An Assisted EU Council presidency

It’s not just Greece which has suffered thanks to its membership of the EU. Without even having joined the single currency, Bulgaria already is experiencing considerable hardship as this piece by Horst Teubert shows. (The original first appeared on the German Foreign Policy website and is reused with permission)

SOFIA/BRUSSELS/BERLIN – Bulgaria exercises its EU Council presidency – which began January 1 – with Berlin’s direct “counseling” and “assistance,” according to reports of the CDU-affiliated Konrad Adenauer Foundation. The foundation has been engaged in activities in Sofia along these lines, and has delegated its former Chairman and ex-European Parliament President Hans-Gert Pöttering to serve as consultant in the Bulgarian capital. Since Bulgaria joined the EU on January 1, 2007, oligarchs have become the country’s crucial power factor, controlling its fate, according to observers. Berlin easily tolerates this, because Prime Minister Boyko Borissov readily yields to German leadership, a former Bulgarian justice minister explained. The country, with its unrivalled starvation wages, serves as a production site for German businesses and as a reservoir to recruit skilled workers for Germany.

No Heating, Malnourished

Eleven years after joining the EU on January 1, 2007, Bulgaria’s political and social conditions remain desolate. According to the statistical office of the European Union Eurostat, in 2016, 40.4% of the 7.1 million inhabitants – almost three million people – were at risk of poverty or social exclusion. Nearly one third of the population – 31.9% – was severely materially deprived. They can barely cover basic needs such as affording adequate heating for their homes, everyday items, such as a telephone or a washing machine or meals with sufficient protein.[1] Even though the Bulgarian minimum wage has been raised to around 235 euros, it is not enough for decent living. Child poverty is particularly shocking: 45.6% of all Bulgarian children are on the verge of poverty or social exclusion. According to Eurostat, the situation is particularly catastrophic for children under the age of 16. 36.2% do not have any new clothes, 48.6% have at most one pair of shoes that properly fit, 40% cannot afford to eat fresh fruit or vegetables once a day and 42.4% do not eat enough proteins, because meat and fish are too expensive.

Toiling for Germany

To counteract the impression of hopelessness, spreading throughout the country, Bulgarian politicians like to point to the relatively low unemployment. The unemployment rate is currently 6.1% – significantly lower than the EU’s average of 7.4%. This, however, is due to the fact that large segments of the Bulgarian workforce have emigrated since 1990. The country’s population shrank from 8.9 million in 1990 to 7.1 million in 2017. Particularly the younger, well educated have left the country – in many cases to Germany. At the end of 2016, over 260,000 Bulgarians lived in Germany. More than 1,600 Bulgarian doctors are helping to alleviate Germany’s shortage of doctors.[2] From a German perspective, this is particularly profitable because Berlin did not have to pay a cent for their education. Sofia had paid for their expensive medical training. The same holds true for the training of numerous other Bulgarian specialists now working in Germany. Numerous other Bulgarians are being exploited as unskilled laborers, often under miserable working conditions, and at times, as illegal workers at the lowest wages.[3] Last year, the German government tried to prevent return flows to Bulgaria by massively cutting child benefits for EU foreigners, including more than 5,500 Bulgarians. The attempt failed, at least for now.

Unrivalled Starvation Wages

For the German economy, Bulgaria serves not only as the country of origin for cheap “human capital,” but also to a certain extent, as a sales market and as a low-wage production site. German companies sold nearly €3.5 billion worth of goods in that country in 2016. Although this placed Bulgaria 45th on Germany’s export list – behind Thailand, Israel and Ukraine – it, nevertheless, contributed to the stabilization of Germany’s Southeast European trade. Germany is Bulgaria’s largest trading partner and probably one of its most important foreign investors, when considering its indirect investments made through the Netherlands or Austria. In Bulgaria, labor costs are “the lowest in the EU,” noted the state-owned Germany Trade & Invest (GTAI). Wages and the non-wage labor costs are unrivaled at €4.4 per hour. This is another reason why this country remains “an interesting production site.”[4] The German clothing manufacturer, Hugo Boss, benefits from Bulgaria’s starvation salaries. Around 16 percent of Germany’s imports from Bulgaria are textiles. GTAI has, however, begun to complain of a noticeable “shortage of skilled workers” in Bulgaria – due to the emigration of well-trained personnel – also to Germany.[5]

The Age of the Oligarchs

Whereas the social situation in Bulgaria – caught in the economic hammerlock imposed by Berlin and the EU – remains desolate, the Bulgarian oligarchs’ political control over the country has considerably grown since it joined the EU. Experts are beginning to refer to an “age of oligarchs.”[6] One of the most powerful Bulgarian oligarchs is the businessman Delyan Peevski, who also controls about 80 percent of Bulgaria’s print media market. The fact that Bulgaria plunged from 51st place (in 2007) to 109th (2017) on the “Reporters Without Borders” World Press Freedom Index has been attributed to the predominating influence of the oligarchs.[7] The journalist Assen Jordanov, a specialist in white-collar crime, even accuses Bulgaria’s Prime Minister Boyko Borissov of being deeply involved in illegal transactions. “In fact, a neo-feudal, oligarchic, Mafia-clan is operating a shadow economy in Bulgaria.”[8] Unlike the leaders of Hungary and Poland, Borissov – whose party members sit alongside those of the CDU and CSU as members of the European People’s Party (EPP) – is easily tolerated by Berlin and Brussels, because of his political subservience. Hristo Ivanov, Bulgaria’s former Minister of Justice, (2014 – 2016), notes, “If there is a dossier in Brussels, and the Germans have a clear position on it, we agree with the Germans. … Otherwise, do as the Commission does, there is no independent Bulgarian position.”[9]

