Tag Archives: European Commission

The Doomed Euro?

In any normal January commentators offer their views on the coming year. However, most years, after the usual mix of doom and gloom, the world seems to carry on in the same old way.

This year, however, really is different. Quite a lot of the world is already not carrying on in ‘the same old way.’ In 2019 we are going to realise that something big has changed ‘out there’.

The Eurasia Group, political risk consultancy and adviser to the world’s elites, warns in its latest report: ‘The geopolitical environment is the most dangerous it’s been in decades.’ This is the year that events, and lack of remedial action, threaten global stability and risk collapsing the old world order in a way not seen for many years. The post-1945 Pax Americana is crumbling before our eyes as President Trump unravels the transatlantic alliance that has underpinned Europe since the 1950s. Many blocs – NATO, the UN, the G7, G20, WTO and the EU – are in varying degrees of crisis as new global challenges emerge and as America walks away from acting as the world’s sheriff. The Middle East is a basket-case, fighting its own ‘Thirty Years War’ between Sunni and Shi’a with a wary Israel looking on. In the East, China and North Korea are flexing their muscles; and in the emerging world a new breed of hard-line autocrats are taking over in Brazil, Turkey, Saudi Arabia, the Philippines and Hungary.

The world order is changing – and not for the better.

The outlook is bad enough; but to make things worse, a world trade recession is looming. Global economic forecasts for 2019-20 make for dismal reading: 2019 could turn out to be the year that the world economy falls apart, although timing global economic slumps is like watching an oil tanker running slowly onto the rocks.

This is the wretched backdrop against which the European Union is confronting the biggest challenge to its existence since it began as a dream of a single European superstate back in the 1950s.

The year 2019 will be full of important decisions for the EU, as Brussels will have to set a seven-year budget – without Britain’s cash – as well as appointing new leaders to key institutions, and discussing reform, whilst coping with falling economic growth, the threat of populist national elections, trade frictions with the US, plus the challenges from Russia and China. Brexit is merely background noise to the increasingly embattled, unelected and unpopular bureaucrats sitting in the Berlaymont (European Commission HQ).

The EU is fighting on three fronts at the same time, even as many of its member states have their own domestic problems to contain (the French anti-Macron revolution is a symptom of a wider EU malaise):

  • First, nationalism (aka, ‘populism’)
  • Second, the Catalan rebellion and the Visegrad Four’s mutiny epitomise the growing challenge to Brussels’ rule
  • Third, underpinning everything, is the threat to the Euro. Brussels’ flagship currency is in deep trouble

The smiling celebration party for the euro’s 20th anniversary masked the rising panic among the fat cats, bureaucrats and bankers waving champagne flutes for the cameras. They now know that their grandiose plans to cement the EU together by issuing a single currency was a huge gamble and a serious mistake. ‘The house of cards will collapse’, admits Professor Otmar Issing, ironically one of the original cheerleaders of the euro and the founding chief economist of the European Central Bank (Business Insider, 17 October 2016).

For a real monetary union to work smoothly you need a genuine single authority, plus the ability to swing government money around a united economy. Thus England can pipe London taxpayers’ cash to support Scotland, Wales and Ireland; and the US can shore up the Rust Belt states with money from New York and California. Brussels however does not have the power, or the authority, to transfer rich German taxpayers’ cash to struggling Greece, or to get the Netherlands to pay for the million illegal immigrants who are descending on Italy.

The real economic problem is the EU’s ‘Club Med’. Southern Europe’s economic fragility was well known when Greece was allowed to join the euro, after some pretty dodgy accounting. It was always a risky venture.

To take one simple example, when Greece had its own currency, Athens could stimulate an economic slump by devaluing the drachma: suddenly Greek holidays were dirt cheap and millions of tourists brought their spending power to Greece. Not anymore. Athens was trapped into a currency it could not control or devalue, and which the big boys of the EU wanted to keep strong at all costs.

Devaluation of any German controlled pan-European currency was unthinkable. So Greece was told to cut its budget and live with austerity. That meant that the only way Greece could get extra euros was by borrowing – heavily. Sure enough the big German and French banks were only too happy to lend trillions of euros to the Club Med countries. Unfortunately it became a vicious circle, known as a ‘debt doom loop’, between countries with high levels of debt and the banks that hold that debt.

