Eurozone crisis challenges UK role in Europe

Britain is buzzing with talk of a referendum on “Europe”. In May Peter Mandelson was advocating a national vote some time after 2016, when a new Europe of fiscal union will have been defined. He sees it as a way of resolving divisions within Britain’s political parties.

Last week it was David Owen’s turn. He called for a dual option: Question One on UK membership of the “European Community”, which would essentially be the single market plus extras; and Question Two on belonging to the “European Union”, which he defines as the eurozone group of countries in an economic federation. Once Britain’s foreign secretary and one of the Gang of Four which split from Labour to form the Social Democratic party in the early 1980s, Owen was always an advocate of Britain’s place in Europe, but was consistently opposed to joining the euro. He would want “yes” to his EC, “no” to his EU.

The fact is that Owen’s EC and EU cannot be so easily disentangled from each other, and while the referendum option may seem a decisive way of determining Britain’s future in Europe, there is nothing decisive about it. A negative vote would confront the nation with some deeply painful choices and be a recipe for long-term decline.

There is no doubt that the eurozone crisis is a fundamental game-changer for Britain, as it is for the whole European Union. This is the watershed. If the euro is to survive there must be significantly closer economic integration, more discipline over national budgets and a more robust European banking system. Angela Merkel is now talking of political union as well.

Britain and some other countries may wish to keep their distance, but the UK government must tread warily, for this is marshy ground. Such closer integration is bound to have far-reaching consequences for the British economy, especially over financial services. It also has implications for Britain’s influence at a global level and its role in the world.

Although British adoption of the euro is clearly out of the question, at least for the foreseeable future, it remains a fundamental responsibility of any UK government to maximise its influence over the direction of the European project. British ministers may express fierce indignation over the impact of the euro crisis on Britain’s economy (while the German economy, by the way, continues to flourish), but it remains crucially important to maximise leverage over policy and to engage with European partners, not just to shout from the sidelines.

It is hard to see any British government voluntarily choosing the referendum option. Cameron surely had no choice but to opt out of the fiscal treaty last December if he wished to avoid such a vote, but there remains a real danger that his hand will be forced by political pressures within his own party and the inroads which UKIP could make in Conservative seats in a general election. For the coalition government it would be a deal breaker, but at least legislation adopted last year to hold a referendum (only) if further powers were to be transferred to Brussels provides a useful firewall.

The right formula for Britain is as a committed member of the European Union, but with some options kept open.  Schengen, the Charter on Fundamental Human Rights and monetary union are policy areas where opt-outs have been effectively applied. Europe’s direction of travel is unpredictable. Today’s bail-out of the Spanish banks may be a sign of more decisive action, but we still await the Greek general election result, which has come to seem very much like a referendum on the survival of the euro.

Michael

June 10, 2012 at 3:52 pm Leave a comment

EU resists pressure on airline emission scheme

There is no doubt that European standards for commerce and industry have had a profound influence across the world. Europe’s standards have become global standards, if only because anyone wishing to sell their goods on European markets must respect them. Emission limits for motor vehicles, for instance, is one sector where EU legislation has had a worldwide effect in cutting fuel consumption and emissions.

There are high stakes when the EU seeks to introduce environmental standards with global reach, such as the carbon emissions trading scheme for all air services into European airports. The European airline industry is scared that the scheme will provoke retaliation from countries like the US, India, China and Russia, while Airbus is worried by China’s suspension of orders for new aircraft.

Airlines and industry have been stepping up the pressure to persuade the Commission to soften its position. They have been lobbying Transport Commissioner Siim Kallas, who seems desperate to avoid a trade conflict, but EU governments and the European Commission still insist that the plan will come in on schedule, in April 2013.

There seems to be more international solidarity in opposing the EU measures than in introducing measures to cut emissions, given that 23 countries, including the United States, Russia, China and India, agreed at a Moscow meeting in February to retaliate against the EU if it stuck to its plans.

