Macron’s victory may create more problems than it solves

Emmanuel Macron campaigned for – and indeed, won – the French Presidential election on an unashamedly pro-EU platform. His victory was greeted with huge sighs of relief across the Continent. Rather ironically, however, his enthusiasm for the Single Currency and indeed the European project as a whole may have the opposite effect, as John Stepek pointed out in a recent edition of Moneyweek magazine.

At the heart of the problem is that when it comes to further integration within the EU and in particular, the single currency area, it is far easier to talk the talk than walk the walk.

A broad range of economists acknowledge that so many economically divergent nations pushing ahead with a single currency in the 1990s was far from ideal. If a monetary union is to work, fiscal and political union, while not prerequisites, certainly reduce the risk of a catastrophic failure. As it currently stands, the Eurozone is far from being an optimal currency area.

This is exactly the line Macron has been taking. In other words, as Stepek puts it, “He’s one of the rare pro-eurozone politicians who’s actually quite honest about the euro and the eurozone. He is calling openly for a much closer Europe. He reckons that Europe needs a common budget, a common banking system – effectively, a full-blown United States of Europe.”

Any French politician who has made such a proposal in the past has been fobbed off by Berlin with the curt instructions to put their own house in order first. Reforms to France’s generous pension arrangements, bloated public sector and short working week have been often proposed by a number of newly-elected Presidents only to be scuppered by tyre-burning, stone-throwing protesters backed by France’s powerful trade unions.

But just suppose Macron succeeds where his predecessors have come to grief. Even a streamlined French economy will take years to converge with Germany’s and then, what about Italy or Greece? Following Macron’s victory, the headline in the Bild newspaper, which Stepek describes as the rough German equivalent of the Sun, was “How expensive will Macron be for us?”

This is not just the heart of the Eurozone’s problem – it highlights a major stumbling block with the whole European project. Germany has been happy to be a net contributor to the EU’s funds via the EU budget. In some ways, it would be very churlish of the Germans to moan about this. Labour market reforms in the first decade of the 21st Century made German businesses more competitive and the single currency also made German goods relatively cheap in other Eurozone countries. Italy and Spain, habitual devaluers before adopting the Euro, have lost this option. Unable to weaken their currency and thus boost their export markets, businesses in these countries have failed to compete with the Germans.

The unemployment figures bear this out. Only 3.9% of working age Germans are out of work and youth unemployment was a mere 6.7% in March. The corresponding figures for Italy are 11.7% and 34.1%. Spain and Greece are even worse, with overall unemployment at 18.8% and 23.2% respectively and more than two out of every five young people out of work in both countries.

Closer fiscal union means that not only would German taxpayers be paying into the EU budget to rebuild the infrastructure of the former Soviet bloc countries, but they would be liable for the social security and pension benefits of unemployed and retired Greeks, Italians and Spaniards. At the same time, a banking union would increase German liabilities if an Italian bank went bust. In short, it would be all pain for the average German (who is doing very nicely out of the Euro) with very little gain.

But surely the gain would be the big step towards full political integration which has always been the goal of the EU project? We are now getting to the heart of a fundamental flaw in the whole federalist vision. The idea of an United States of Europe may have been appealing in the late 1940s when everyone was keen to find a format which would prevent another world war. The problem is that while certain intellectuals, particularly on the political left, have long had an internationalist outlook, ordinary men and women are far more attached to the concept of nationhood and ethnicity, even though they may not even be aware of how deep that attachment runs.

But the subject of fiscal transfers, along with the related issues of benefits and welfare, can be guaranteed to bring such sentiments out into the open. Even in the United States of America, there is considerable resistance in some states to a European-style welfare state – and significantly, the states in question are the most ethnically diverse. It seems to be hard-wired into our nature that we are more willing to make sacrifices for people who are “one of us” than for people we perceive to be different.

A German, whose public sector employees have to work well into their 60s, is therefore unlikely to take kindly to subsidising the pensions of Greek public sector workers, many of whom used to retire in their 50s. But Greek austerity is biting impossibly hard. At our Annual CIB rally, Ambassador Chrysanthopoulos told us that his own pension had been cut from 3,400 euros per month to 1,200. If the recently announced cut of a further eighteen per cent applies to him, he will be down to under 1,000 euros a month – and he reckons himself lucky! So real hatred for Germany is building up in Greece, as is impatience with Greece in Germany. The German people may yet find the price of European empire too high while poorer Greek households on the most basic social security are currently receiving around 8 euros per household (not per person) per day. So starvation stalks the land – all in the name of building a European superstate.

An extreme example? Perhaps, but it illustrates graphically the challenges which Macron’s election has brought to the surface. How deeply does the average German, Greek, Frenchman, Swede, Pole, etc  – as opposed to an intellectual or a politician – really love the EU? If the depth of love of the rank and file isn’t strong enough to transcend ethnic and cultural divisions or to be willing to endure financial deprivation and extreme hunger, the only question which Macron, Merkel or their successors will need to consider is how the whole EU project can be put peacefully to sleep without a total political and economic catastrophe.

