Conservatives!

Britain’s relations with the EU have played a curious role in the debate so far. For both Nick Clegg and Gordon Brown the Conservatives’ secession from the European People’s Party was a stick to beat David Cameron. “Joining with a bunch of nutters” said Clegg. Cameron refused to be drawn in response other than to refer to the Polish president’s tragic death. Cameron might after all be prime minister in two weeks’ time and need all the friends he can get.

Cameron was also circumspect on EU policy issues, providing just enough to feed the appetite of a sceptical party (“in Europe, but not run by Europe”) and attacking the failure to hold a referendum on Lisbon, but giving no hostages to fortune. Take immigration for instance, which is one of the most emotive issues in this election. David Cameron, as well as Brown and Clegg, repeatedly stressed that Conservative policies would be directed at controlling the flow of “non-EU” immigrants, with passing reference to future accessions but not even a token threat to migration within the Union.

The catch phrase of the first of the debates was “I agree with Nick”, which did Mr Clegg no harm, but Gordon Brown did attack him for being anti-American – a clear confirmation of the British prime minister’s foreign policy instincts which give as much weight to the trans-Atlantic relationship as to Europe. Given his party’s opposition to the invasion of Iraq, it was an accusation that Clegg could live with.

It is impossible to predict how the euro-sceptic UK Independence Party will do on May 6. There is little sign that Europe is playing a major part in the general campaign, but any revolt against the main parties could translate into votes for UKIP and there are parts of the country such as Cornwall where anti-EU feeling runs strongly.

No one is counting their chickens. There’s little doubt that the Liberal Democrats will do well in terms of total votes in next month’s vote, but this could well translate into second place in many constituencies – the consequence of the first-past-the-post electoral system. My own prediction, or rather guess, is that the demand for change and poor turnout will hit the Labour vote, that the Conservatives will secure a small overall majority and that the Liberals will strengthen their position in the House of Commons.

This would not be a comfortable outcome if it put a newly elected prime minister David Cameron in hock to an anti-EU fringe in his own party.

Michael

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April 26, 2010 at 2:26 pm Leave a comment

Zero growth offers no relief in euro crisis

Zero GDP growth in the eurozone for the last quarter of 2009 and a feeble recovery in the first quarter of 2010 is not what Europe’s finance ministers might wish to hear, but that’s the latest message from the OECD.  It just shows what a challenge Europe faces in restoring the strength of public finances, most especially in Greece and other eurozone countries facing massive budget deficits.

There is certainly no sign of growth in the Greek economy. Yet without economic revival there is no way that Greece’s euro crisis can be settled.

It seems clear that the package of “support” announced by Europe’s leaders on March 25-26 will do little to resolve the crisis. The package was so hedged about with conditions that the markets have given it little credence. The spread between Greek and German interest rates on ten year bonds has continued to widen, from three to four percentage points since the summit – not a sign of market confidence.

The summit statement is more of a threat than a promise. Bringing in the IMF as the first potential source of funding echoes the family threat – “just you wait till your father comes home” – the disciplinarian who can put on the pressure which European institutions cannot. And if bilateral support is required from fellow members of the eurozone it will be offered at quite explicitly penal rates of interest, despite the fact that the high cost of borrowing is a significant element in the Greek crisis.

Many commentators have identified the summit as evidence that Germany has turned its back on European integration. Indeed, it was quite a shock to see that even Charles Grant of the Centre for European Reform, a staunch supporter of European integration, could say that “not until this year’s euro crisis did I think the EU could go backwards”. He saw the summit outcome as symptomatic of deep divisions between Germany and France, of the isolationism of Germany, and of Europe’s introspection.

The summit did confirm beyond a peradventure that there will be no economic government for Europe. Any ambitions France might have in that direction are clearly thwarted despite a commitment in the summit communiqué to strengthen economic governance. President Sarkozy presented the outcome as a triumph for Franco-German co-operation; in fact it was largely Chancellor Angela Merkel’s work.

Germany’s dominance in European affairs is evident. Berlin is now more important to Paris than Paris is to Berlin. The economic challenge of German reunification has been met and relations with Russia have become a new priority. The German constitutional court has put the brake on any federalist tendencies. People may criticise Germany for its failure to boost domestic spending, but there is little sign of any response in Berlin.

Today’s OECD report has made one politician very happy: UK prime minister Gordon Brown. He can rejoice at the news that the British economy is predicted to grow at an annual 2 per cent rate in the first quarter of 2010 and by 3.1 per cent between April and June. Not bad timing for him, just one day after calling a general election. He can also take comfort from the fact that at least Europe is not likely to pose any problems for him on May 6 election day. After all, it was he that resisted Tony Blair’s wish for the pound sterling to join the euro in 1997!