Europe should stand firm, if only to encourage progress on that international agreement which was promised in the UN’s International Civil Aviation Organisation way back in 2004 and reaffirmed in an ICAO framework agreement in 2010, whose aim was to limit total CO2 emissions from aircraft despite the anticipated increase in air travel. Aviation currently accounts for about 3 per cent of global emissions.

Last week eight Chinese and two Indian airlines refused to provide 2011 emissions data to the European Commission, it seems because the Chinese government has expressly forbidden its airlines to co-operate, but apparently another 1,200 carriers have complied. These governments have accused the EU of taking extra-territorial decisions, but one might say that of all pollutants CO2 is the most global in its impact. When China is opening a new coal-fired power station every week, a limit on aircraft emissions seems a modest measure. And anyway, the EU trading scheme would only affect services into Europe and would be absorbed into an international agreement once that could be agreed.

So how much will Europe’s scheme cost each passenger? Estimates seem to vary from €3 (the price of a cup of coffee says Climate Change Commissioner Connie Hedegaard) to €40 or more. Some airlines already impose a small charge on the ticket to prepare the way. In the longer term everything will depend on how generous the emission allowances will be for individual airlines. There is no doubt that the measure will further persuade the aerospace industry on the need to improve performance, although it pales into insignificance beside the escalating cost of aviation fuel.

Michael

May 27, 2012 at 2:08 pm Leave a comment

Join us at the Personal Democracy Forum, 2012!

On Thursday, May 31 we’ll be in the European Parliament, taking part in a captivating brainstorm on how tech – and tech-savvy citizens – are transforming governance, politics and civil society.

Why don’t you join us?

Now in its ninth year in the United States and its third year in Europe, the Personal Democracy Forum brings together top opinion leaders, politicians, technologists, and journalists from across the ideological spectrum to network and exchange ideas.

Next week’s event – Finding Europe’s Public Place – is set to put the impact of technology in Brussels under the spotlight, evaluating its role in the European institutions, diplomacy, lobbying and journalism.

Speakers will examine how interactive communications technologies are now being regularly deployed to address critical civic problems, and make governments more efficient, transparent, and accountable. They’ll also discuss whether these technologies are bringing Europe any closer to the as yet elusive public sphere.

Also on the agenda: the invaluable role social media has played in supporting democracy movements all over the world.

The Personal Democracy Forum invariably attracts highly distinguished guests – and this event is no exception. Ambassador William E. Kennard of the US Mission to the EU,  Facebook Europe’s Erika Mann and Peter Spiegel of the Financial Times are just a few of the speakers who’ll be sharing their insights on the day.

Register now to secure your place for this thought-provoking and invaluable event.

See you there!

Catherine.

May 22, 2012 at 2:01 pm 1 comment

Greece’s 2012 elections: what message to Europe?

Rarely do citizens vote not on the basis of right or left but right or wrong:  and Greeks consider the tough austerity measures plain wrong.

At the ballot box, voters punished the two predominant parties for their role in the economic crisis and for imposing spending cut measures on the population already suffering from a 22% unemployment rate.  This ends the predictable era of politics which saw Greek voters alternate between PASOK and New Democracy.

Biggest winners: Syriza & Golden Dawn

Illustrating the breadth of support, Syriza picked up voters who in 2009 had voted for Pasok (37%), New Democracy (14%) and KKE (9%), the greatest chunk of which were aged 18-35.  According to opinion polls, support for Syriza blossomed when leader Alexis Tsipras announced his objective to form a left-leaning government.  Moving from 4.6% support in 2009 to 16.8%, Syriza convinced voters it is more than a simple third party but a serious coalition partner.

Another winner in the election was the Golden Dawn party that stripped New Democracy of over 40% of its supporters and 20% of PASOK from 2009.  Its base comes largely from under 35-year-olds and is considered a mix of traditional right with young people.  How this party might act in  Parliament is unclear but signals raised by party members demanding journalists stand when the party leader entered a press conference are surely concerning.