Photo by Lorie Shaull

Where do your candidates stand? (1) Civil Liberties

QUESTIONS EVERY CANDIDATE SHOULD ANSWER

Whatever the party manifestos may say, the finer points of a future Brexit settlement are by no means done and dusted, regardless of the makeup of the next government.

The Campaign for an Independent Britain will be producing a few questionnaires for you to mail to all your prospective Parliamentary candidates. The will address issues where so far, what we have heard from Mrs May’s Government has not been particularly encouraging. We want to raise the profile of these issues and make it clear that we will not accept a half-baked Brexit.

Our first downloadable questionnaire covers civil liberties, particularly the European arrest Warrant. If you would like to know more about this subject, Torquil Dick-Erikson’s speech at a CIB meeting last March will provide you with the main points of concern.

Our questionnaire can be downloaded here. Please feel free to print off as many copies as you like

Conservative Manifesto – PM May Fail on Fishing

EU unemployment could be higher than the official figures

A study by the European Central Bank has suggested that the real level of unemployment in the European Union may be higher than the official figures.  If the numbers of underemployed and unemployed people in the Eurozone are added together, it apparently amounts to between 15% and 18% of the total workforce.

France and Italy in particular have not seen the slow recovery within the Eurozone translate into reduced levels of unemployment. Bert Colijn, a senior economist at the Dutch bank ING, estimates that in Italy, the total of the underemployed and unemployed may be as high as 30%.

In total, five million jobs have allegedly been created across the EU since the 2008 financial crisis, but many are part-time or temporary. This means that wage growth is pretty anaemic in many EU member states.

This report, if true, paints a very bleak picture indeed for some EU member states, as the official data is pretty grim. The youth unemployment rate in Greece stood at 48% in January. In Spain, it hit 56.1% in April 2013, but by March 2017, it had fallen to 40.5% – still two in five young people. The figures for Italy and France were 34.1% and 23.7% respectively. By contrast, in Germany, the figure was 6.7% and the overall unemployment rate a mere 3.9%.

These figures highlight the flawed nature of the single currency. The Germans insisted on a “strong” €uro as the price for surrendering the Deutschmark. They have ended up gaining a very profitable export market for their goods on their very doorstep. Meanwhile, the Mediterranean countries are suffering.

Given that, on the one hand the current state of affairs is going to continue to keep unemployment high in these countries while on the other, Germany would have considerable say in any moves towards further integration within the Eurozone, the prospects for their struggling neighbours to the south are unlikely to  improve any time soon.

What if we had lost?

It’s now over 10 months since the referendum. After the initial euphoria at the result, we enjoyed a brief and well-deserved break before plunging in to the next campaign – ensuring that we end up with the best Brexit deal possible. With Article 50 now triggered, however, the negotiations about to begin in earnest and memories of the referendum itself beginning to fade, it’s easy to forget how hard we had to work to achieve last June’s result.

Suppose, however, that it we had lost.

David Cameron had spelt out in no uncertain terms that this referendum, like Scotland’s vote in 2014, was a “once in a generation” decision. Admittedly, Nicola Sturgeon is straining every nerve to try to engineer a second vote on Scottish independence, but given that it was 41 years since our previous referendum on EU membership, we all knew that if our countrymen had voted to remain in the EU last June, we would have faced many more years of campaigning before a third vote would ever become even a remote possibility.

But just suppose a further vote had eventually been held in, say, 2025, what sort of state would our country – or indeed, the EU – be in by then?

We know that there was a great deal of unease on the Continent following the Conservatives’ 2015 General Election victory, which meant Cameron was going to have to make good his promise to hold the referendum. Laurent Fabius, France’s Foreign Minister, called his pledge “dangerous”. Until last June, Cameron had been described as a “lucky” Prime Minister, winning the 2015 General Election when many pollsters were predicting a hung parliament and securing the results he wanted in both the AV and Scottish independence referendums. Perhaps his track record helped calm nerves in Brussels and Berlin. After all, if remain had won, the implications for the EU would have been enormous.

A vote by the most consistently eurosceptic member state to remain in the EU would have been a green light for a further push towards federalism. Such a move may have initially been focussed on the Eurozone, especially given the victory of the enthusiastic federalist Emmanuel Macron in last Sunday’s French Presidential Election, but we would have inevitably found ourselves swept along in the federalist slipstream. Furthermore, even if voters in other EU member states voted the “wrong” way in any subsequent plebiscites, the EU could have pressed on confident that opposition could be muzzled. If even the truculent UK ultimately had decided to submit to the yoke of Brussels, the EU would have felt emboldened in the pursuit of its objective of creating a superstate. To put it another way, all 28 member states would have themselves been locked into an EU where the Jean-Claude Juncker mindset would have reigned unchallenged. “’If it’s a Yes we will say “on we go”, and if it’s a No we will say “we continue””, he famously said.

