by Philip Whyte
Not long after its launch, the euro was famously dismissed by a disgruntled currency trader as a “toilet currency”. How things have changed. Since 2003, the euro’s external value has soared despite comparatively sluggish rates of economic growth in many of Europe’s largest economies. The strength of the euro has been a boon to European consumers who have been able to buy DVD players from China for less than the price of a meal at a run-of-the-mill restaurant. But not everyone has been celebrating—least of all France’s hyperactive president, Nicolas Sarkozy, who has been fretting about the economic downsides of a strong euro. Mr Sarkozy believes that the euro is now over-valued and that French companies’ trade competitiveness is being damaged as a result. Ever since he entered office in May, therefore, he has thrashed around looking for a culprit.
At first, he blamed the European Central Bank (ECB) for neglecting the euro’s external value and for pursuing its inflation target at the expense of economic growth. This struck many observers as odd, for at least two reasons. First, a central bank cannot target the inflation rate and the exchange rate simultaneously: was Mr Sarkozy suggesting that the ECB jettison its inflation target? Second, it seemed perverse to accuse the ECB of pursuing an excessively restrictive monetary policy. Real interest rates remain low by historical standards, and were even negative for much of the period between 2003 and 2004. More recent indicators—notably buoyant rates of broad money growth and lending to the private sector—hardly point to a central bank that has sacrificed economic growth on the altar of low inflation. Mr Sarkozy’s broadsides were in any case widely seen as an attack on the ECB’s institutional independence—so no-one was surprised when they were given short shrift.
Mr Sarkozy then shifted his attention across the Atlantic. Authorities in the US, he argued, needed to act to stem the US dollar’s decline against the euro. Again, however, it was not clear what Mr Sarkozy was proposing the US authorities should do. Raise short-term interest rates? You must be joking! The US Federal Reserve is trying to contain the fall-out from the crisis in sub-prime lending which is threatening to push the world’s largest economy into recession. This is why it cut short-term interest rates in September. In any case, it is hard to see what the US Federal Reserve could possibly do to support the US dollar. The dollar is weakening because the US is struggling to attract the capital inflows needed to fund its current-account deficit. As the world’s largest debtor, the US has to attract three-quarters of the world’s capital flows to service its external deficit. This is unsustainable—and not just because US assets have offered investors absolutely terrible returns in recent years. A weak US dollar is imperative if the US’s external deficit is to narrow.
Slowly, it dawned on Mr Sarkozy that the problem might lie to the east rather than the west. In the run-up to the G7 meeting in late October, the French government spoke rather less about the US dollar and rather more about the Chinese yuan. It had taken its time, but at last it had stumbled on the heart of the problem: namely, that parts of the world—mainly China, Japan and oil exporters in the Middle East and elsewhere—are saving vastly more than they are investing. This excess of savings over investment has resulted in colossal outflows of capital which have supported the spending habits of governments and households in the US and, to a lesser extent, Europe. That’s right, you read correctly. Developing economies such as China are now large net creditors to the developed world. This is totally at odds with what one might normally expect. Capital usually flows in the other direction, from the developed to the developing world. So what happened?
The short answer is that China and a number of other Asian economies have spent the best part of the last decade pursuing unashamedly mercantilist policies. There are two reasons for this. One is the abiding attraction of an egregious fallacy: that a country’s primary objective in trade is to export more than it imports. The other is the experience of the Asian crisis in the late 1990s, when countries with large external deficits were unable to defend their currencies in the face of huge capital outflows. Stung by this experience, many Asian countries did not choose to abandon fixed exchange rates. Instead, they decided that they should continue to maintain a peg of sorts against the US dollar—but by actively intervening to keep their currencies artificially weak. Since that date, many Asian countries have turned trade deficits into vast surpluses by accumulating foreign exchange reserves. And the world has been stuck with an asymmetric monetary system in which the euro and the US dollar have floated freely against each other, but not against Asian currencies.
