23 January 2013
The Little Englanders Win Big
By Gwynne Dyer
The real problem is continental drift: Brussels, the capital of the European Union, is getting further and further away from England. Or at least that is British Prime Minister David Cameron’s line.
Cameron made his long awaited speech promising a referendum on continued British membership in the European Union on 23 January, and he placed the blame squarely on plate tectonics: “People are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity or their taxes are used to bail out governments on the other side of the continent.”
The “frustrated” people in question are English, of course. Hostility to the European Union is mainly an English thing, but that matters a lot in the United Kingdom, where 55 million of the kingdom’s 65 million people live in England.
The Scottish nationalists seeking separation from England in their own referendum take the opposite tack. They promise the Scottish electorate that leaving the UK would NOT mean leaving the European Union (although in fact Scotland would probably have to re-apply for membership). Scottish politicians have to promise to stay in the EU, because otherwise very few Scottish voters would say “yes” to independence. But England is different.
The “Little Englander” glories in the notion of England being unencumbered by foreign ties and commitments. It’s the kind of nationalism that Americans call “isolationism”, and the phrase is now used to describe strongly nationalist, even xenophobic people on the right of English politics. Those people, always present in significant numbers within Cameron’s Conservative Party, have now won the internal party debate.
Every Conservative leader has had to deal with these people. They always managed to contain them in the past, because the European Union is Britain’s biggest trading partner, and it is obviously in Britain’s interest to belong to the organisation that makes the rules for Europe’s “single market”. What has changed is that the long recession and relatively high immigration of recent years have increased the popularity of the extreme right in England.
That doesn’t mean that populist demagogues and neo-fascists are about to win power in the United Kingdom. Far from it: they’d be lucky to get 10 percent of the vote. But it does mean that the Conservatives are losing their more right-wing supporters to the anti-EU, anti-immigration United Kingdom Independence Party.
UKIP could never win an election in Britain, but it could easily steal enough votes from the Conservatives to make them lose the next election. So there has been mounting panic in the Conservative Party, and not just among its instinctively anti-EU members.
Cameron’s promise of a referendum on EU membership is first and foremost an attempt to steal UKIP’s thunder and win back the defecting Conservative voters. He doesn’t really want to leave the EU, but he really does want to win the election that is due in 2015.
His reluctance to be the man who took Britain out of the EU was evident in the way he hedged around his referendum promise. The referendum would not take place until after the next election, and only if the Conservative Party won enough seats in 2015 to form a government on its own. (Its current coalition partner, the Liberal Democratic Party, opposes the whole idea).
Cameron says he will spend the next two years renegotiating the terms of Britain’s EU membership to “repatriate” many powers from Brussels to London, and to make various changes in the way the EU is run. Then, if he is satisfied with the outcome, he will support EU membership in the election and in the subsequent referendum, which will be held by 2017. But he had no satisfactory answer to the hard questions that followed his speech.
What if the 26 other EU members choose not to waste months in talks on changing Britain’s relationship with the EU? What if they do negotiate but refuse to tie themselves up in knots just to ease Cameron’s local political problems? Would he support continued EU membership in the promised referendum if he didn’t have a “new deal” to offer the voters. He simply wouldn’t answer those questions.
There is much that could be done to improve the accountability and efficiency of the European Union, but it is not helpful to open a negotiation with 26 other governments by standing at the exit door and threatening to leave if you do not get your way. The time may well come when Cameron has to answer those questions, and he probably does not know himself which way he would jump.
So for the next four years, all those foreign companies that have been using the United Kingdom as a convenient, English-speaking centre to produce goods and services for the European market will be re-thinking their investment strategies. If the United Kingdom may leave the EU by 2017, is this really the right place to put their money? It will probably be a long dry season for the British economy.
How did an allegedly grown-up country talk itself into this position? It’s an attitude that was summed up in an apocryphal English newspaper headline of the 1930s: “Fog in (the English) Channel; Continent Cut Off.”
To shorten to 725 words, omit paragraphs 4 and 13. (“The Scottish…different”; and “There is…jump”)
14 October 212
Nobel Booby Prize?