Michael

April 8, 2010 at 10:17 am Leave a comment

Bilateral deals will open up EU trade

Eighteen months ago, when the world economy seemed on the brink of collapse, one of the biggest fears was that economic depression would trigger a global wave of protectionism. So it’s all the more surprising that Europe is busily working on new trade treaties. The EU is on the brink of finalising a major free trade agreement (FTA) with South Korea, has opened negotiations with Vietnam and Singapore and is aiming to conclude a deal with India by next October.

Bilateral agreements are being forged at the same time as global trade negotiations are blocked. The Doha Round seems completely becalmed, and unlikely to move as long as President Obama remains domestically on the defensive. There was some tut-tutting in Brussels when the US president announced a target of doubling of US exports, rather than a doubling of trade – but you can see his problem! Still, there is a G-20 commitment to finalise Doha by the end of 2010.

All the planned bilateral deals are giving the EU’s trade commissioner Karel de Gucht a busy year. His trip round the Asian countries earlier this month seems to have been highly productive. He returned home with an agreement to launch an FTA with Vietnam, the start of bilateral talks with Singapore and a “new impetus” for negotiations with India.

It certainly makes sense to strengthen trade relationships with these dynamic economies, but of course there will be resistance from some of Europe’s industrial players, for instance Europe’s automobile, textile and footwear industries, and no doubt from others who are concerned about the environmental or social aspects of potential deals.

The new elephant in the room is the European Parliament, newly empowered by the Lisbon Treaty as co-decider on international agreements. MEPs will want a big say in the negotiating process and will be no push-over in ratifying free trade agreements – see the letter to the Council from Vital Moreira, Chair of the EP Committee on International Trade, demanding more involvement.

As Commissioner de Gucht has said, putting the parliament on equal terms with the Council “will change the political environment and will also probably change my life”.

As a former MEP de Gucht knows the kind of problems to expect. For instance could the EU-South Korea FTA, which was initialled last October, be blocked by the Parliament because the death penalty has not been formally abolished in South Korea, or because public procurement liberalisation does not cover rail transport, where Alstom and others are facing discrimination in the Korean market?

The Koreans hope the deal will be signed off by the end of April. Wishful thinking, perhaps.

The economic impact of these EU-Asian FTAs is potentially enormous. With South Korea, for instance, whose EU trade in 2008 amounted to €65 billion, 97 per cent of tariffs would be abolished within three years, amounting to €1.6 billion saving for EU exporters. Both goods and services would be covered by the agreement, with clothing, luxury goods,  drinks, legal and financial services, pharmaceuticals, advanced engineering and low carbon technologies all expected to benefit.

A judicial dispute settlement mechanism would also be introduced.

As for other bilateral partners, EU-Vietnam trade amounted to €12 billion in 2008 and EU-Singapore trade to €55 billion. An agreement with India would be the biggest prize of all. The aim is to double bilateral trade to €150 billion dollars annually over the four years following a free trade deal.

If these agreements can be negotiated, ratified and implemented in the time scales envisaged it will be a major achievement for the new Commission and demonstrate a welcome resilience in Europe’s abilities to resist protectionism even in difficult times.

Michael

March 23, 2010 at 11:16 am Leave a comment

Commission breaks impasse on GMOs

The new Barroso Commission has wasted no time in grasping the GMO nettle, after years of delay and obfuscation. It is authorising the cultivation and use of Amflora, a new genetically modified potato for industrial use, while at the same time working on a policy which will allow individual member states to forbid the cultivation of GM crops on their territory. I guess this optional approach is the only way to resolve an impasse based far more on sentiment than science.

It was about time that the Commission moved on the GM issue. Of course genetically modified products should be rigorously examined for any impact on the natural environment, but blanket opposition to their development makes no sense when it rejects all use of a technology which has the potential to increase food and raw material supplies in the most impoverished regions of the world.

Austria and Italy were the first to protest against the Commission’s decision; Hungary and Greece can be expected to follow. These countries will surely forbid their producers from growing the crop, but of course they can do nothing to prevent its industrial use.

Germany, on the other hand, will be quick to authorise production.  It will be interesting to see what France’s policy will be, given the importance of potato and starch production there.

The new decision, together with authorisations for the importation and processing of three GM maize varieties, marks a major policy switch by the Commission. It’s clearly linked with the transfer of the biotech portfolio away from the anti-GMO Environment DG, whose Commissioner Stavros Dimas from Greece fought a dogged rearguard action to prevent authorisation, to the Health and Consumer Policy DG, where incoming Commissioner John Dalli says that all scientific issues have been “fully addressed”.

It’s 13 years since an application for Amflora was first submitted by BASF. The European Food Standards Agency issued positive reports back in 2006, supplemented in 2009 with a further report on antibiotic resistance which discounted any risks.