The apparently insatiable appetite of China and other Asian countries for piles of depreciating US dollars has had undoubted benefits for the EU. The most important is the boost to domestic demand that the resulting strength of the euro has provided. This has worked in at least two ways. First, by bearing down on import prices, the strength of the euro has contained inflation—allowing the ECB to keep official interest rates lower than they would otherwise have been. Second, it has boosted consumers’ purchasing power. The Chinese government, in other words, has indirectly given European consumers and mortgage holders something looking like a free ride. The downside is that the yuan’s exchange rate is generating protectionist demands from beleaguered European firms labouring under the weight of a currency that has borne the brunt of global adjustments since 2002. The EU trade commissioner, Peter Mandelson, has been muttering darkly about the speed at which the EU’s trade deficit with China is growing; and hinted that the EU cannot maintain an open market for Chinese goods if the Chinese government does not change policy direction.
In the mid-nineteenth century, the UK famously used gunboats to open Chinese markets to opium. Times have changed and few would now advocate similar methods to persuade the Chinese government to let the yuan appreciate. In fact, there is not much the EU can do, other than to raise the rhetorical volume and wait for the domestic tensions generated by China’s policy to play themselves out. No-one knows how long this process will last. The Chinese people’s capacity for pain is legendary. But the point will surely come when the Chinese government succumbs to internal pressure and refocuses economic policy on raising the living standards of the wretched Chinese people rather than relentlessly acquiring assets in a depreciating foreign currency. When this happens, Mr Sarkozy should pay particularly close attention. For the mercantilism that China has practised looks suspiciously like that which he would be tempted to pursue if ever he were let loose on the ECB!
Philip Whyte is a senior research fellow at the Centre for European Reform.
Monday, October 29, 2007
Friday, October 19, 2007
A grand bargain with Russia?
by Charles Grant
Relations between the Russia and the West have not been so prickly since the break-up of the Soviet Union. Viewed from the US and the EU, Russia is being obstructive across a whole swathe of issues, such as its blockade of trade with Georgia, its refusal to accept independence for Kosovo, and its opposition to further UN sanctions on Iran.
But although Russian foreign policy seems increasingly driven by a strident nationalism, there may be a method behind it. In Washington and Brussels, influential figures (including Henry Kissinger) think Russia may be seeking a ‘grand bargain’. President Vladimir Putin dropped hints that he might be open to such a bargain when he met think-tankers (myself included) at Sochi in September. “If our partners want something from Russia, they must be specific, and not ask for everything at once,” he said. “If you want to talk about Kosovo, OK, if you want to talk about the Iran nuclear problem, OK, but then don’t talk about Russian democracy at the same time.” He has a point: the US has tended to make wide-ranging demands of Russia without prioritising them.
The EU has a central role to play in any set of bargains between the West and Russia, given its extensive trade and investment links. The EU should seek to work with the Russians on three areas where they have mutual interests, and where a bit of horse-trading could be beneficial.
• Russia and the EU share many long-term interests in energy. Europeans want assurances that Russia will develop new gas fields, since a gap between demand and what Russia can supply is likely to emerge within a few years. The Russians worry that the EU’s moves to liberalise the European energy market may prevent Gazprom from buying pipelines there. Russia will have to abide by the EU’s rules on energy markets, just as the EU will have to accept that Russia does not allow foreign firms to buy key energy assets. Mutual dependency should encourage both sides to compromise.
• Both would benefit from Russia’s full integration into the global financial system. Thanks to the high oil price, Russia’s government and leading companies are sitting on funds worth several hundreds of billions of dollars. They want to put some of the cash into foreign firms. But the EU is becoming concerned about ‘sovereign wealth funds’. It should allow these funds to invest in European firms, so long as they are transparent and operate independently of politicians. And the EU should welcome Russian acquisitions of its companies, so long its rules are respected and European firms gain reciprocal rights.