“Unity Brings Strength”

This principle obviously applies also to Bulgaria’s EU Council Presidency. Back in early October, the FDP-affiliated Friedrich Naumann Foundation’s project manager for Southeast Europe noted that, Sofia remained very “vague” in the preparations; “various priorities without a clear thread” are mentioned. They cannot even formulate their “own … projects.”[10] Meanwhile the CDU-affiliated Konrad Adenauer Foundation has sought to plan the Bulgarian council presidency, and has begun “advising” Prime Minister Borissov’s government accordingly. They will be “advising the council presidency” also “in the same way,” it has been officially announced. “An important role will be played by the foundation’s president [whose term of office ended December 31, 2017, editors note] and former President of the European Parliament, Dr. Hans Gert Pöttering, who the Bulgarian government had appointed to join its supreme political advisory council.”[11] The issues Sofia is now presenting correspond to Berlin’s objectives for the EU. On the one hand, ways must be found to hold the union together, despite the centrifugal forces growing stronger, which is why Bulgaria has placed its presidency under the “Unity Brings Strength” motto. On the other, stronger ties should be established to non-EU member western Balkan countries, to counter China’s rapidly growing influence in the region. ((german-foreign-policy.com reported.[12])

Moving Toward the Right

At the same time, a government is assuming the presidency of the EU Council, in cooperation with the Konrad Adenauer Foundation that is in a government coalition which includes an extreme rightwing party. An extreme rightwing party is also a coalition partner of the Austrian government, which will assume the presidency of the EU Council during the second half of 2018. German-foreign-policy.com will soon report.

[1] Eurostat press release 155/2017 16 October 2017. According to Eurostat, “severely materially deprived persons have living conditions constrained by a lack of resources and experience at least 4 out of the 9 following deprivation items: cannot afford 1) to pay rent/mortgage or utility bills on time, 2) to keep home adequately warm, 3) to face unexpected expenses, 4) to eat meat, fish or a protein equivalent every second day, 5) a one week holiday away from home, 6) a car, 7) a washing machine, 8) a colour TV, or 9) a telephone (including mobile phone).”
[2] Rainer Woratschka: Durch Zuwanderung deutlich mehr Ärzte in Deutschland. tagesspiegel.de 26.05.2017.
[3] Deutsche Arbeitgeber beuten EU-Ausländer aus. mdr.de 11.10.2017.
[4], [5] Michael Marks: Lohn- und Lohnnebenkosten – Bulgarien. gtai.de 22.05.2017.
[6] Stefan Antonov: The Age of the Oligarchs: How a group of political and economic magnates have taken control of Bulgaria. University of Oxford: Reuters Institute for the Study of Journalism. Oxford 2013.
[7] Barbara Oertel: “Ich würde Sie feuern“. taz.de 21.11.2017.
[8] Nina Flori: Ein Land in Oligarchen-Hand. wienerzeitung.at 22.03.2017.
[9] Markus Bernath: Bulgarien vor Beginn der EU-Ratspräsidentschaft im Zwielicht. derstandard.de 27.12.2017.
[10] Daniel Kaddik: Mangelnde Vorbereitung, fehlende Visionen. www.freiheit.org 02.10.2017. See also Bulgaria’s European Course.
[11] Thorsten Geißler: “Einigkeit macht stark“. Bulgarien übernimmt am 1. Januar 2018 die Ratspräsidentschaft der Europäischen Union. Konrad-Adenauer-Stiftung, Länderbericht Bulgarien. Dezember 2017.
[12] See also Berlin Calls for a “One-Europe Policy”.

Photo by Swedish National Heritage Board

Brexit still on course – a statement from Anthony Coughlan (Dublin)

BREXIT STILL ON THE WAY AS THE EU/UK NEGOTIATION MOVES FROM PHASE 1 TO PHASE 2

Genuine democrats and EU-critics everywhere will welcome the news that Brexit is still on the way following the decision of the European Council of Prime Ministers and Presidents to move to the next stage of the EU/UK negotiation, i.e. on the two-year withdrawal period and the post-withdrawal trade agreement between the UK and the EU.

If there had been a failure to move the negotiation to Phase 2, ultra-Europhiles and Eurofanatics everywhere would have been delighted.

The European Council decision of the other day means that the hopes of such people that they can stop Brexit are significantly diminished, although they will continue to hope on and still do all they can to  attempt to derail the process.

The less EU-besotted amongst Irish policy-makers and media commentators will now have to start thinking for the first time whether it is really a good idea for this State to attempt to remain in an increasingly federalizing EU when 1.8 million of our fellow-countrymen and women  in Northern Ireland will be leaving it.

They will need to ask themselves do they want to be responsible for a new Partition of Ireland!

If the EU/UK negotiation leads to a meaningful Brexit, which means that the UK as a whole will leave the EU single market and customs union at the end of the UK Government’s proposed two-year transition/implementation period, as now looks probable, ONE CAN BE CONFIDENT THAT THE REPUBLIC WILL FOLLOW THE UK OUT OF THE EU IN TIME  because the drawbacks of the Irish State seeking to stay in the EU when the UK leaves will become so obvious and be so painful that the Irish public will come to demand nothing less.

However, wishful thinking is still likely to prevail widely in the Republic for some tine and among those “Remain” supporters everywhere who seek to overthrow last year’s democratic UK referendum result  –  in particular the hope that Brexit can still be frustrated in the Westminster Parliament or by a change of UK Government during the negotiations; or that at the end of the day the softest of “soft” Brexits will mean that the UK will effectively remain under EU supranational  jurisdiction.