Now, however, there will be much nail-biting whenever a new treaty is put to a popular vote. The Brexit vote has shown that electorates are happy to defy a powerful combination of their own political leaders, businessmen and senior figures from both Europe and the wider world. The results of the Dutch general and French presidential elections may have been greeted with huge sighs of relief in Brussels, but it is worth remembering that in the first round of the French elections, 46% of voters opted for an EU-critical candidate. Macron’s victory does not imply a renewed love for the EU in France.

A remain vote would have bolstered the EU’s credibility in the wider world. It is doubtful whether it would have altered the course of events in Turkey, where accession to the EU now looks highly improbable following President Erdogan’s revisions to his country’s Constitution. It would, however, have strengthened the pro-European forces in Norway and Iceland. Maybe even the Swiss would have felt that sooner or later, they would have to join up. Instead, our vote to leave essentially buries the prospect of membership for Western Europe’s non-EU members and also makes the EU a harder sell in the Balkans and the former Soviet republics.

After all, although many of us are aware that one country, Greenland, had earlier left the EEC (as it then was), how many of us can actually remember it happening? It was a pretty minor piece of news at the time whereas the Brexit vote was splashed over front pages across the world, complete with pictures of either Donald Tusk or Angela Merkel looking distinctly gloomy.

The EU was never going to be the same after our referendum, however we voted. Its credibility would either have been boosted or dented.

As for how our country would have been affected by a remain vote, as Rupert Matthews pointed out, defeated leavers would have accepted the result with far more grace than the appalling behaviour we have witnessed from remainiacs like Gina Miller, Richard Branson and Tony Blair. We would have vowed to continue the fight but would not have accused voters in the opposite camp of being stupid. Nor would we have been cry-babies saying that the people didn’t know what they were voting for.

However, within a matter of only a few years, we would have seen much of our remaining distinctiveness gradually eroded. How long would we have been able to remain outside the single currency? How long before our armed services would have been absorbed into an EU army? What of the safeguards of our common law-based criminal justice system, so superior to the Napoleonic inquisitorial system of continental Europe, which the EU eventually would have replaced with a single criminal justice code? Would metrication have been pushed with renewed vigour?

Thankfully, instead of this nightmare scenario, we voted to leave and in so doing, besides the eventual benefits to our own country, we may well have put a big spanner in the works to the whole federalist project, for the good of the whole continent. As William Pitt the younger famously said 200 years ago, “England has saved herself by her exertions and will, as I trust, save Europe by her example.”

Brussels’ provocations

By Horst Teubert

German business associations are calling on the EU Commission to end its Brexit provocations. A disorderly Brexit would entail enormous costs for the German economy, the President of the German Chambers of Industry and Commerce (DIHK) warned; therefore an amicable Brexit agreement with London must be reached. The Federation of German Industries (BDI) expressed a similar view. The head of the EU’s Commission’s recent audacious financial demands and deliberate indiscretions have stirred massive resentment in the United Kingdom and were rightfully considered an attempt to influence Britain’s upcoming parliamentary elections. Observers attribute these indiscretions to EU Commissioner Jean-Claude Juncker’s German Chief of Staff, Martin Selmayr (CDU), who is currently playing a key role in the Commission’s Brexit negotiations’ preparations. The German Chancellery is now calling for restraint in view of the severe damage a hard Brexit could entail for the German economy.

The Commission’s Indiscretions

German businesses are complaining about the EU Commission’s recent provocations: On the one hand, the deliberate indiscretions concerning confidential talks on April 26 in London between the British Prime Minister, Theresa May, the President of the EU Commission, Jean-Claude Juncker, and their respective closest collaborators in preparation of Brexit negotiations. The alleged contents of the talks were leaked to a German newspaper, which published a detailed report, spiked with assessments, presenting the British government as blind to reality, uncompromising and disunited.[1] Juncker’s statements, reproduced in the report, are rightfully regarded in Britain as an attempt to tarnish Theresa May’s Conservative government and thereby reinforce EU-oriented forces, particularly among the Liberal Democrats and segments of the Labour Party during the election campaign – apparently to no avail. The obvious attempt to interfere in the country’s internal affairs has stirred massive resentment in the United Kingdom. In last week’s local elections in various parts of the country, all pro-EU parties, except the Welsh Plaid Cymru, lost mandates, whereas the conservative party made substantial gains. In spite of the significance of particularities in local elections, this is regarded as an expression of the wide approval for May’s political course.