• Both the EU and Russia have an interest in the countries of their common neighbourhood becoming stable, prosperous and well-governed. The EU should offer to work with Russia to promote peaceful change in Belarus, stability and unity in Ukraine, and a resolution of the ‘frozen conflicts’ in Transdnestria, South Ossetia, Abkhazia and Nagorno-Karabakh. The Russians may baulk at this: they fear encirclement by an expanding NATO and more ‘colour revolutions’, like those that loosened their control over Georgia and Ukraine. EU governments should allay Russian concerns by saying they will not support NATO membership for Ukraine or Georgia in the medium term. But the EU should offer such countries closer ties – and make clear to Moscow that they must be free to determine their own destiny.
The EU has a huge stake in the future of Kosovo; it cannot integrate the Western Balkans until that territory’s status is resolved. It will provide most of the money, soldiers, policeman and administrators to make any peace plan work. Russia has almost no interest in Kosovo, other than as a card to play against the West. The EU and the US believe that the least bad option for Kosovo is supervised independence, which Russia rejects.
But what if Russia was offered something in return? The US decision to deploy missile defence systems in Europe, against an Iranian threat that does not yet exist, was unwise. Russia’s anger over the deployment is genuine. Some former US officials claim that the deployment would break the spirit of promises made to Russia in the 1990s: the US said it would have no significant military presence in the Central European countries that joined NATO.
Russia’s heavy-handed over-reaction to US plans for missile defence – threatening to target missiles on Central Europe – makes it hard for Europeans to oppose those plans. Nevertheless, the Europeans should urge Washington to postpone the deployment indefinitely – so long as Russia accepts independence for Kosovo in return. Russia may shun this sort of bargain. But if its rulers are serious about maximising Russian power, they should negotiate with western leaders over their differences, rather than turn their back on them. (A longer version of this article appears in the November edition of www.prospect-magazine.co.uk).
Charles Grant is director of the Centre for European Reform.
Relations between the Russia and the West have not been so prickly since the break-up of the Soviet Union. Viewed from the US and the EU, Russia is being obstructive across a whole swathe of issues, such as its blockade of trade with Georgia, its refusal to accept independence for Kosovo, and its opposition to further UN sanctions on Iran.
But although Russian foreign policy seems increasingly driven by a strident nationalism, there may be a method behind it. In Washington and Brussels, influential figures (including Henry Kissinger) think Russia may be seeking a ‘grand bargain’. President Vladimir Putin dropped hints that he might be open to such a bargain when he met think-tankers (myself included) at Sochi in September. “If our partners want something from Russia, they must be specific, and not ask for everything at once,” he said. “If you want to talk about Kosovo, OK, if you want to talk about the Iran nuclear problem, OK, but then don’t talk about Russian democracy at the same time.” He has a point: the US has tended to make wide-ranging demands of Russia without prioritising them.
The EU has a central role to play in any set of bargains between the West and Russia, given its extensive trade and investment links. The EU should seek to work with the Russians on three areas where they have mutual interests, and where a bit of horse-trading could be beneficial.
• Russia and the EU share many long-term interests in energy. Europeans want assurances that Russia will develop new gas fields, since a gap between demand and what Russia can supply is likely to emerge within a few years. The Russians worry that the EU’s moves to liberalise the European energy market may prevent Gazprom from buying pipelines there. Russia will have to abide by the EU’s rules on energy markets, just as the EU will have to accept that Russia does not allow foreign firms to buy key energy assets. Mutual dependency should encourage both sides to compromise.
• Both would benefit from Russia’s full integration into the global financial system. Thanks to the high oil price, Russia’s government and leading companies are sitting on funds worth several hundreds of billions of dollars. They want to put some of the cash into foreign firms. But the EU is becoming concerned about ‘sovereign wealth funds’. It should allow these funds to invest in European firms, so long as they are transparent and operate independently of politicians. And the EU should welcome Russian acquisitions of its companies, so long its rules are respected and European firms gain reciprocal rights.