The problem got worse. Big banks have bought more and more public debt from Eurozone countries. However, should the debts not be paid back (‘non-performing loans’ in Bankspeak) then the banks holding those loans are themselves in deep trouble. Now the euro-banks are running scared. Without payment, they could follow Lehmann Brothers into oblivion. The ‘rescue’ of Greece 2010-13 turns out to have been nothing more than a face saving bail-out ‘loan’ to save the big French and German banks. Even the IMF has admitted that Greece was sacrificed to save the euro and the European banking system from disaster in the great financial crisis.

Italy is the canary in today’s Eurozone coal mine. Italian banks hold one-third of the unpaid euro loans; Italy largest banks hold 300 billion euros of bad debt, dodgy securities and off-balance sheet items that aren’t being repaid. Also, billions of euros of Italian government bonds are held by Deutschebank, Commerzbank, Societé Générale, Crédit Agricole and the Netherlands’ ING.

All this could be solved at the EU level; however there is fierce opposition from Northern European countries to swinging their taxpayers’ money around. In 2018 they diluted President Macron’s proposals for greater money pooling and higher spending in the Eurozone. The idea of stripping elected parliaments’ control over taxation, spending, and the economic policies of the nation state was never going to be accepted; ‘ever closer union’ had hit the buffers of national self-interest, as the UK’s Brexit proves.

Without a means to transfer funds and a ‘fiscal union’ by the EU countries (by pooling everyone’s taxes in Frankfurt and Brussels) the euro is at mortal risk. Now the economic storm clouds are gathering to make things even worse. Eurozone economies are slowing. Even the German economy is contracting. Industrial production was down by 4.7 per cent in the previous year leading up to November 2018. This means that, unbelievably, Germany – yes, Germany – is probably heading for a recession. Meanwhile, Italy has been in recession for a long time and Greece, Ireland, Spain and Portugal are still struggling to escape the last financial disaster. The Eurozone is heading for a full-blown recession; and without the means to devalue, or order ‘government’ spending to boost European economies, a slump seems inevitable. The pressure to break out of the stranglehold of the euro in order to print their own money has never been stronger for some nations.

‘What is clear is that the status quo cannot persist indefinitely if the euro is to survive in the long term’, an LSE blog article warned in October 2016.

This combination of member states’ disillusionment with Brussels, domestic problems, a shrinking economy, massive indebtedness, social and political challenges and the crisis of migration, plus the intrinsically unstable basis of the euro, means that monetary union has failed economically and politically.

Unless the EU27 agree to form a new central Treasury, the euro is doomed. That’s something to keep an eye on in 2019.

Advertisements

Brexit: Another Fine Mess

‘I do declare that no foreign prince, person, prelate, state or potentate hath, or ought to have jurisdiction, power, superiority, pre-eminence or authority within this Realm.’  The Bill of Rights (English Parliament, 1689)

‘Well, here’s another nice mess you’ve gotten me into!’ Laurel and Hardy’s catchphrase seems particularly appropriate as Britain approaches Brexit, due on 29 March 2019.

Few of us can remember a more confused and troublesome time in politics. From Donald Trump’s surprise election as president, to Italy throwing its Euros out of the pram; and from Korea’s nuclear threats to the collapse of ISIS, none of these cataclysmic events has caused as much heart-searching among Britons as the vote to leave the European Union: Brexit.

It is important to record two key facts from the start; first, the vote was on the largest turn out in British electoral history, with 30 million voting and a majority of over one million to leave. Second, the very generation that voted the UK to join the European Common Market back in the 1970s was the very generation that voted to quit forty years later. (Under forties mainly voted to remain.)

This poses the question, what has changed? The answer is simply, Europe. What Britons joined as a Common Market has morphed into something quite different. Today’s EU has taken on all the trappings of a superstate, with its own flag, anthem, currency, budget, courts, diplomatic representation, unelected bureaucracy in Brussels, border police, and is even trying to build its own army. What we see today is not the Common Market Britons thought they were joining back in the 1970s. The electorate was tricked into joining Europe – and quite deliberately, too.