End of two party alternating rule

Voters delivered a blow to PASOK by stripping the party of 119 seats (of 300) in the Parliament.  The party lost over 2 million voters from 2009 when it enjoyed 44% support. Back then it swept to power promising to clean up and modernize the government, yet within weeks announced that Greece’s debt numbers had been fudged, plummeting the country into a crisis of confidence involving the markets, then the whole Eurozone as fear of contagion spread.

Two and a half years later, PASOK’s center-right party in the outgoing coalition, New Democracy (ND) had expected to win enough votes to form a government outright or at least with PASOK.  ND finished first, allowing them to take advantage of a reinforced proportionality law (they won while last in government) providing the first party 50 bonus Parliamentary seats.  Yet even this boost wasn’t sufficient to help ND secure a coalition government.

Unity government uncertainties

New Democracy attempts failed to form a government, giving Syriza three days to form a coalition.  Tsipras wasted no time announcing his hopes to build a government that operates inside the European Union, with the Euro, but rejects the austerity measures imposed by the Troika in return for billions to keep Greece afloat.  For a country unaccustomed to coalitions yet accustomed to sweet election promises, the expectations raised by renegotiation rhetoric may undermine efforts to form a lasting coalition.

Markets, lenders, and European and global leaders are holding their breath while leaders of this country of only 11 million people decide more than the country’s future.  Each passing day without a government brings increased uncertainty and the eyes of the world will continue to watch the machinations in Greece as a prophesy for what lies ahead for the European economy and beyond.

By Julie Garman Kolokotsa, a former member of the FH team now based in Athens.

 

 

May 9, 2012 at 6:37 pm Leave a comment

Guess who’s coming to dinner!

European Council president Herman van Rompuy has arranged a summit dinner for EU leaders on May 23. For François Hollande the Brussels feast will be a first opportunity to brief all his colleagues on France’s new approach to the eurozone crisis and how he sees a return to growth in Europe. His message will be relatively well received.

The fascinating question is who will fill Greece’s dining chair and how deep will the Greek crisis have become in two weeks’ time.

Writing on Europe Day, May 9, the prospects are not encouraging. Suddenly the prospects of Greece quitting the euro look much more plausible. While neither PASOK nor the New Democracy party have been able to form a coalition, Alexis Tsipras, leader of the Left Coalition and leader of the second biggest party, demands that any coalition partner must join him in renouncing the bailout package and tearing up the fiscal treaty.

His argument is that Greece can retain the euro without the austerity, because any attempt to expel the country from the eurozone would bring the whole edifice tumbling down. In other words, you need us more than we need you, so you will have to concede.

New Democracy leader Samaras is reported as saying that “Mr. Tsipras asked me to put my signature to the destruction of Greece. I will not do this”. PASOK’s leader Venizelos, who negotiated the latest €130bn package, is equally clear. He wants a pro-Europe unity government.

The most likely prospect seems to be that Lucas Papademos will continue as caretaker prime minister until new elections can be held, possibly on June 17. The question is whether enough Greek voters, faced with the new reality, will revert so soon to traditional loyalties. If the answer is no, then it could be back to the drachma.

The Greek crisis has set François Hollande, by contrast, plumb in the mainstream of eurozone thinking. Commission president Barroso, Mario Monti in Italy, the ECB’s Mario Draghi and Christine Lagarde at the IMF have been quick to argue that Hollande’s priorities are their priorities. More spending by EU structural funds, emphasis on research and innovation, and a bigger role for the European Investment Bank are part of the mix, but deficit reduction remains a major preoccupation.

Until French parliamentary elections on June 10 and 17 Hollande will continue to focus on the growth agenda. He will push for a “growth pact” to be linked with the fiscal treaty but has told the Irish that there is no reason to delay Ireland’s May 31 referendum on the grounds that it might be changed. (Greece, Portugal and Slovenia have already ratified).

Michel Sapin, possible finance minister and a veteran of the Mitterand years, has already said that Eurobonds are not an answer to the crisis (which avoids one contentious issue with Germany), but a financial transaction tax will be high on the French agenda, although Hollande makes reference to the UK’s hostility to the idea in a wide-ranging interview. It’s worth noting, too, that he wishes to move away from the Franco-German “duopoly” in European policy, while retaining close links with Merkel.