Genuine democrats everywhere will  now wish UK Prime Minister Theresa May and her Government every success as they move to implement a meaningful Brexit that gives citizens of the UK democratic control of their own law-making once again and removes them from the EU single market and customs union.

The man who could blow up the EU

On 22nd April 1966, Jean Rey, the Belgian lawyer who succeeded Walter Hallstein as president of the European Commission, delivered a speech in Brussels full of optimism about  the future of the European project.  At this time, the Community had just emerged from the “Empty Chair Crisis” where France’s General de Gaulle, concerned about the increasing power of the Commission and erosion of national sovereignty, recalled France’s representatives, resulting in six months of virtual paralysis within the European institutions.

Rey expressed great confidence about the Community’s ability to bounce back form the crisis and move forward towards closer integration:- “There is no reason for the leaders of the Community to show the any hint of pessimism, of discouragement; the slightest doubt about the eventual success of their efforts.”  Europe had a great future, he claimed, but only if it integrated. Indeed, in so doing, Europe could lead the world:- “The times when nations could live in isolation is over….After several centuries when the nation state represented the final word in political wisdom, see how the world is organising itself in continents and it’s the Europeans who are leading by their example.”

Overt federalists like Rey are a rare breed nowadays. True, the EU has expanded from its original six members to 28 (soon to be 27) but the optimistic, almost visionary quality of Rey’s utterances are a thing of the past. No better proof of can be found by comparing Rey’s words with a speech by Martin Schulz, the leader of the German Socialist Party, the SPD, at his party’s  conference on 7th December.  The substance may be similar but the tone is completely different.

“I want there to be constitutional treaty to create a federal Europe” he said. Fine, that has always been the goal of the EU. He then went on to say that once drafted, it would “be presented to the member states, and those who are against it will simply leave the EU.”

This is the big difference. It would never have occurred to Jean Rey to talk of expulsion from the EU and Schulz’s harsh language is an implicit admission that the European Project is faltering. We addressed some of the reasons a couple of months ago and in spite of the promising headline data on the Eurozone economy, the political divisions are as deep as ever.

Far from encouraging unity around common ideals, Schulz’s words will only inflame these divisions. His vision of “Europe” is the Western European multicultural variant which is being so fiercely resisted in countries like Hungary, Poland and the Czech Republic.  Furthermore, as a German, his words will be interpreted in Southern Europe as a threat to their fiscal independence.  The most extreme reaction may well come from his own countrymen, however. The federal Europe to which he aspires can only come about if his countrymen are prepared to foot the bill and subsidise the poorer countries. The lack of enthusiasm for such generosity lay behind the success of Alternative für Deutschland in the recent Federal Election. Perhaps Herr Schulz might care to reflect that his own party recently registered its worst performance – and under his leadership – in almost seventy years.

True, there was a certain amount of grandstanding in the speech. The SPD is setting out its stall for renewing its coalition with Mrs Merkel’s CDU party but its overt federalism was given short shrift by the German Chancellor, who said ““I believe the ability to act now is the priority, not setting long-term goals,” In reality, while Schulz (and Jean-Claude Juncker, for that matter) are wanting to put their foot on the accelerator, Merkel actually wants to go more slowly but in exactly the same direction – and it’s not a direction that commands as great a degree of support as it once did.  There may not be anyone of the calibre of Charles de Gaulle in a position of authority in an EU member state, but the issues are the same as those which provoked the “empty chair crisis” – increasing centralisation and a loss of sovereignty by the member states.

In a very thought-provoking article, Ambrose Evans-Pritchard said that we must not forget why we are leaving the EU. “It is not a whimsical choice. The decision was forced upon us because the EU began to assert ‘totalitarian’ reach, using Hannah Arendt’s term advisedly to mean a systematic assault on prior traditions and institutions in order to create an entirely new order,” he said. The article begins, however, by quoting someone from the very heart of Europe who is claiming that the EU is becoming  an “imperial construction”. In other words, it’s not just the UK which has lots of unhappy people. “Life in Europe in 2017 is resembling more and more what it was like under colonial administration. We are subjected to an invisible administration that shapes our destiny down to the tiniest details. Should we really be surprised that it is leading to revolts?” asks the Belgian David van Reybrouck, a prolific writer and historian.

The EU expended a huge amount of energy (and, no doubt, money) to try to contain Brexit and prevent a domino effect. It breathed a huge sigh of relief when  Neither Geert wilders nor Marine le Pen achieved the breakthrough they had hoped for. The volatility of many European voters and the fault lines between the EU-27 have not gone away, however, and if Schulz becomes Germany’s vice-chancellor and fancies joining forces with Jean-Claude Juncker and Emmanuel Macron to push ahead with the federal Europe to which they fervently aspire, the net result may well be the opposite – that they end up blowing the whole project to pieces.

 

Photo by opposition24.de

The Brexit negotiations – a German perspective

This speech By Dr. Markus Krall was delivered at the House of Lords on the  invitation by Lord Nicholas Fairfax on October 24th, 2017 Although rather long, we feel it is well worth reading right through as it is a most helpful explanation of the predominant German mindset. The original was first published by Global Britain and is used with full permission.

Honorable members of the House of Lords, Ladies and Gentlemen,

I Introduction and Summary

Before sharing my perspective on the negotiations of the terms of separation of Britain from the EU, or Brexit, allow me to express my gratitude for the invitation and the opportunity to speak to you at the House of Lords. I feel honoured and privileged to have been invited by Lord Fairfax.

This parliament stands as a beacon of liberty and free speech going back to times when the continent was still subject to the power of absolutist, non-constitutional monarchs. This long standing tradition of liberty lies in my humble opinion at the heart of the decision that

the majority of the British people has made with regards to its future role in Europe and the world. I would like to put my deliberations into perspective:  A German perspective I will deliver to you today,

is not one shared by the German government or mainstream media. It is rather my personal one which is based on a number of discussions with political staff in Berlin, including government officials, members of parliament, and lobby groups.