We now know from three impeccable sources that what Christopher Booker called The Great Deception was based on a barefaced lie. Sir Edward Heath, the British Prime Minister who took Britain into the Common Market, lied consistently to the British people about the true consequences of joining Europe. He knew he was signing away Britain as an independent power. He admitted it years afterwards. Moreover, his highly classified Foreign Office briefing notes are now available (FCO 30/1048, April 1971) and confirm his lies beyond all argument. Sir Con O’Neill, the Whitehall mandarin behind this astonishing briefing paper, warned Heath that Britain would, by ceding judicial and executive powers, eventually end up as little more than a vassal state taking orders from Brussels. They knew: and so did Heath. O’Neill advised Heath to ‘swallow the lot and swallow it now’, according to the hitherto secret official record of the EEC talks.

Astonishingly, the faceless authors behind the briefing paper made an even more sinister recommendation; they advised ministers to hide the truth from the British public. The result of this deception has been that successive governments have deliberately kept the British public in the dark about what EEC membership really meant, hoping that it would one day be too late to leave. What Heath and the civil service never anticipated was that sooner or later the British public would see though the fraud and vote to quit Europe in a fiercely contested referendum half a century later.

Britons cannot pretend that they were not warned. There can be no doubt that the avowed purpose of the EU has always been to create a single European super-state, governed from Brussels, absorbing formerly independent and autonomous nation states. But don’t just take my word for it. Here are some quotes from European politicians over the years to confirm the point:

‘A United States of Europe is our goal’. Arthur Salter and Jean Monnet, 1923.

‘Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.’  Jean Monnet, 1952.

‘We have sown a seed … Instead of a half-formed Europe, we have a Europe with a legal entity, with a single currency, common justice, a Europe which is about to have its own defence.’ Valery Giscard d’Estaing, President of the EU Convention, June 2003

‘The European Union is a state under construction.’ Elmar Brok, European Parliament’s Committee on Foreign Affairs.

‘We need a true political union … we need to build a United States of Europe with the Commission as government and two chambers – the European Parliament and a “Senate” of Member States … European Parliament elections are more important than national elections …’ Viviane Reding, Vice-President of the European Commission, January 2014

Even the UK politician, Kenneth Clarke, former Conservative Chancellor, in a rare moment of honesty from a British politician takes a similar view:

‘I look forward to the day when the Westminster Parliament is just a council chamber in Europe.’ International Currency Review, Vol 23 No 4, 1996

All this flatly contradicts Heath’s famous 1971 speech on joining the Common Market.

‘There are some in this country who fear that in going into Europe we shall in some way sacrifice independence and sovereignty, even that we shall begin to lose our national identity. These fears, I need hardly say, are completely unjustified and exaggerated ….’

If ever there is proof of a lie to the British electorate, the evidence is clear. Heath arguably committed an act of treason. He deliberately misled the British people and betrayed the Queen into breaking her Coronation Oath. Today’s inevitable backlash from a badly mis-sold electorate is what has fuelled the uncivil battle over Brexit faced by Theresa May.

Unfortunately for her, time to come up with a workable exit EU strategy is fast running out. PM May has just a few weeks to devise a new, mutually acceptable solution because, since Brussels rejected her Chequers proposals, she is trapped between the proverbial rock and a hard place: between her mutinous Eurosceptic party wing and an unyielding Commission, determined not to give an inch for fear of encouraging other increasingly rebellious EU nations. The former ‘arch ditherer’ at the Home Office now has to make a crucial decision. Britain’s timid but stubborn leader must shake off her rabbit in the headlights diplomacy.

As for the Europhiles, Britain must be punished, if only pour décourager les autres.

Frau Merkel has said so. She and France’s latest would-be Napoleon, President Macron, dare not back down. To do so would unleash a flood of anti-EU challenges, starting with Italy and its dodgy Euro, to be followed by the rebellious ‘Visegrad Four’ nations of Eastern Europe, who don’t want any more ‘refugees,’ thank you very much. The EU line must be held, at all costs. The European Commission agrees, warning that the political and economic damage inflicted by Brexit simply presents too great a risk to the EU.