By Gwynne Dyer
Maybe they gave the Nobel Peace Prize to the European Union because they couldn’t think of anybody else who wouldn’t embarrass them. Nelson Mandela already has one. So does Aung San Suu Kyi. Even Barak Obama has one, though what for is not exactly clear. They even gave it to Henry Kissinger once, but we probably shouldn’t go into that. So who’s left? We’ll just give it to the European Union. Nobody’ll notice that.
But they did notice, and some of them were not amused. “A Nobel prize for the EU at a time Brussels and all of Europe is collapsing in misery? What next? An Oscar for (European Council President Herman) Van Rompuy?” asked Geert Wilders, the Dutch eurosceptic. “Rather than bring peace and harmony, the EU will cause insurgency and violence,” warned Nigel Farage, leader of the UK Independence Party (which wants Britain to leave the Union).
And France’s leading newspaper, Le Monde, asked on its website: “But who will go to Oslo for the EU to receive the Nobel Peace Prize? As trivial as it may seem, the question raises (the legitimacy) of an entity…whose institutional stops and starts and lack of democratic representation are regularly criticised.”
It’s actually not a trivial question at all, because the large EU bureaucracy that is based in Brussels, the EU’s “capital”, was not elected by anybody, and nobody loves it. The member countries are all democracies, but the decisions at the continent-wide level are taken by governmental elites who do not trust their own citizens to vote the right way.
The EU was an elite project from the start, and policy for the 27-member union is still set mostly by politicians and officials, not by citizens. So don’t send a Brussels bureaucrat to Oslo to collect the prize. Send some ordinary citizen, chosen by lot, to represent the 500 million citizens of EU countries who don’t even have a vote on most EU decisions.
However, don’t throw the baby out with the bath-water. The original purpose of the Nobel Peace Prize was to honour people who worked to put an end to the terrible wars that have repeatedly devastated the European continent (and much of the rest of the world as well) over the past four centuries. The EU has made a major contribution to that task, but that is not its greatest achievement.
It has been 67 years since there was a major war in Europe. Indeed, there have been no wars in Europe at all, apart from the various civil wars in the 1990s in former Yugoslavia (which was not a EU member). More importantly, a war between any of the EU’s member countries is now quite unthinkable.
“This started after the (Second World) war – putting together former enemies,” said EU Commission President Jose Manuel Barroso in an interview with the BBC. “It started with six countries and we are now 27, another one (Croatia) is going to join us next year and more want to come. So the EU is the most important project for peace in terms of transnational, supernational co-operation.”
That’s a bit over the top. The United Nations surely has more to do with 67 years in which no great powers have fought each other. So do two generations of American and Soviet officials and politicians who showed great restraint and managed to avoid a nuclear war that would have devastated the whole world. You could even give some credit to nuclear weapons themselves, which forced the great powers to behave more prudently than usual.
The great virtue of the European Union, despite its “democratic deficit” at the Brussels level, is that ALL its member countries must be fully democratic, relatively uncorrupt, and fully observant of civil and human rights. Not only has this prevented some members from backsliding into intolerance and authoritarianism in times of great stress; it has also been a huge incentive for prospective members to clean up their act.
Would Greece, Spain and Portugal all have ended up as full democracies after overthrowing their old dictators, and in the latter two cases as relatively honest ones as well, if not for the changes they had to make to qualify for EU membership?
Would the nine ex-Communist countries of Central Europe that emerged from the long night of Soviet tyranny in 1989 have created modern civil societies practically overnight without a great deal of aid from the EU? Would they even have bothered, without the incentive of future EU membership?
Would Turkey have striven so hard to entrench respect for civil rights in the law and force the military to retire to their barracks permanently if it had not been offered the prospect (sadly betrayed) of EU membership?
The Nobel Peace Prize is a misnomer. It should actually be the Nobel Democracy and Human Rights Prize. Occasionally it goes to some person or organisation whose main purpose is building international peace, but much more often it goes to people like Nelson Mandela, Aung San Suu Kyi, and most recently Liu Xiaobo, whose accomplishment, or at least goal, has been to make their own countries democratic and respectful of human rights.