Based on this I will try to provide you with a brief picture of the German and the Brussels mindset and their interaction regarding Brexit before spending a few remarks on the misguided game theory approach resulting from the underlying ideological edifice. This will lead us directly to what I think to be the German governments, specifically Mrs. Merkel’s, approach and how the gaps in its consistency can provide opportunities for the UK negotiation strategy. Finally I will take the liberty for a very short statement why I am taking an EU-critical position in a debate that is well known to my valued audience.

II  The German State of Mind

Now, allow me to start with some observations about what I would like to call “the German state of mind”. I once stumbled upon a little article in the Economist recounting an anecdote from 19th century France: Emanuel Litrè, the leading French linguist of his time once

Fell prey to an error of judgment and as a consequence was caught by his wife with their housemaid in the conjugal bedroom in flagranti. As his wife entered the room she exclaimed “Dear, I am surprised!” And what did the erring Frenchman reply? “No dear, you are astonished, it’s us who are surprised.” The term “astonished” very neatly describes the state of mind regarding Brexit in Germany, especially among its economic and political leadership. Germany is probably the one country in Europe that was emotionally and intellectually least prepared for the news that a majority in the United Kingdom had decided to call it quits with the European Bureaucratic Union. That has several reasons.

One is that we Germans – regrettably – have a tradition of belief in the infallibility of government. While the liberal school of Anglo-Saxon origin views the state and its bureaucracy with a healthy dose of skepticism this is not so to the same degree between the rivers Rhine and Oder. This is also true for the media, which are toeing the “official line” because 80% of journalists identify themselves as left of centre. There is a resulting lack of democratic control and public debate.

Secondly, very much in line with the undemocratic decision-making the EU has adopted, we have seen a systematic erosion of the rule of law in Germany regarding European matters. This included the illegal bail out of broke €urozone members, Greece among others, the thinly-veiled practice of government funding by the ECB through various programs in contradiction of the treaties and the opening of the borders in clear defiance of the Schengen treaty. It is, by the way, a most deplorable observation that you can cajole my fellow countrymen – or at least a sizeable minority of them – in to going along with the erosion of the rule of law if it’s for a presumed greater moral good. The end justifies the means.

The EU is a clear beneficiary of this attitude as Government and Brussels have become interchangeable terms for good reason. So for a majority of Germans as well as of officials in Berlin it was simply an unthinkable heresy when British voters said “we leave”. As it actually happened, they were completely astonished, and intellectually unprepared.

Thirdly, in the past, Germany and Britain have often been aligned in efforts to tame the Brussels bureaucracy, and push the EU towards free trade and open borders. The common market in its original free trade design was largely the result of Margaret Thatcher’s pressure. The Germans, who didn’t have the same political weight as a result of well-known historical developments gratefully took this for granted. The presence of Britain in the EU was in the German view a necessary counterweight to the school of étatisme, the primacy of the state bureaucracy coming from Paris. Now this balance of power in the EU is damaged. To put it bluntly: You guys are leaving us alone with a bunch of socialist Latin-European nut-heads. We are not delighted.

III The Brussels Attitude

The EU bureaucracy immediately adopted a hostile attitude towards your country’s democratic  decision. It was viewed as a dangerous precedent, especially in the light of the frictions caused by the Euro and the widening cultural divide between what Donald Rumsfeld once called the old Europe versus the new Europe.

In the bureaucrats’ view, nobody should be incentivized to leave the club or even to think about it. He must not go unpunished. This attitude makes it impossible, by definition, to tolerate an economically successful United Kingdom outside the Brussels sphere of hegemony. Because if Brexit is a success, economically, politically and socially there is proof to the pudding that prosperity s possible without them. The plethora of Europe’s presidents from Schulz (now ex-President) and Juncker to Draghi and Tusk would be walking naked –  emperors without clothes.

The resulting reaction has several elements:

  • Accusations of the vote being undemocratic because the British voters are not adults, and therefore presumably followed liars
  • Meting out punishment in the form of an extortionate “Brexit Bill”, and
  • Propagating fictional beliefs as facts which don’t stand the test of reality.

The result is what I call a Brexit trap consisting of a prisoner’s dilemma to be solved in a timeframe that is insufficient if one follows the Brussels script.  From all this brouhaha guiding negotiation principles were derived with the aim to let those little warm-beer-drinking and on the wrong side of street of history (let alone real roads) driving inhabitants on a chilly European archipelago understand their political heresy: “Turn back and repent, you English fools!” The indulgence selling priest Johan Tetzel would have loved the drama.

Let us take a closer look at the parts:

  • Liar’s Poker:

The accusation that the voters fell into a trap of lies originated, of all places, in the EU Commission whose bibulous president Juncker once coined the telling bon mot “if things get serious you have to lie!” Well, let me cautiously put it that way: This is difficult to beat in terms of irony, hypocrisy and unintended satirical quality.

  • The 100 BN €uro bill:

The final sip that the subsidy-hungry Brussels bureaucracy and its sycophants would like to take out of the net-contributor bottle that generously used to be provided by the United Kingdom. This is the indulgence receipt for those little black souls on the banks of the River Thames. Just to imagine Britain could ever be willing to continue the huge transfers which were one of the main reasons to leave the club is totally bizarre. However, bizarre and Brussels are compatible. The British tolerate this kind of thing by calling it “eccentric” which means several standard deviations away from the norm of mental sanity.

  • What are those fictions being mixed with facts?