Because Brussels recognises that the defection of the UK could be the capstone that collapses the EU’s arch. The loss of 10% of the Commission’s budget alone is a grievous blow: but the threat of mass defections and an unravelling of the whole European project terrifies the EU Federalist elites, let alone the nervous European banks. Their gravy train could hit the buffers.

The irony is that this bitter and protracted struggle to stifle dissent and lock the stable door is caused by an organisation that was meant to foster European harmony. The Europhiles and the Commission appear to have allowed their dream of a united Europe to over-ride the genuine concerns and anxieties of democratic voters in free nations. They don’t understand, for example, that the annexation of Northern Ireland into the EU means political suicide for any British PM.

What is now clear is that the biggest change to the unwritten British political constitution since 1689 was based on a politician’s lie and the British electorate was deliberately deceived. It was also legally questionable, according to the Bill of Rights.

Whether you agree or disagree with Brexit is immaterial. Brexit goes to the heart of what the UK is. Will Britain be self-governing? Or part of a new federal state?

That’s why it matters.

Democracy?

Sir Winston Churchill famously growled, ‘Democracy is the worst form of government – except for all the others.’

The great man had a point. He understood the dangers of ‘the tyranny of the majority’ very clearly, even adding on one occasion, ‘the best argument against democracy is a five-minute conversation with the average voter.’ Despite this, Churchill was a genuine democrat. He believed in the people and accepted their judgments.

‘Let’s do this the Democratic way …. Hands up all those who agree with me?’

This is highly relevant today, because democracy is under attack. The most obvious is Britain’s undeclared civil war over Brexit, where a narrow majority of voters – albeit on the biggest recorded electoral turn out – voted to quit the European Union. The subsequent uproar and the blatant attempts to pervert and obstruct the people’s decision to leave have shown that the democratic will is only recognised by some when it suits them. That is profoundly undemocratic. But, as in some many things, it all depends on what you mean by ‘democracy.’

Democracy as a political idea dates back to ancient Greece. Literally, it means, ‘rule by the people.’ The word comes from the Greek word dēmokratiā, which is a combination of ‘the people’ (demos) and ‘to rule’ (kratos). The first major exponent of the system was the city state of Athens, around 400 BCE. Not every Greek agreed with the concept. When a Spartan aristocrat argued for more democracy, he was put down firmly by the retort, ‘I’ll believe it when you run your own family as a democracy!’

Since then, both the theory and the practice of democracy have undergone profound changes.  What worked for certain types of male citizens of Athens centuries ago (women, slaves, foreign residents and children under 18 years of age had no vote) clearly does not work for hugely diverse countries like the USA or complex modern societies like the UK.

However, the idea of the people as ‘sovereign in their own affairs’ persists at the heart of democracy. Lincoln spelled it out simply in his Gettysburg Address: ‘… government of the people, by the people, for the people shall not perish from the earth’. From this, three principal systems of democracy have emerged; ‘direct’; ‘delegated’; and ‘representative’.

  • Direct democracy means every voter has a direct say via referendums. The Swiss and Californians like these.
  • Delegated democracy means that the people elect an individual to carry their views to a governing body such as a Senate, as in Ancient Rome. British Trades Unions are a modern example. Shop stewards are given instructions from their members and send delegates to the TUC with ‘a mandate from their members’.
  • Representative democracy means that elected officials represent a group of people. This is the theme of the rest of this article.

Colonial America favoured a system of representation because of the new country’s enormous size and widespread population. The Constitutional Convention (1787) realised that ‘the People of the United States’, could only govern themselves at the national, Federal level by electing Congressmen to go to distant Washington DC to represent their wishes.