And if that is the real criterion, then the European Union truly does deserve the prize.
To shorten to 725 words, omit paragraphs 4, 7 and 13. (“It’s actually…way”; “It has been…unthinkable”; and “Would Turkey…membership”)
6 November 2011
Euro Crisis: Muddling Through
By Gwynne Dyer
In December 1893, the Greek prime minister of the day stood up in parliament and announced: “Regretfully, we are bankrupt.” Nobody was greatly surprised, because the country had already defaulted on its foreign debt three previous times during the 19th century. It defaulted once more in 1932, and the smart money is betting that it will do so again in 2012.
Since Greece uses the euro, the common currency shared by seventeen members of the European Union, this is not just a matter of local concern. Many fear that a Greek default could take the euro itself down with it, so there have been frantic EU attempts to cobble together some financial aid package that could keep Greece solvent.
The latest package was enormous: 130 billion euros ($178 billion) in direct aid, and a 50 percent write-off of Greece’s huge debt to various European banks. In return, Greece must impose an even tougher austerity programme on its citizens to bring its deficit under control. But Greek citizens are already fed up with austerity, so every day brings a new surprise.
On Tuesday, the 1st of November, Prime Minister George Papandreou agreed to the European Union’s rescue package, and everybody heaved a sigh of relief. But on Wednesday he astonished everybody by promising to hold a referendum on the financial package in February: three more months of uncertainty, with a high probability that Greek voters would reject the deal in the end.
The markets erupted in panic, and the EU leaders exploded in fury. On Thursday, they told Papandreou that he couldn’t just hold a referendum about the rescue package, as if the Greeks could renegotiate the deal if they didn’t like it. The referendum must simply ask Greek voters if they wanted to keep the euro as their currency or not. There would be no more money from the EU until they said yes, and none at all if they said no.
So late on Thursday night Papandreou cancelled the referendum. On Friday he barely survived a confidence vote in parliament by promising to allow the creation of a broad coalition government. But on Saturday Antonis Samaras, the leader of the main opposition party, said he would not join a “government of national unity” and demanded a snap election instead.
On Sunday, however, Samaras agreed to join an interim government that would pass the promised austerity measures and then hold elections in February – on condition that Papandreou not be prime minister again. The roller-coaster ride continues.
Greeks practically invented drama and they do it very well, but Greece is a small country and foreigners don’t really care about either its economy or its politics. The markets are panicking because this crisis isn’t really about Greece at all. It’s about the future of the euro, which was built on a very shaky foundation from the start.
It was primarily a political project, intended to lock the EU members into perpetual union by the device of a common currency – but there was no public support in any EU country for the surrender of national sovereignty that creating powerful shared financial institutions would require. Nobody wanted a European Central Bank that could give orders to their own government on issues like budget deficits and inflation rates.
The founders of the euro compounded their error by not restricting membership to a northern European core of high-productivity economies. It was about unity, so Mediterranean countries like Greece, with dramatically lower productivity, were encouraged to join as well.
Greece, with access to practically unlimited credit because its currency was the “sound” euro, ran up enormous foreign debts: the government’s salary bill doubled in a decade. It couldn’t go on indefinitely – and so it didn’t.
When the crisis struck last year, it became obvious that the Greek government could never pay its debts, no matter how savagely it cut its spending. If it defaulted, however, the big European banks that lent so much money to Greece would be gravely damaged. Some might collapse, as might even the euro itself .
So the EU is shovelling enormous amounts of money into Greece to forestall a default, while forcing European banks to take a “haircut” of 50 percent on their Greek loans. Even with all that, however, Greece is still drowning in debt, and the EU is no closer than ever to creating a financial authority with the power to protect the euro. It can’t, because there is just no political support for a genuinely federal Europe with harmonised economies.
When will Greece finally default and get it over with? Here’s a clue. Euro deposits in Greek banks fell by 14 percent last year, as depositors moved their money abroad to protect it from being converted into “new drachmas” at a huge discount when Greece crashes out of the euro. In just the past month, euro deposits fell by a further six percent. It may not be long now.