This week’s decision on Amflora is carefully hedged about. The potato provides a starch suitable only for industrial uses such as textiles and paper manufacture and not for human consumption, although its by-product can be used for animal feed. Strict cultivation rules are to be applied.

Of course traditional plant breeding methods remain fundamental to crop development,  which in turn depends on the availability of cultivars from across the world, so – closer to home – I was pleased to see that EU legislation now makes it much easier to get hold of “heritage” potato cultivars, forgotten varieties able to resist those scourges of the potato crop such as blight and eelworm. I shall be growing Pink Fir Apple and Charlotte this year. I hope they show sturdy resistance.

Michael

March 5, 2010 at 12:35 pm 3 comments

Shock: British journalist praises Barnier

At last a touch of balance in Britain’s Daily Telegraph over the nomination of Michel Barnier to the internal market portfolio, with responsibility for financial services! I guess it’s no coincidence that the writer, eurosceptic Ambrose Evans-Pritchard, was the newspaper’s correspondent in Brussels from 1999 until 2004 – the same time span as Barnier’s former term as commissioner. No doubt he has personal experience of the Frenchman’s qualities.

I mention this in the context of the furore over recent months concerning EU appointments, linked in the UK with the debate over financial services regulatory reform and the perceived threats to the City of London. Maybe the frenetic atmosphere is beginning to disperse.

It certainly didn’t help when President Sarkozy told Le Monde that the English were “the big losers in this business”, although the wave of aggression whipped up in sections of the British press over Van Rompuy, Ashton and the Commission nominees was quite a provocation, to say nothing of prime minister Brown’s own trumpeting of the Ashton appointment as a national victory in response to Conservative criticism.

It’s just as well that Sarkozy’s plan for a reassuring joint visit to London with Barnier was knocked on the head. It really would have looked like a French conspiracy.

Barnier has been calming things down. His job, he says, is to strengthen Europe’s financial centres, including London. The fears which had been expressed in the City of London were “very exaggerated”.

There has however been a shift in the political mood which is reflected in the composition of the new Commission. The three key economic portfolios – internal market, competition and industry – go to the Club Med with commissioners from France, Spain and Italy. Free markets, raw in tooth and claw, will not be the flavour of the next five years. The drive is clearly for more regulation, especially in financial services, regulation which has to operate at a European level. That’s no surprise, given that the near-collapse of the global banking system did have Anglo-Saxon origins.

An economic double-dip with more lost jobs would put further pressure on EU policy-makers. The challenge for the Barroso II Commission is to maintain progress in the single market, to stimulate business activity, so helping drag Europe out of recession, and to continue the liberalisation of sectors like energy and telecoms. The nominated energy commissioner, Günter Oettinger, may have the most challenging role, given the problems which German firms have with the gas and electricity packages. Neelie Kroes, on the other hand, should be in her element with the “digital agenda”.

As for financial services, the Council of Ministers and the Parliament are of course working on proposals for financial regulation which also date from the outgoing Commission – the legacy of Charlie McCreevy. These include the establishment of the European Systemic Risk Board managed by the ECB and the three European supervisory bodies for banking, insurance and investment services.

There is some progress on these dossiers. It seems that ministers last week agreed that the powers of the three supervisory bodies will be circumscribed, allowing appeal to the Council by a member state which believes its sovereignty is being infringed. MEPs have yet to discuss these proposals.

Meanwhile the treatment of hedge funds and private equity remains a highly contentious issue which may run well into next year – perhaps beyond a British general election, which some rumours suggest could be in March 2010.

Michael Berendt

December 11, 2009 at 11:23 am 1 comment

EU appointments: visionaries need not apply

We live in the age of media celebrity. So no surprise at the critical and sometimes bitter press reaction to the nomination of Herman Van Rompuy and Catherine Ashton, virtually unknown beyond their own parishes, as Council President and High Representative respectively. As someone said, it was like a TV talent show where the choice of the people (and the press) was ignored by the judges. If only we’d been able to phone in!

I guess there are two kinds of disappointment: from those who were seeking charismatic European leadership to force the pace of change and talk face to face with other world leaders; and from those like UKIP who wanted appointment of a powerful figure like Tony Blair to demonstrate that the feared “European Superstate” really had been born. Two sides of the same coin, in fact.

It does at first sight seem a sad reflection on the EU’s lack of ambition that it should choose people with relatively little experience at the highest level of international affairs.

The reality is somewhat different though. This is a period of consolidation. Visionaries need not apply. The European Council was looking for a president who could provide continuity in the management of its business, escape from the six-monthly presidential rotation (although that will still apply for the specialist councils) and build longer term relationships on the international stage. By all accounts Van Rompuy seems well suited to this chairmanship role. His term as Belgian prime minister certainly demonstrated considerable political skills.