The key word is ‘represent.’  Whereas a delegate is merely a mouthpiece, a representative is sent to use his (or her) best judgment on behalf of his constituents. The English political thinker Edmund Burke described his role as an MP to the voters of Bristol in 1774: ‘Your representative owes you … his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.’ This explains why, for example, hanging is not put to the popular vote. Polls show that any referendum of the people would reimpose capital punishment, but Britain’s elected representatives in Parliament disagree. MPs think they know best, so they use their judgments to represent their constituents; they do not take their instructions from the people between general elections, which gives rise to the saying: ‘If you don’t like me or my views, then you can vote me out.’

Democracy therefore can mean different things to different people. What is clear, however, is that representative democracy requires mutual trusttrust of the representative by the people; and trust in the people by their elected representatives. Somewhere in the past 20 years that trust has begun to break down. We live in a world where politicians spout democracy – but do everything in their power to overturn it when the people give the ‘wrong answer’ at elections.

Nowhere was this more in evidence than the 2008 farce of Irish voters rejecting the Lisbon Treaty, only to be sent back to vote again after EU officials’ behind-doors deal to force a second referendum. Similar European Commission’s contempt for democratic majorities – and for democracy itself – has been seen in Denmark and France. For Brussels, ‘the people’ cannot be trusted and must be forced to vote again until they come up with the ‘right answer.’ This is dangerous stuff and reflects Bertholt Brecht’s sardonic comment on Communist elections: ‘Would it not be simpler, if the government simply dissolved the people and elected another?’

Closer to home, the UK’s Brexit referendum and Trump’s election in the USA sent shock waves through liberal elites, by coming up with the ‘wrong answer’. The chattering classes were horrified. What these events revealed across the Western world is a widening chasm in far too many countries between voters and the cosy governing class represented by the likes of Davos, the Bilderburg Group, Brussels, Westminster, Washington, politicians, intellectuals and civil servants. This gap is made worse by the refusal of these elites to accept the will of the people; vested interests do everything in their power to block resolutions using non-elected institutions, such as supreme courts and the European Commission, to clamp down on dissent and liberty. For the EU it’s the (deliberate) ‘democratic deficit’; for the chatterati it means finding some way to ignore or neutralise voters’ wishes.

So, when added to the alternative-fact extremes of frightened metropolitan-elite politicians who wish to bash the masses using phrases like ‘post-truth politics’ to control the ‘unqualified simpletons of the great voting public,’ something sinister and profoundly undemocratic is emerging.

Democracy itself is under attack across Europe and the USA, a fact becoming plainer with every daily headline. The idea that the ‘common people are too ignorant and too driven by base emotions to really understand what they voted for’ has gained ground in political circles ever since Trump was elected and Britain voted for Brexit. This is sold as defence of human rights, and especially minority rights against the ‘tyranny of the ignorant majority’. These days it’s not the aristos who fear the mob – it’s the ivory-tower academics and intellectuals who think only they know what is best.

Their solution? ‘Ordinary people are too ill-informed to know what’s best for them – leave it to the experts.’ Well, the experts of the IMF, CBI, the EU, most of the media, the Chancellor and the Bank of England forecast instant ruin, famine, unemployment and plagues of frogs if Britons dared to leave the EU. They’re still waiting.

Another chestnut touted by the new anti-democrats is that ‘Democracy leaves semi-illiterate voters at the mercy of fake news and media lies.’ The high-minded BBC naturally does not agree; but heartily agrees that Fox News and the Daily Mail’s ‘propaganda’ only confuses ordinary, simple folk – quite unlike the BBC and The Guardian, of course ….

The truth is that democracy itself is under attack. Nowhere can this be seen more clearly than in today’s struggle over Brexit, but showing contempt for the masses can only end one way.

As Chairman of the Public Administration and Constitutional Affairs Select Committee, Sir Bernard Jenkin MP has said he ‘dreads to think’ what will happen to British politics if the Establishment fails to implement the people’s verdict in the Referendum. He warned: ‘That’s not what democracy looks like in my book. Of course, the EU has always tried to reverse every adverse referendum … but if they defeat the British people in this endeavour, that would be a disaster for our country.’

And for democracy? Watch out for forthcoming variations on the ‘I’m a democrat, but …’ theme before politicians and bureaucrats then ignore the will of the voters. Be very careful; the ‘post-Democratic’ age is being touted as the way ahead.

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave

SaveSave