There is indeed a widespread assumption that Hollande’s victory and the Greek results mark the end of Angela Merkel’s predominance in European politics. I doubt it. Germany clearly remains fundamental to any resolution of the eurozone crisis and remains the motor of Europe’s economy.

Just to rub home the facts: German exports were up nearly one per cent in March to an all time record of €91.8 billion and imports were up by 1.2 per cent to €78.1 billion – also a record. But on a more sobering note for the new French President French labour costs are now higher than those of Germany. Economic competitiveness will inevitably need to become part of his agenda.

Michael

May 9, 2012 at 1:14 pm Leave a comment

Budget chickens come home to roost

The European Commission is struggling to justify an increase of nearly 7 per cent in the EU payments budget for 2013.  The timing could hardly be worse, with national budgets feeling the full force of austerity, governments facing fierce opposition to spending cuts at home, and the Dutch being forced into new elections as coalition consensus crumbles. No surprise, then, that presentation was a major preoccupation at this week’s Commission meeting.

As you might expect, member states which are net contributors were quick to express their indignation at the Commission’s draft budget, which would rise to €151 billion for commitments (up 2 per cent) and to €138 billion for payments (up 6.8 per cent).

But of course everyone is to blame: governments, Parliament and the Commission. Yesterday’s chickens are coming home to roost. Long-term spending programmes from past budgets must be paid for, and a backlog of liabilities has accumulated which must either be cleared, or pushed further into the future.

The roll-over of unpaid bills from 2011 to 2012 amounted to €11 billion out of a total payments allocation of €129 billion for the year. It would hardly be good housekeeping to allow these liabilities to increase further, quite apart from the pressure on member states which have made investments under EU programmes and are then denied reimbursement to which they are entitled.

In presenting the Commission proposals President Barroso stressed that the funds to be committed for 2013 programmes would only increase by the rate of inflation, and I could only find one budget line, “Intermodality between Transport Means” where the proposed commitment has actually been cut. Another cut would be a 5 per cent reduction in Commission staff numbers over five years, but total administrative costs would still rise by 2.8 per cent.

Agricultural spending, including direct payments to producers, continues to take a third of the total budget, but the proposed increase would be less than the rate of inflation.

The budget proposals are of course founded, first on the belief that spending on European programmes will deliver more sustainable growth than spending at the national level, and secondly that they play a vital role in redistribution from wealthier to poorer regions.

On this basis, research, innovation and the structural funds would receive the lion’s share of new commitments. The allocation for the EU’s external relations would go up by 5 per cent. This includes additional resources for Europe’s diplomatic service, a proposal which has not been well received by Baroness Ashton’s home country.
The 2013 draft budget is an attempt to put greater emphasis on growth and to encourage European integration. But with a European population which is much more sceptical about the virtues of greater integration the argument does not have the traction which it once did.

This year’s budget discussions promise to be more bruising than ever, because long-term budget ceilings must be agreed for the years 2014 to 2018 (or 2020), together with the means of funding them. A financial transaction tax will no doubt be pushed as a supplement to the EU budget, combining with the UK rebate issue to ensure a fractious negotiation.

Just as a footnote it is worth recalling that the EU budget constitutes just over 1 per cent of gross national income of the 27. Figures for per capita payments or receipts in 2010, helpfully compiled by Laissez Faire, give some insight  into how EU citizens are impacted by the EU budget and how this may reflect national negotiating positions.  No wonder the Dutch are sensitive!

Michael

April 26, 2012 at 9:50 pm Leave a comment

Easy e-citizenship in France

As we have explored numerous times in this blog over the years, the Internet is increasingly shaping political discourse, public scrutiny over elected representatives and our democratic life in general. The upcoming French parliamentary elections are proving once again that e-citizenship is gaining ground fast; for some this year, computers will replace the traditional ballot box.