• Both the EU and Russia have an interest in the countries of their common neighbourhood becoming stable, prosperous and well-governed. The EU should offer to work with Russia to promote peaceful change in Belarus, stability and unity in Ukraine, and a resolution of the ‘frozen conflicts’ in Transdnestria, South Ossetia, Abkhazia and Nagorno-Karabakh. The Russians may baulk at this: they fear encirclement by an expanding NATO and more ‘colour revolutions’, like those that loosened their control over Georgia and Ukraine. EU governments should allay Russian concerns by saying they will not support NATO membership for Ukraine or Georgia in the medium term. But the EU should offer such countries closer ties – and make clear to Moscow that they must be free to determine their own destiny.
The EU has a huge stake in the future of Kosovo; it cannot integrate the Western Balkans until that territory’s status is resolved. It will provide most of the money, soldiers, policeman and administrators to make any peace plan work. Russia has almost no interest in Kosovo, other than as a card to play against the West. The EU and the US believe that the least bad option for Kosovo is supervised independence, which Russia rejects.
But what if Russia was offered something in return? The US decision to deploy missile defence systems in Europe, against an Iranian threat that does not yet exist, was unwise. Russia’s anger over the deployment is genuine. Some former US officials claim that the deployment would break the spirit of promises made to Russia in the 1990s: the US said it would have no significant military presence in the Central European countries that joined NATO.
Russia’s heavy-handed over-reaction to US plans for missile defence – threatening to target missiles on Central Europe – makes it hard for Europeans to oppose those plans. Nevertheless, the Europeans should urge Washington to postpone the deployment indefinitely – so long as Russia accepts independence for Kosovo in return. Russia may shun this sort of bargain. But if its rulers are serious about maximising Russian power, they should negotiate with western leaders over their differences, rather than turn their back on them. (A longer version of this article appears in the November edition of www.prospect-magazine.co.uk).
Charles Grant is director of the Centre for European Reform.
Friday, October 05, 2007
What now, Ukraine?
by Tomas Valasek
Ukrainians voters have spoken, sort of. On September 30th, they elected a new parliament. They made some heartening choices, backing forces of reform and sidelining smaller, less relevant parties. Less happily, they also produced a deadlock by giving virtually the same proportion of votes to the main two competing blocs. As a result, we are no wiser four days after the elections about who will lead Ukraine for the next four years.
The biggest winner is electoral democracy itself. Although Kyiv was abuzz with rumours of vote-rigging before the election, Western observers say that the actual poll appears to have been relatively untainted. Turnout – at 65 per cent – was low by Ukrainian standards but this is partly due to fatigue (this was the third national election in as many years). Importantly, the share of votes cast for smaller parties which fail to make the threshold required for entry into the parliament has nearly halved since last elections, from 20 per cent to 12. Far fewer votes are wasted. Four years on since the blatantly rigged 2004 presidential election which triggered the Orange Revolution, Ukraine has conducted three fair national polls. The country’s voters remain committed and take their rights ever more seriously.
Their choices this time around seem encouraging, too. The party of former Prime Minister Yulia Tymoshenko has doubled its share of votes since the 2006 elections, and fell just short of becoming the dominant force in the country. Tymoshenko is an unusual figure – she is suspected, not without reason, of building a cult of personality. Her populist rhetoric can often border on the irresponsible. But she has built a genuine base of support by attacking the cosy business-government relationships that corrode Ukrainian politics. Independently wealthy, she promises to defend the interests of her voters rather than corporate sponsors. And that would be an improvement on the way the two other main parties, President Viktor Yushchenko’s Our Ukraine and Prime Minister Viktor Yanukovich’s Party of Regions, go about their business.
But the poll was not all good news. It has failed to accomplish its main intended goal: to break the standoff between Yanukovich and Yushchenko and to produce a clear leader for Ukraine. The prime minister and the president have been in conflict since spring when Yushchenko accused Yanukovich of bribing parliamentarians to switch sides. The early vote was called to break the impasse.