It strikes me that creation of the European External Action Service led by the High Representative could be much more far-reaching in its impact than the presidential appointment. Catherine Ashton will have a formidable task, but one with great potential – to “conduct” the Union’s common foreign and security policy and defence policy, making new proposals for policy development and carrying out the Council’s mandate. She will both chair the Foreign Affairs Council and sit as vice president in Commission meetings.

She has to create a European diplomatic service bringing together up to 6,000 officials from the Commission, Council and member states, which for the first time will integrate the Commission’s capabilities with the foreign affairs decisions of the Council, so the trade, aid and substantial budget resources of the Commission can be used to leverage the Council’s policy ambitions. A joined-up European foreign policy at last!

Who knows whether this institutional change will transform Europe’s role in the world as it should, using the soft power policies implemented by the Commission to achieve broader political goals and moving beyond foreign-policy-by-press-release (with all respect to the great efforts made by Solana).

Let’s take one region – the Middle East. The European Commission has for years provided the funding to keep the Palestinian Authority alive, yet the Council has developed no coherent political strategy, for instance on the recognition of Hamas after its success in the Gaza elections and the question of Jewish settlements. It’s time that Europe became an equal partner of the United States in such issues.

There is a host of areas where a stronger EU policy must be developed if Europe’s influence in the world is not to decline further in the face of major shifts in economic and political power across the globe. There is need for a European voice in NATO, much stronger co-ordination of policy within the United Nations and other international organisations and coherent European policies towards China, Russia and others.

In other words there is huge amount for Rompuy and Ashton to do, but they will only make progress if the member states accept the need for a concerted EU approach to the external problems which the Union faces and are willing to toughen up policy vis a vis the rest of the world.

Michael Berendt

November 23, 2009 at 12:02 pm 3 comments

Vote for continuity before Copenhagen

The European Parliament’s convincing vote for Jose Manuel Barroso’s second term as European Commission president puts him in a stronger position than any candidate since Jacques Delors in the 1980s. To have secured the votes of the European Conservatives and their allies and an estimated 25 Socialists in addition to his centre right supporters in a secret ballot was a considerable achievement, at 382 delivering 13 more votes than an absolute majority.

Cometh the hour cometh the man. Barroso is no Delors, but can deliver the continuity which will be needed in a highly unpredictable period, where I see that the latest threat is from the Czech constitutional court which could delay Lisbon ratification for another six months even if the Irish vote “yes” on October 2.

Whatever the result of the referendum, Europe must get its act together for the Copenhagen conference on climate change, much as it did more than 20 years ago when the Vienna Convention on the ozone layer and the Montreal Protocol were negotiated.

I mention this because just 80 days before the opening of the Copenhagen conference the United Nations designated September 16 2009 as Ozone Day. The UN sees action on the ozone layer as a curtain raiser for Copenhagen, a model for what can be achieved through concerted international action in the face of a major environmental challenge.

It’s 24 years since the Vienna Convention for protecting the ozone layer was signed and 22 years since the Montreal Protocol, which set the timetables for phasing out of the man-made chemicals responsible for the depletion of the ozone layer. It is proving a remarkable success, although the task is by no means complete. A UN note gives more detail.

What does surprise me is the contribution that the ozone-depleting chemicals, and particularly chlorofluorocarbons (CFCs) were making to global warming. CFCs have now been virtually phased out (January 1 2010 is the phase-out deadline of CFCs for the poorest countries) and scientists argue that this co-ordinated action has given the world up to 12 years of extra breathing space for arresting the process of climate change. They reckon its impact to be five or six times the impact of the first phase of the Kyoto Protocol.

The late 1980s were years when environment policy came of age. The Vienna Convention was first based on a scientific thesis of ozone depletion caused by man-made chemicals, and only proven as fact in 1988 when US spy planes confirmed the existence of a vast hole in the ozone layer above the Antarctic caused by man-made chemicals.  It will be many decades before the ozone layer is fully restored, but things are no longer getting worse and should progressively improve.

Of course tackling climate change is a vastly more complex challenge than reversing ozone layer depletion. Every country and every industry is involved, as is the whole human population, but there are some fundamental principles which have been established through the Vienna process which are relevant to Copenhagen:

A template was negotiated to assist developing countries through a combination of financial assistance and phasing to allow further time for adaptation, plus special help for the countries of central and eastern Europe.

The last twenty years have demonstrated industry’s remarkable capacity to adapt and innovate once faced with obligatory targets. Firms which at first resisted the proposed Montreal measures, arguing that there were no alternatives, have developed new products and new technologies – a process which must continue.

The international community found the political courage and the mutual trust to accept the scientific consensus and build a global policy in the face of inertia and downright opposition.

The European Community (as it then was) was a major driver in formulating an international agreement and seeing it through to completion. It’s a good precedent for the European Union to follow.

September 23, 2009 at 11:40 am Leave a comment

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