A major pioneer of e-citizenship was Switzerland, where in some constituencies citizens are already entitled to vote online; now France is on the verge to cross this barrier. For the first time, as a pilot scheme, expatriates will be offered the opportunity to elect their Members of Parliament on the Internet. They will be saved from the effort of going a remote Consulate and queuing to fulfil their civic duties. I thought I was attached to the decorum around the elections, going to the elementary-school turned poll-office and hearing the familiar “A voté”, but, I have to admit that for me at least, pragmatism has won over principles. 

If the experience proves efficient, it should be extended to more ballots and be available to all French voters. Given the very poor participation of expatriates in 2007 (as a shameful reminder, only 47% of French expats living in Belgium voted in the last presidential election) I can only hope that e-voting will raise the general commitment to democracy. Voting by a show of hands, male suffrage, and the poll tax are all antiques that political institutions gave up under social pressure. There is little doubt, in my view, that in a few decades e-voting will seem as natural as any other aspect of progress, either technological or societal.

In spite of the enthusiasm, there are still significant concerns around securing the integrity of the ballot. However, the Swiss encountered no major problems, and efficient solutions for identification and authentication exist e.g. electronic IDs; not to mention that so far I have never been robbed of my e-ordered pizza…

For information: www.monvotesecurise.votezaletranger.gouv.fr  

 Alice Bowdler

April 26, 2012 at 4:44 pm Leave a comment

FH Europe podcast: 20 years of Public Affairs in Brussels

In the latest instalment of the FH Europe podcast, we interview Caroline Wunnerlich, the Managing Director of Fleishman-Hillard in Brussels. FH Brussels celebrated 20 years in business last year, a landmark Caroline hits this year. In the interview she tells us about how PA in Brussels has changed over the last 20 years and looks ahead at the next 20.

Click here to listen to this edition of the podcast.*

Click here to subscribe to the FH Europe podcast on iTunes.

* If using Internet Explorer, you may have to right-click on the link and “save target as”, then play the saved file by double clicking it.

Steffen

April 25, 2012 at 9:35 am 1 comment

Economic growth is the theme for spring

Spring is the season of growth, and economic growth in Europe has become the dominant theme of the moment. It is certainly a central theme of the French presidential elections.

In a few days time the European Commission plans to launch its economic growth plan for Europe, setting out the measures it believes that member states must take to stimulate their economies. The plan will focus on what the recent Greek sustainability report called “internal devaluation”, slashing the cost of labour by sweeping away restrictive labour practices, shifting taxes from employment to consumption and stimulating the mobility of labour.

The Commission’s plans will provide a timely backdrop to the French election campaign, which focuses so much on the balance between austerity and jobs and how to stimulate growth while at the same time bringing national budgets under control.

There seems to be clear blue water between Sarkozy and Hollande on economic policy. Sarkozy remains committed to a programme of cost-cutting, with much emphasis on reforming labour laws and stimulating export industries. Hollande wants to reverse the retirement age back from 62 to 60, to impose 75 per cent income tax on the rich, to boost social housing and to recruit a further 60,000 teachers.

Both the main contenders for the May 6 run-off are seeking to establish their patriotic credentials with stirring rhetoric. Hollande says “je veux rétablir notre souveraineté nationale”; Sarkozy praises De Gaulle’s empty chair policy, from which, he says, the common agricultural policy arose. But in truth the freedom of action for Le President – or any other European leader – is more limited than it has ever been.

François Hollande appears on the face of it to mount a bigger challenge to mainstream European policy, with his commitment to renegotiate the “Merkozy” treaty on economic discipline in order to put more emphasis on growth. But his latest remarks in today’s La Tribune seem cautious. If he wins the election he does not wish to challenge the disciplinary aspects of the treaty, but only the growth aspects.

(I can already see a new protocol which would emphasise the need for growth being hatched in the corridors of the Commission for a possible Hollande victory . That is, after all, the mood of the moment).

M.Hollande well knows that whatever his deep antipathy to financial markets and the rating agencies, any weakening of France’s commitment to take tough medicine would push up the cost of borrowing – perhaps dramatically. He has even less room for manoeuvre than François Mitterrand in the early ‘80s when he sought to build socialism in one country, only to be forced to change policy as the franc slumped.