This has not happened. The ‘blue camp’, the Party of regions and the Communists, and the ‘orange camp’, Yushchenko’s and Tymoshenko’s parties, scored virtually identical per centage results. A smallish independent party, the Lytvyn bloc, which barely made it into the parliament, can in theory break the deadlock.
The trouble is that the key political figures in Ukraine have little faith in the veracity of the results, no matter what Western observers say. None of the leaders seems ready concede an election decided by just a per centage point or two. Voters will suspect the Lytvyn bloc, irrespective of who it sides with, of having sold its votes. To complicate matters further, another small party, the Socialists, are insisting they gained over 3 per cent and are demanding a recount and a share of seats in the parliament. Yanukovich may yet decide to support their claim in the hope of forming a government without Yushchenko or Tymoshenko.
This mess would normally be considered worrying but not dangerous. Elections elsewhere have been decided by lesser margins; in 2000 George W Bush came to the presidency of the United States, a country of 300 million, thanks to 500-odd votes in Florida.
But unlike most democracies, Ukraine lacks a credible and independent judiciary. And in mature democracies the courts have the last say. The US election was eventually settled through a Supreme court ruling. The way the court reached its decision – by a 5-4 vote along ideological lines – was controversial and arguably dented the court’s credibility. But once made, the ruling stood without question. Few believe Ukraine’s own Constitutional court could act with such finality. During the crisis leading up to the elections its rulings have repeatedly been ignored by both the president and the prime minister.
Absent a credible judiciary, it is unlikely that either the ‘blue’ or ‘orange’ bloc will gain all-out power. Their margins are too small, neither side will want to concede such close elections, and no independent body can authoritatively rule in favour of one camp or the other. The odds are that Yushchenko and Yanukovich will settle the elections through an agreement to rule jointly, with or without smaller coalition parties. Their alliance is the only available combination of forces with a majority strong enough to overcome any challenge to election results.
If so, Ukraine would be right back where it started six or so months ago. Yanukovich and Yushchenko, two leaders who utterly failed to co-operate the first time they shared power, would be expected to do so again.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
Ukrainians voters have spoken, sort of. On September 30th, they elected a new parliament. They made some heartening choices, backing forces of reform and sidelining smaller, less relevant parties. Less happily, they also produced a deadlock by giving virtually the same proportion of votes to the main two competing blocs. As a result, we are no wiser four days after the elections about who will lead Ukraine for the next four years.
The biggest winner is electoral democracy itself. Although Kyiv was abuzz with rumours of vote-rigging before the election, Western observers say that the actual poll appears to have been relatively untainted. Turnout – at 65 per cent – was low by Ukrainian standards but this is partly due to fatigue (this was the third national election in as many years). Importantly, the share of votes cast for smaller parties which fail to make the threshold required for entry into the parliament has nearly halved since last elections, from 20 per cent to 12. Far fewer votes are wasted. Four years on since the blatantly rigged 2004 presidential election which triggered the Orange Revolution, Ukraine has conducted three fair national polls. The country’s voters remain committed and take their rights ever more seriously.
Their choices this time around seem encouraging, too. The party of former Prime Minister Yulia Tymoshenko has doubled its share of votes since the 2006 elections, and fell just short of becoming the dominant force in the country. Tymoshenko is an unusual figure – she is suspected, not without reason, of building a cult of personality. Her populist rhetoric can often border on the irresponsible. But she has built a genuine base of support by attacking the cosy business-government relationships that corrode Ukrainian politics. Independently wealthy, she promises to defend the interests of her voters rather than corporate sponsors. And that would be an improvement on the way the two other main parties, President Viktor Yushchenko’s Our Ukraine and Prime Minister Viktor Yanukovich’s Party of Regions, go about their business.