To shorten to 725 words, omit paragraphs 10 and 11. (“The founders…didn’t”)
25 September 2011
Will The Euro Survive Until Tomorrow Afternoon?
By Gwynne Dyer
Few things are as galling as being right too soon. Back in 1970, dissident Soviet historian Andrei Amalrik wrote a book boldly called “Will the Soviet Union Survive Until 1984?” He predicted that it would not, which greatly annoyed the Communist regime. He was sent to Siberia for his temerity, and later forced to leave Russia for the West. Even worse, he was wrong. The Soviet Union survived until 1991.
Many pundits find themselves in the same situation today with regard to the future of the euro, the decade-old common currency that is shared by 17 of the European Union’s 27 nations. They are suggesting that the euro could collapse any day now, and that the EU itself may follow. Making such blood-curdling predictions is great fun, but they are getting ahead of themselves again.
We are dealing with three different things here. One is a default by Greece. That could happen any day now. Indeed, it SHOULD happen soon.
The second is a collapse of the euro, triggered by a Greek default. That would plunge Europe back into recession, and cause chaos in the world’s financial markets.
The third thing is the collapse of the European Union itself. This, we are warned, would cause it to rain blood, or at least frogs, all over Europe. And that clinking sound you hear offstage is the Four Horsemen of the Apocalypse saddling up.
So, let’s begin with Greece. Why should it default on its international debts? Because they amount to 160 percent of Greece’s Gross Domestic Product, and the savage austerity measures that the EU has forced on the country have driven its economy deep into recession. The Greek economy is shrinking at 7 percent a year – so Athens can never repay the debt.
The market knows this: Greek government bonds due for redemption next March are trading at half their face value. The interest rate that Greece would have to pay on new loans to roll over its debts is prohibitive, and ordinary Greeks are already in revolt against this pointless exercise in financial orthodoxy. Default and get it over with.
Default for a country has much the same consequences as when an individual declares bankruptcy. You find yourself a good deal poorer and nobody will lend you money for a while, but you escape from a crushing burden of debt. You really shouldn’t have let it get so out of hand, but it benefits nobody to keep you in debtors’ prison for the rest of your life.
However, Greece uses the euro. Wouldn’t a Greek default bring the whole common currency into disrepute? Well, maybe, but that’s certainly not an inevitable outcome, and it would be in nobody’s interest to push it in that direction.
The euro is the root cause of Greece’s difficulties. It has an uncompetitive economy, and the government fails to collect even half the taxes it is owed. So back when it used the drachma, it paid high rates for foreign loans, and devalued the drachma once in a while to deal with the competitiveness problem.
Greece should never have been allowed to join the euro, but it was allowed in because the new currency was not really about financial advantages; it was seen as a vehicle to greater European unity. In practice, however, what it meant was that weak economies like Greece’s, which normally could not borrow money cheaply, could now get foreign loans at the same rate as Germany or France. So they borrowed a lot, of course.
The European banks are as much to blame as the Greeks. They lent torrents of money to a country that they knew was a bad risk, calculating that if the Greeks couldn’t pay them back, the EU would bail them out to save the euro. But that is turning out not to be true, and so the banks are going to be hurt. Some of them may fail.
The euro will probably survive this crisis: what are ten million Greeks compared to the 325 million people who use the euro? But it probably won’t survive more than another five to ten years, because there are much bigger countries using the euro – notably Italy, but perhaps also Spain – that have an equally problematic relationship with the common currency.
The problem, in a nutshell, is this. A common currency generally presupposes a single government with the fiscal and monetary tools to protect it, and the political unity to do so. The euro common currency, a primarily political project, was created without any of those fundamental assets, and it is bound to fail unless the EU can now come up with them in a hurry.
It almost certainly won’t, because that would require the members to surrender far more of their sovereignty than they are prepared to do at this time. The euro in its current form will probably collapse before 2020. Will the European Union collapse with it?
Why should it? The EU has been in existence, under various names, since 1958. It survived all but the last ten of those fifty years without a common currency, because its existence served the purposes of its members. It will survive a future without the euro, too.
To shorten to 725 words, omit paragraphs 7 and 8. (“The market…life”)