Fiction No 1: “We must not allow cherry picking”

This statement insinuates it is an altruistic act towards others to open your own borders for free trade. The EU which, if the new US President offers himself as a convenient target, presents itself as a champion of free trade and permanently talks of win-win through open borders, yet has no problem whatsoever to ask non-members for entry payments for common market access. That is a kind of protection money in return for not obstructing the free flow of goods and services with tariffs. That doesn’t mean though they will not obstruct it with non-tariff hurdles. They are just giving it a different name. They call it “regulation”, “norms” and “ban” and it’s almost a no-brainer that all the small countries in the Brussels periphery have to swallow these toads and translate everything into their national legislation. Bruxella locuta, causa finite. Trade imperialism at its bes.t

Fiction No 2: “The four freedoms of the common market are indivisible”

This fiction is supposed to give strength to the demand of unlimited immigration and to make it impossible for EU member countries and Great Britain to deflect the storm of badly trained and even worse educated immigrants into their social systems. The claim of indivisibility is pure nonsense of course. No free trade agreement the EU has negotiated with third countries under the flag of TTIP, CETA or any other acronym makes this assumption. The reason is quite simple: Other large countries would tell the EU in unflattering words what they think of this if the demand would ever be brought up.

Fiction No 3: The United Kingdom needs the EU more so than vice versa

Yes, the market for goods and services is larger in continental Europe. So what? If you are running a trade surplus of 120 billion Euros annually, you don’t want to put that at risk, do you?

That though is the EU surplus with the UK. A continent that by design and ignorance, has neglected its infrastructure for security and defence over decades might have an incentive to be friends with a country which didn’t commit that folly. Again Brussels has to look over the Channel. The party that has – with over 3 million – three times as many people working in Brexit country compared to just one million British working on the continent should be interested in not failing on a deal to protect all of them, does it? Who needs whom in this situation? Is that really so clear? I beg to differ.

Fiction No 4: 30.000 regulations need to be renegotiated

Smugly the members of the platitude party point out to us that 30,000 EU regulations and laws supposedly need to be renegotiated between Great Britain and the EU27 and that it would be impossible technically to achieve this. In this we can find a misunderstanding and an involuntary confession: The misunderstanding is that Britain and the EU have to agree on all paragraphs of this deluge of laws. Is it not rather a sovereign decision of the United Kingdom to adopt these regulations partly, in full or not at all? If the EU views some of them as conditional for a free trade agreement they should draw up a list and use CETA and TTIP as benchmarks. Then one can discuss if the UK can accept that list or not.

Now to the involuntary confession: We are flooding the continent with so many regulations, laws, executive orders and decrees that it becomes impossible with normal human capacity to comply with the law. Winston Churchill had a comment on this: “If you have ten thousand regulations you destroy all respect for the law”. Exactly! Juncker’s minions have over delivered on this by a factor of three.

IV The EU Chicken Game Theory Negotiation Guide

The political intention behind the use of these fog grenades is easy to discern and one could even have a certain tolerance for it, if it was just about the creation of a rational negotiation strategy. The problem is: Europe’s politicians have told this to each other so often in their echo chamber that by now they really believe it! They have fallen prey to their own propaganda.

The result of this giant echo chamber of mutual self-assurance and stew of self-righteousness is the conviction that the Brexit negotiations are inherently a game of chicken. The one who first

blinks will lose. The concept is completely insufficient to capture the inherent complications of the problem, but also pretty obviously overtaxing the intellectual capabilities of its proponents. The enemies in this game of chicken are not just the insubordinate secessionist rebels in London, but all countries and political forces toying with the thought of following their example; or those just daring to remind the Bureaucratic Party of the principle of subsidiarity in an “ever closer union”. They shall get a preemptive lesson that it will be painful to spurn the intrusive love of those who define their political raison d’être in attaching their tentacles to other people’s fridges.

This game theoretical toxic waste is even articulated by some professors who belong to the close circle of advisors of the German government. It is though pretty obvious that the question as to what game we are playing is far from resolved. This game is not one of chicken. It is not an “I win you lose” game. That is only the case in the thin intellectual reasoning of people who would do well to learn about the assumptions and limitations of game theory before they employ it and turn it into a guide for their political war cry.

Looking at the economic and technological realities mentioned above makes it clear this game rather is a prisoner’s dilemma. Incentives for cooperation will be switched of on both sides as a result of the erosion of trust. This is a sorrow state of affairs that will produce losers only. The ability for critical reflection has been degraded and degenerated by this exercise in such a way that old and proven principles of behaviour and respect in the mutual dealing between sovereign nations have gone overboard.

This is specifically true regarding the respect for the territorial integrity and sovereignty of the United Kingdom. Quotes bubble up from Europe’s capitals about the desire for secession of Scotland, Northern Ireland and Wales, even of London! The NATO ally Spain is encouraged to abuse the opportunity for a Gibraltar debate by giving Madrid a veto over a matter they had not even asked for.

Instead of minding their own business they are minding the business of a sovereign nation in a completely outrageous way. Why? Because they do not view members of the EU as sovereign states with sovereignty embodied in the will of their people. This is the Juncker version of the Brezhnev doctrine. EU member states are viewed as provinces which have to be administered for the advantage of the administrators and whose population (note: not People!) is granted the privilege to occasionally applaud in an acclamatory fashion in order to demonstrate their gratefulness.

In clear denial of the facts it is being claimed that for Scotland there is indeed a new situation after Brexit justifying a new vote on independence. When Scotland voted, the Brexit vote had already been scheduled. Everybody knew it could go either way. So Scotland voted, in the full knowledge of the possibility of Brexit, for the continued Union with England. What then is the new fact on the ground? Would another outcome of the vote also have constituted a reason to vote again? Do we want to turn every democratic decision of political significance in the future into a reason to split up nations after centuries of common history due to regional differences in the voting result?