But the poll was not all good news. It has failed to accomplish its main intended goal: to break the standoff between Yanukovich and Yushchenko and to produce a clear leader for Ukraine. The prime minister and the president have been in conflict since spring when Yushchenko accused Yanukovich of bribing parliamentarians to switch sides. The early vote was called to break the impasse.
This has not happened. The ‘blue camp’, the Party of regions and the Communists, and the ‘orange camp’, Yushchenko’s and Tymoshenko’s parties, scored virtually identical per centage results. A smallish independent party, the Lytvyn bloc, which barely made it into the parliament, can in theory break the deadlock.
The trouble is that the key political figures in Ukraine have little faith in the veracity of the results, no matter what Western observers say. None of the leaders seems ready concede an election decided by just a per centage point or two. Voters will suspect the Lytvyn bloc, irrespective of who it sides with, of having sold its votes. To complicate matters further, another small party, the Socialists, are insisting they gained over 3 per cent and are demanding a recount and a share of seats in the parliament. Yanukovich may yet decide to support their claim in the hope of forming a government without Yushchenko or Tymoshenko.
This mess would normally be considered worrying but not dangerous. Elections elsewhere have been decided by lesser margins; in 2000 George W Bush came to the presidency of the United States, a country of 300 million, thanks to 500-odd votes in Florida.
But unlike most democracies, Ukraine lacks a credible and independent judiciary. And in mature democracies the courts have the last say. The US election was eventually settled through a Supreme court ruling. The way the court reached its decision – by a 5-4 vote along ideological lines – was controversial and arguably dented the court’s credibility. But once made, the ruling stood without question. Few believe Ukraine’s own Constitutional court could act with such finality. During the crisis leading up to the elections its rulings have repeatedly been ignored by both the president and the prime minister.
Absent a credible judiciary, it is unlikely that either the ‘blue’ or ‘orange’ bloc will gain all-out power. Their margins are too small, neither side will want to concede such close elections, and no independent body can authoritatively rule in favour of one camp or the other. The odds are that Yushchenko and Yanukovich will settle the elections through an agreement to rule jointly, with or without smaller coalition parties. Their alliance is the only available combination of forces with a majority strong enough to overcome any challenge to election results.
If so, Ukraine would be right back where it started six or so months ago. Yanukovich and Yushchenko, two leaders who utterly failed to co-operate the first time they shared power, would be expected to do so again.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
Friday, September 21, 2007
Middle ground missing in Middle East?
by Clara Marina O'Donnell
Over the last few weeks,Tony Blair, Javier Solana and Bernard Kouchner have been there; this week Condoleezza Rice has done so – as, for that matter, has Madonna. If you like motorcades, Israel is the place to go. Ever since the US said it would sponsor a peace conference in November, the Middle East has been a hive of activity.
But is all the high-level diplomacy having any impact on the ground? Certainly the comings and goings of the great and the good keep the up-market hotels in business. But the reality at grass-roots level, as judged by this writer’s recent visit, seems far removed from the glitzy political meetings.
Settlements in the West Bank continue to grow (and new ones are created) at a rapid rate - so much so that the growth rate of the Israeli population in the West Bank is higher than in the rest of Israel. Construction work continues on the ‘wall’, eating into territory beyond the Green Line, the internationally recognised border, sometimes going far into the West Bank and separating Arab farmers from their lands. Roadblocks remain firmly in place, despite a promise by Ehud Olmert, the Israeli Prime Minister, to Mahmoud Abbas, the Palestinian president, to reduce them. The official explanation for the delay is implementation difficulties. Yet an Israeli government plan has existed for a year on how to safely reduce internal checkpoints, so far to no effect.