As for Sarkozy, his threat to apply EU preference to French public procurement contracts unless there is reciprocal treatment for public contracts in countries such as China cannot be applied unilaterally without major dispute in Europe and beyond. On the other hand his aims may be partly met by the WTO Agreement on Government Procurement, a voluntary deal which came into effect just two weeks ago after 10 years of negotiation and is expected to be joined by China.

Sarkozy’s aggressive position on Schengen is no surprise. Although given new focus by the killings in Toulouse it is consistent with his position 12 months ago, when he threatened to renounce the Schengen agreement as migrants crossed into Italy en route to France and it was agreed that the agreement should be reviewed.

It is a fascinating election. The polls suggest a photo finish for the first round on April 22, but who knows where the supporters of Le Pen, Mélenchon and Bayrou will put their votes on May 6? And what if parliament returns a conservative majority under an Hollande presidency. Cohabitation? What economic policy will France then adopt?

Michael

April 13, 2012 at 6:47 pm Leave a comment

Good news for the ozone layer, but what lessons for climate change?

A few days ago the death was announced of F. Sherwood Rowland, the American scientist who identified the damage being caused by chlorofluorocarbons (CFCs) to the earth’s protective ozone layer. His pioneering scientific work and the fierce campaigning by him and his collaborators led to a UN framework agreement to tackle the problem and to the 1987 Montreal Protocol, which provided the basis for the global phasing out of CFCs and halons in refrigerators, aerosols and industrial processes – a good template, you might think, for global agreement on climate change.

The European Community was of course a major player in negotiating the Montreal Protocol and subsequent decisions.

It all began as scientific theory, but this was borne out by clear evidence, discovery in the mid ’80s of a vast hole in the ozone layer above the Antarctic. The ozone shield which protects Earth from solar radiation was being rapidly eroded, especially during the winter months, potentially exposing people to increased radiation from cancer-causing UV and threatening extensive damage to the natural world. CFCs and related gases were the culprit.

The good news is that the action taken over the last 25 years appears to be working. We have reached a turning point. A recent study suggests that the ozone layer is no longer undergoing the damage that it was. UV radiation levels are beginning to decline and the scale of ozone holes is diminishing. It was always clear that recovery would take many years as the man-made chemicals dispersed, but positive results are now coming through. It just shows how the world can respond when faced with an identified threat. A NASA website illustrates the trend.

The benefits go further: as well as damaging the ozone layer, CFCs and the other targeted chemicals are greenhouse gases which contribute to global warming, so their elimination is already making a contribution to slowing climate change.

What is striking about the CFC measures is how the scientific evidence was accepted by policy-makers and how the world rallied to take action. There were sceptics, and some industrial sectors were opposed to legislation, but the scientific approach – and the precautionary principle –  prevailed. Given the gravity of the threat the world decided it had to act, even if elements of doubt remained. Would that climate change could be approached with the same degree of global agreement and commitment! But it is of course a hugely more complex problem.

There is scientific theory, and then there is experience. Yet again this spring parts of western Europe, including eastern England, France, Germany, northern Italy and Spain are suffering drought, it seems because the jetstream has taken an unseasonal northerly shift, producing a high pressure area across Europe which is blocking access for the usual spring showers from the Atlantic.  Once more there is talk of harvest failure if the rains don’t come soon.

Climate change is just one of the “evil twins”  spawned by CO2 emissions. The other twin, more secretive and silent, is ocean acidification, where man-made carbon dioxide dissolved in the water is already affecting life in the seas and has the potential to damage ocean ecosystems and destroy vital fish stocks. It is surprising that the European Union has paid so little attention to this threat, but a new Swedish study sets out just how serious the risks are.

Michael

March 27, 2012 at 11:54 am Leave a comment

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A blog on politics, policy, public affairs and communications in Brussels and the European Union. The blog is written by the team at Fleishman-Hillard in Brussels. Views expressed are personal and do not reflect those of the company or its clients. You will find the contact details of our team at www.fleishman-hillard.eu

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