The whole debate is testament to the abysmal disdain of the Brussels bureaucrats and their satraps for the voter’s will and the expressions of this will by the people. Polls are accepted only if they fit their purpose. Especially with regards to European matters we have seen it more than once that people were called to the polls until the result was compliant. In this sense Ms. Sturgeon is a docile padavan to her Brussels masters: Repeat the vote until you get what you want and then lock that in. This lack of democratic credibility is a central Leitmotiv of the EU`s governance, where the composition of every decision making body is s the result of horse trading instead of universal suffrage.

There is a reason why the term “one man – one vote” originated in the English language. We even use the English term in Germany quite frequently. This reason is the historically developed democratic tradition on the island. And this is the very same reason, why the British have a deep rooted aversion against undemocratic bureaucratic elites. And it will be damned difficult to exorcise it out of them.

V The German Government’s Situation and Position

Let me briefly talk about the German governments political motivations. The first element driving the German government into the arms of Mr. Barnier ́s confrontational approach is the budgetary aspect. The UK is, together with Germany, the only other net contributor of significance to the EU-Budget. The expectation that the sycophants in the Berlaymont will not reduce their subsidization and redistribution schemes because of Britain ́s departure can be taken for granted. Getting a budget under control, let alone reducing one is totally anathema for this “class distributif”.

Germany alone has not nearly enough votes in the EU Commission, the council, or any other common institution to organize cuts in line with the smaller size of the budget available. In every European council exercising power, from the commission to the ECB, the rule of one ountry – one vote leads to the absurd result that the weight of a voter is inversely proportional to the size of his country’s population. In the doubtlessly most influential body on the continent, the ECB council, a Maltese voter has the weight of 204 German voters. That probably reflects the fact that a Maltese understands monetary theory and policy 204 times as well as a German citizen. I dare to call this sorry state of affairs a special form of apartheid. It contradicts democratic principles and traditions and an institution with the ambition to replace democratic nation states cannot claim any legitimacy on such a basis.

And even though Germany does have some leverage, albeit not de jure but de facto, Merkel does not want to use it as a matter of principle – unless forced by circumstances. If the outcome of the recent elections can contribute to this remains to be seen. I would so far say it didn’t. So, not willing to pick a fight over budget reductions and savings in the corridors of the Berlaymont, chancellor Merkel has decided that the Brexit bill is of utmost importance to limit the additional demands directed at Germany. To blow it up to €100BN would imply that Britain’s net contributor position is preserved for a decade or so at current levels. Needless to say, the coalition formed by these interests will not want to give anything back in return to the UK taxpayer.

Deflecting these demands from Britain can only be managed by disputing the components of the bill line by line, demanding value added in return, a quid pro quo, because that was also part of the deal in the past. And free trade is certainly not a quid pro quo in this sense, because both sides profit from it from the start, the EU even more so than the UK.

There is a second element which I believe has a large influence on a number of key decision makers in Berlin, especially on our very powerful finance minister Wolfgang Schäuble. He is part of a generation of politicians with a genuine “faith” in the EU as the central “project of peace” on the continent. This group does not believe that they can succeed in building a new version of the Europe des Patries that the founding fathers dreamed of if the existing institutions are demolished and hence support the misguided idea of an “ever closer union”. For that reason they don’t see the original vision as an option any more. What they see being endangered is no less than their lifetime achievement. This is no weak force for inhibiting sound judgment.

The problem they face is the timely coincidence of Brexit with the €uro-crisis. They know that it is impossible to push the southern European countries towards the market reforms necessary to enable their economic survival inside the €urozone. They have tried and failed repeatedly. However the €uro is of such centrality in the ideological edifice they have erected that it is being defended come hell and high water even in the face of complete absurdity, unsustainable cost and life threatening risks.

The €uro, however, is the time bomb that will likely blow up the European institutions in a single cataclysmic event. I am convinced it will do so during the next German government’s term in office. The reason is simple. The Euro has created huge trade imbalances inside the Eurozone. Goods and capital have been flowing from a super competitive Germany (for which the €uro is undervalued) to a decrepit “Club Med” (for which the €uro is overvalued). As a consequence, unsustainable levels of debt held by Germany through a variety of vehicles have been accumulated. At risk are bonds bought by German institutional investors (€1.8 TRN), the ESM commitments as part of the “Euro-rescue” efforts (€200 BN), and the Target-2 exposure.

Target-2 is an overdraft loan the Bundesbank has handed out at zero interest, unlimited, unsecured, for indefinite time and without any control or discretion to the other central banks of the €uro system. As of September 2017 it added up to €850 BN. I call this combined approximately €2.8TRN exposure my country is running “the biggest hedge fund on the planet with one single bet, namely that the €uro will be saved”. The problem with this sort of policy is that it creates imbalances in the real economy which cannot be kept under the rug forever. Specifically the flat yield curve at zero level erodes the earnings power of commercial banks. Our calculations show that most German and indeed EU commercial banks will start suffering substantial operational losses from 2019/20 onward.

This translates into shrinking risk taking capacity of the banks which in turn leads to shrinking credit volumes, shrinking bank money creation and deflationary pressure. Paradoxically the desperate push for more inflation thus will create deflation.

Furthermore, the zero interest rate environment has kept hundreds of thousands of companies in business that would have gone bust under normal cost of capital conditions since 2007. Thus, it created what I call an army of corporate zombies which infect the banks credit books with junk quality loan exposures. These companies will fail in the event of rising interest rates or a downturn in the business cycle. Their breaking wave of defaults will likely lead to losses north of €1,500BN for the €urozone banking system taking down more banks than the US mortgage crisis did.