Gaza remains completely isolated. The private sector has collapsed, the public sector is barely ticking over, and unemployment is soaring, as this week's UK government report (The Economic Aspects of peace in the Middle East) confirms. Hamas is still firmly in control and Quassam rockets are being fired into Israel virtually every day. The plight of Gaza’s 1.4 million inhabitants is widely ignored – including by the Palestinian Authority in Ramallah. During this author’s stay, the only real attention paid to Gaza was an Israeli cabinet debate on stopping Israeli supplies of water and electricity to Gaza as collective punishment for the firing of Quassam rockets. The likelihood of such a move has increased since then, with Israel having declared Gaza an “enemy entity”.
The measured, almost friendly banter between Israeli and Ramallah-based Palestinian leaders (Olmert and Abbas were shown smoking cigarettes together during one of their latest rounds of talks) says nothing about the mood in the streets. In private, there are people on both sides who take a blunt and uncompromising view of the conflict, shrouded in religious, ethnic and existential terms. The memory of the terror of the second intifada is still vivid in many Israelis’ minds. Palestinian schoolbooks incite hatred towards Israel. And some Israelis step over the line between legitimate security concerns and xenophobia: during a conference in Tel Aviv the Israeli ambassador to the UN argued that all of Islam had its hands covered in blood.
The complexity of the Middle East can never be over-estimated. But the all-too-evident disconnects between political rhetoric and practical action, between public discourse and private sentiment, and between leaders and led, suggests that some of the challenges may currently be under-estimated. And it might explain why nearly no one this writer spoke to had any hopes in the November conference.
Clara Marina O'Donnell is a research fellow at the Centre for European Reform.
Over the last few weeks,Tony Blair, Javier Solana and Bernard Kouchner have been there; this week Condoleezza Rice has done so – as, for that matter, has Madonna. If you like motorcades, Israel is the place to go. Ever since the US said it would sponsor a peace conference in November, the Middle East has been a hive of activity.
But is all the high-level diplomacy having any impact on the ground? Certainly the comings and goings of the great and the good keep the up-market hotels in business. But the reality at grass-roots level, as judged by this writer’s recent visit, seems far removed from the glitzy political meetings.
Settlements in the West Bank continue to grow (and new ones are created) at a rapid rate - so much so that the growth rate of the Israeli population in the West Bank is higher than in the rest of Israel. Construction work continues on the ‘wall’, eating into territory beyond the Green Line, the internationally recognised border, sometimes going far into the West Bank and separating Arab farmers from their lands. Roadblocks remain firmly in place, despite a promise by Ehud Olmert, the Israeli Prime Minister, to Mahmoud Abbas, the Palestinian president, to reduce them. The official explanation for the delay is implementation difficulties. Yet an Israeli government plan has existed for a year on how to safely reduce internal checkpoints, so far to no effect.
Gaza remains completely isolated. The private sector has collapsed, the public sector is barely ticking over, and unemployment is soaring, as this week's UK government report (The Economic Aspects of peace in the Middle East) confirms. Hamas is still firmly in control and Quassam rockets are being fired into Israel virtually every day. The plight of Gaza’s 1.4 million inhabitants is widely ignored – including by the Palestinian Authority in Ramallah. During this author’s stay, the only real attention paid to Gaza was an Israeli cabinet debate on stopping Israeli supplies of water and electricity to Gaza as collective punishment for the firing of Quassam rockets. The likelihood of such a move has increased since then, with Israel having declared Gaza an “enemy entity”.
The measured, almost friendly banter between Israeli and Ramallah-based Palestinian leaders (Olmert and Abbas were shown smoking cigarettes together during one of their latest rounds of talks) says nothing about the mood in the streets. In private, there are people on both sides who take a blunt and uncompromising view of the conflict, shrouded in religious, ethnic and existential terms. The memory of the terror of the second intifada is still vivid in many Israelis’ minds. Palestinian schoolbooks incite hatred towards Israel. And some Israelis step over the line between legitimate security concerns and xenophobia: during a conference in Tel Aviv the Israeli ambassador to the UN argued that all of Islam had its hands covered in blood.