Berlin’s Special Role

London has taken note of the special role Germany is playing in this affair. The indiscretions were published in a German newspaper and were probably leaked by the German EU official Martin Selmayr, a member of the CDU. Selmayr is Commission President Juncker’s Chief of Staff, and, according to reports, he is closely allied with Chancellery Minister Peter Altmeier. He is considered to be Juncker’s most important prompter, having a “tight grip” on the Commission, according to observers. (german-foreign-policy.com reported.[2]) He also holds a prominent position in the Brexit negotiations: Last October, Juncker mandated him to conduct regular preliminary talks on the Brexit negotiations with London. In the meantime, Selmayr has repeatedly announced that “Brexit will never become a success,”[3] thereby following Berlin’s suggestion that the Brexit could possibly have a deterrent effect on EU critics in other member countries. Selmayr is suspected of having leaked the recent indiscretions, because they contained also those parts of the confidential talks in London, in which only he and Juncker had participated on behalf of the EU. Michel Barnier, the chief Brexit negotiator, and his deputy, Sabine Weyand, joined the talks only later on April 26th. Alongside Selmayr, trade expert Weyand is the second German in a decisive procedural position in the Brexit negotiations.

100 Billion Euros

Alongside this indiscretion, the most recent hike in the amount Brussels is demanding that London pay for its exit from the EU is being met with resentment in Great Britain. Even the 60 billion euros, mentioned a while back must be seen – to put it mildly – as an unrealistically exorbitant starting point for the negotiations. Last week, the commission increased the amount even further, to €100 billion, according to which, two years after its exit, the United Kingdom is to pay, for example, agricultural subsidies for other EU countries, as well as EU administrative costs, alongside co-financing both the European Central Bank (ECB) and the refugee agreement with Turkey. On the other hand, London would not be able to lay any claims to its share of the EU’s assets.[4] Observers suppose that these unorthodox demands have been ultimately raised to increase pressure on London’s government and lower its re-election possibilities in favour of EU-oriented forces – until now, to no avail.

More Strain on Germany

Instead, Brussels’ provocations are now leading to public complaints from the German economy. Britain is its third largest sales market for the highly export-dependent German industry and its second largest foreign investment site. At a time when business with important business partners is suffering – due to sanctions (Russia) or political tensions (Turkey), when trade with its most important ally, the United States, has become unreliable with the recent change of government and its number one sales market – the Euro zone – remains deeply embedded in a crisis, German business associations are adamantly refusing to take on any more risks.[5] “Now, it is important not to smash any more porcelain during the talks,” warns Dieter Kempf, President of the Federation of German Industries (BDI), in reference to Brexit negotiations. “Reason and pragmatism” must be the guidelines for “both” negotiating partners.[6] One should not forget “that the Brexit will come at high costs, also for the German economy,” warned Eric Schweitzer, President of the German Chambers of Industry and Commerce (DIHK). A disorderly Brexit, in which merely WTO standards apply between the EU-27 and Great Britain, trade between Great Britain and the EU would engender trade tariffs of around twelve billion euros. Because of the extensive exports to the United Kingdom, this “would engender an enormous additional strain, also on German enterprises.”[7]

Calls for Restraint

Over the weekend, the first calls for restraint had been heard in Berlin because of complaints from within business circles, and the fact that the EU’s provocations seem to be backfiring in the United Kingdom. Chancellor Angela Merkel made known that she is “upset” about Commission President Juncker, because “his failed Brexit dinner” has only made the climate worse between Brussels and London.[8] The German MEP Ingeborg Grässle (CDU), chair of the European Parliament’s budgetary control committee, criticized Juncker in the name of the European Parliament. “It is time that the EU Commission presents a bill comprehensible for everyone,” she demanded in view of the sum London has to pay for the Brexit. “We want to maintain good relations with the British.” The most recent demands – a good example of the EU Commission’s dealing – are “completely exaggerated.”[9]

The original was published by german-foreign-policy.com and is used with permission

[1] Thomas Gutschker: Das desaströse Brexit-Dinner. www.faz.net 01.05.2017.
[2] See Eine nie dagewesene Machtkonzentration.
[3] Florian Eder, David M. Herszenhorn: Brexit will never be a success: Juncker’s top aide. www.politico.eu 05.05.2017.
[4] Hendrick Kafsack: Ich will mein Geld zurück. Frankfurter Allgemeine Zeitung 04.05.2017.
[5] See A Dangerous Game and Auf brüchigem Boden.
[6] BDI fordert Pragmatismus im Brexit-Poker. www.handelsblatt.com 06.05.2017.
[7] DIHK warnt vor hohen Brexit-Kosten. www.dihk.de 04.05.2017.
[8] Merkel verärgert über Juncker nach Brexit-Dinner. www.spiegel.de 06.05.2017.
[9] Andre Tauber: Wie hoch ist der britische Anteil am EU-Vermögen? www.welt.de 07.05.2017