While refusing to acknowledge this publicly, the German government has been made acutely aware of these imbalances as the OECD, IMF, BIZ and a number of private institutions have all confirmed the estimate that so called zombie firms are by now making up 9-10% of Europe’s total number of firms. It reinforces the stance of Juncker, Barnier, Merkel and Schäuble that they must avoid cracks appearing on the facade of the remaining EU-27. Politically they cannot afford to lose a single additional country. Not from the EU, and not from the €urozone, as leaving it automatically involves a trigger to leave the EU.

VI The Leverage the UK can apply

Now, how does this play into the Brexit negotiations? Paradoxically, this situation could be leveraged by the UK to the advantage of a constructive negotiation strategy. It might be a winning strategy to put some focus on Berlin in the coming months. This has several reasons:-

It is of utmost interest for Germany to avoid being pushed into an even higher net contribution after Brexit. This can either be achieved by an outrageous Brexit bill for the UK or by savings in Brussels. The UK needs a clear communication strategy to the German public and political decision makers that spending in Brussels necessitates big cuts. A targeted PR strategy  focusing on Germany might be worthwhile to be considered. The EU-27 have a 120 BN €uro trade surplus with Great Britain, much of it coming from the bilateral trade between Germany and the UK, much of it easily substituted from other sources. When I attended a presentation of a Ministry of Finance official to the commission of the Economic council for the Financial Industry a few months ago this matter was brought up in the subsequent discussion. It very quickly resonated with the representatives of companies and banks that were present. However, before the number was thrown into the debate, 95% of the participants were unaware of it.

The resulting question for the UK negotiators is: How can public awareness be built with the effect to create political awareness? The security debate in Germany is heating up. The influx of 1.5 Million refugees from Syria and North Africa, 85% of them young men, into Germany has created a severe public security problem. Germany has dropped to rank 51 in the global travel security index and now trails behind Rwanda, Morocco, Korea, Albania, Azerbaijan and Tajikistan. Cooperation with the one country in Europe that is leading in electronic intelligence is therefore imperative for our security. That fact alone creates a certain level of leverage through mutual interest and it would not hurt reminding Berlin of this.

We are also witnessing an increasing tendency for the Russian bear to flex his muscles. At the same time our American friends are dealing with an internal constitutional crisis. It is clearly of the utmost importance for the European members of NATO to step up their own defence spending and reinforce their mutual defense commitments. Here, realistically there are three, possibly four relevant countries: UK, France, Germany and Poland. The survival of the EU is conditional on the continued willingness of the militarily significant European members of NATO to work together for mutual defense. The critical decisions will be taken in Berlin, Paris, London and Warsaw – not Brussels. Again, it is clear that the UK would not use this as a point of leverage, but Berlin can be obtuse when it comes to issues of defence and it would not hurt to remind the Chancellor of these matters.

Why do I believe this collection of German interests is relevant for the UK? Because while we have seen above what the current drivers of the Merkel administrations behaviour are, it is also clear that she does have a huge leverage over the other key players, namely Macron, Juncker, Barnier and the governments of the southern periphery which she is reluctant to use:- The monetary policy of the ECB which currently accommodates the unwillingness to reform Italy, Greece, Portugal and others could not be conducted without Merkel ́s tacit approval. Draghi wants to continue this as long as he presides over the ECB-council in 2019.

France ́s president Macron has aimed for a mix of timid reforms and more intra-European redistribution. Transfers and socialization of risks through schemes like Eurobonds, etc. are his goals. There will be some sort of deal of money for reforms and although I don’t think it will work, he is looking to Berlin for help. President Macron’s  biggest worry currently is that the liberal FDP opposed to this gains too much strength in a future German government.

Italy needs, apart from the continuation of the ultra-loose monetary policy Berlin’s tacit approval to rescue more of its banks with tax payers’ money in violation of the new treaty regulating failed banks resolution, a move that will create more debt and more target-2 transfers from the Bundesbank to the Banca d`Italia.

To summarize it: Germany is the one country in Europe that can least afford to let the Brexit negotiations fail. And it is the one country with the largest leverage over the negotiations while at the same time refusing to use it. This may have some implications for the UK`s negotiation strategy. I also think any discussions need to take place at the very highest level, power is concentrated in my country and it would take a rare courageous minister to buck the line coming from the Kanzleramt.

However, make no mistake with regards to Chancellor Merkel’s attitudes. She will not be helpful to the UK without the application of what I would call “constructive pressure” changing her European equations in favor of a balanced result of the negotiations!

VII Concluding Remarks

Honorable members of the House of Lords, Ladies and Gentlemen, The Prime Minister of the United Kingdom during its finest hour, Sir Winston Churchill, whom I regard as the greatest statesman of the 20th century, and whom I hold in the highest esteem for liberating Europe and my home country, once coined the immortal phrase: “The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.”

For me in this matter there is one simple truth: The British people have made a democratic decision in line with your best traditions, values and a vision of Britain that recaptures and preserves its state of liberty, freedom and democratic patriotism, a role model for a free and prosperous Europe. They have done this because they observed that those values collide with the direction the EU has taken. This decision is to be respected and this is a truth that is currently attacked by malice, derided by ignorance, but in the end, there it is.

I thank you very much for your kind and patient attention

 

Austria: EU hypocrisy

In the days following Austria’s General election, both Jean-Claude Juncker, the President of the EU Commission and the country’s President, Alexander van der Bellen, have had a gentle word with Sebastian Kurz, the man who will soon be sworn in as the country’s new Chancellor, about forming a coalition.

The  31-year old Kurz has been told that he must be a good boy and form a “pro-European” government – in other words, his party, the Austrian People’s Party (ÖVP). must share power with the Social Democrats (SPÖ), who came in third place, rather than the second-placed Freedom Party (FPÖ), led by Heinz-Christian Strache. Juncker has not hidden his feelings about the FPÖ. “I do not like them,” he said bluntly. “With these right-wing populists, it is neither possible to debate nor having a dialogue.”

The advice is likely to fall on deaf ears. At one point during the campaign, the €urosceptic FPÖ was in pole position. Kurz’s tactics which resulted in his party overtaking them and gaining the largest share of the vote were simple – to borrow the FPÖ’s tough language on immigration. It worked, but given the consequential blurring of the lines between the ÖVP and the FPÖ, a coalition between these two parties looks far more likely than a left-right coalition involving the SPÖ.

An ÖVP/FPÖ coalition would not be the first as the two parties governed Austria together between 2000 and 2005. At the time, the inclusion of a party like the FPÖ in a government of an EU country was greeted with horror.  “The far right is in power”, screamed the headlines at the time and the other member states imposed diplomatic sanctions upon Austria. This achieved nothing and they were quietly dropped a few months later.

However, the FPÖ’s success in last Sunday’s elections has once again cast the spotlight on its past.  According to Wikipedia (And if the article was incorrect, it would have been subject to challenge), the party’s first leader  was Anton Reinthaller, who was a former Nazi Minister of Agriculture and an SS officer. Even now, over seventy years after the end of the Second World War, anyone with connections to Hitler is regarded as highly suspect. Another €urosceptic party with a dubious figure in its past is the Sweden Democrats (Sverigedemokraterna) party whose first auditor, Gustaf Ekström, was a Waffen-SS veteran, again according to Wikipedia. The media has ensured that this fact is widely known.

So two European political parties are beyond the pale because of their Nazi connections. Fair enough, but what about Hans Josef Globke, the Chief in staff to West Germany’s Chancellor Konrad Adenauer? Adenauer  is regarded as one of the founding fathers of European unification and was even commemorated as such on a special gold Belgian coin in 2002. His Chief of staff, however,  was involved in drafting legislation on the confiscation of Jewish property and removal of their political rights during the Hitler years. The first President of the European Commission,  Walter Hallstein,  was involved with the Nazis, although the Wikipedia article about him seeks to play this down.

The EU’s recent meddling in Ukraine has been aided and abetted by militias with Nazi sympathies, but no one in Brussels seems to care. It seems that dragging up unsavoury details from the past is merely a useful tool for turning public feeling against €urosceptic groups.

For anyone seeking a more balanced commentary on Austria’s election, this blog, written by an English expat resident in that country, provides a helpful antidote to all the hysteria. No one is denying that Austria has taken a tough line on migration. Kurz, who was Foreign minister before becoming Chancellor, was instrumental in this. Furthermore, although our blogger does not expect Austria, whether or not the FPÖ ends up as part of the government, formally to join the Visegrad group, he thinks it likely that Kurz will  stand with them in refusing to accept large numbers of Moslem immigrants.  He is also reckoned to be distinctly unsympathetic to Emmanuel Macron’s blueprint for  closer integration within the €urozone.

In summary,  for all the lashing out at the “far right” by the media and pro-EU politicians, Austria’s election, like Germany’s last month, shows that a sizeable and growing body of voters across the EU are distinctly unimpressed with the federalist vision of Juncker and his fellow-travellers. No wonder Brexit is seen as being such a distraction in Brussels; keeping some members of the remaining EU-27 in order is becoming increasingly difficult and the standoff over Catalonia, the forthcoming elections in the Czech Republic later this month and in Italy next year are most likely to cause a few more headaches for the EU élite.

An Irish version of Tony Blair?

This letter, which originally appeared in the Southern Star, a local newspaper covering the western part of Co. Cork in Ireland, was spotted by our Chairman, who considered it to be well worth reproducing.

SIR – John Bruton, former Taoiseach, appears to see himself as the Irish version of Tony Blair, telling everyone in Britain they ‘must’ stay inside the EU, regardless of the democratic vote which told John and Tony that Britain is leaving. What part of this democratic expression do they not understand?

Bruton says that the UK ‘needs another six years to reconsider voting again to stay’ within the EU shambles. Oh really?

Why would this happen, exactly, when the facts point to continuing austerity and unemployment, which for a decade has been the policies for all of us, by Brussels, Berlin and Paris?

Voting for a better way of life by the powerful population of Britain was the most sensible route to take when the very national laws of each member State in the EU is under the process of being usurped or changed by that dictatorial bloc.

In Ireland we are still blind to this, even though by us passing some EU referendums and being made to change others after we were naughty, we cannot now even hold a referendum to leave the EU. This was a clause in one of those decrees we signed up to. Where is the freedom of nations in such a regulation?

We now begin to learn that this little republic has no power or even the tiniest say in Britain’s negotiations with the EU. We do not count in all of this … and why should we?

John Bruton and his likes are just blustering has-beens who are never listened to, no matter how much they get paid to waffle on and on.

Britain has won all of their vital battles and saved Europe when it was called upon, twice in the 20th century. This is a world power which will not be pushed around by Irish-EU yabber-jabberers, or the supposed heavy-hitters in EU headquarters. Britain will be progressing long after the European Union tyranny is long gone.

The latest news from Westminister shows that pulling away from listening to all of the EU threats and demands is a real decision that may not be so far away.

Is this suitable to Mr Bruton, even when it is none of his business?

Just be quiet, sir. The British believe in the decision of the ballot box.

Robert Sullivan,

Bantry.

Photo by Horasis