The complexity of the Middle East can never be over-estimated. But the all-too-evident disconnects between political rhetoric and practical action, between public discourse and private sentiment, and between leaders and led, suggests that some of the challenges may currently be under-estimated. And it might explain why nearly no one this writer spoke to had any hopes in the November conference.
Clara Marina O'Donnell is a research fellow at the Centre for European Reform.
Thursday, September 13, 2007
The Microsoft appeal: The Commission was right
by Simon Tilford
On September 17th the European Union’s Court of First Appeal will rule on Microsoft’s long-awaited appeal against the record fine imposed on the company by the Commission in 2004 for abusing its dominant position in computer operating systems. The decision to fine Microsoft has prompted unprecedented criticism of EU competition policy and even accusations of anti-US bias. If the court upholds the Commission’s decision, demands for it to be stripped of its competence over competition law will no doubt intensify. The criticism of the Commission is without merit.
Indeed, the Microsoft case is a poor choice for critics of the Commission to champion. Attempts to portray its ruling as anti-competitive and as a threat to innovation do not really stack up. This case is not, as Microsoft and its supporters contend, about punishing a company for being successful by compromising its intellectual property. The market for IT is not so different from other markets that the suspension of antitrust law is justified. Rather, the case is about making it possible to compete with Microsoft in its core areas of business.
Supporters of Microsoft tend to conflate various issues. First, they accuse the Commission of undermining competition and hence innovation by placing constraints on dominant firms in the IT sector. According to this argument, dominant companies will only make big investments if they are confident they will face no significant competitors. Second, they argue that the Commission should focus on the impact on the consumer and not on the level of market dominance; that is, it doesn’t matter how much of a market a company (in this sense, Microsoft) controls, if its dominance benefits the consumer.
There are obvious weaknesses to these arguments. If it were the case that companies only innovate when they are confident that they will be allowed a monopoly, no company operating in a competitive market would invest in product development. But of course they do. They have to do so in order to ensure that their product or service is better than that of the competition. Only then can they hope to win a profitable share of the market. It is this need to be better than the opposition that drives innovation and productivity growth.
Similarly, it is not clear how Microsoft’s dominance benefits consumers. Is it because the company’s size (and hence ability to leverage huge economies of scale) allow it to offer products at low prices? If so, this would be an argument for abolishing competition policy. Or is it because consumers benefit from the ubiquity of Microsoft products? This ubiquity almost certainly does provide short-term benefits to consumers. But it is hard to see how allowing such dominance could serve consumers in the long-term if it precludes innovative companies challenging Microsoft.
Just because Microsoft won the race does not mean it should be permitted to dominate huge markets indefinitely. This would not be tolerated in any other market, including other high-tech markets. The IT market is a fast-moving one, but this is hardly a unique characteristic.
EU competition policy is already under attack from member-states that would like to provide their companies with more support and who want to promote national champions to positions of market dominance. A ruling by the Court of First Appeal in favour of Microsoft could not come at a worse time. It would play into the hands of those like France’s President Sarkozy that want to dilute EU competition policy, and who question what competition has done for the EU.
Simon Tilford is chief economist at the Centre for European Reform.
On September 17th the European Union’s Court of First Appeal will rule on Microsoft’s long-awaited appeal against the record fine imposed on the company by the Commission in 2004 for abusing its dominant position in computer operating systems. The decision to fine Microsoft has prompted unprecedented criticism of EU competition policy and even accusations of anti-US bias. If the court upholds the Commission’s decision, demands for it to be stripped of its competence over competition law will no doubt intensify. The criticism of the Commission is without merit.
Indeed, the Microsoft case is a poor choice for critics of the Commission to champion. Attempts to portray its ruling as anti-competitive and as a threat to innovation do not really stack up. This case is not, as Microsoft and its supporters contend, about punishing a company for being successful by compromising its intellectual property. The market for IT is not so different from other markets that the suspension of antitrust law is justified. Rather, the case is about making it possible to compete with Microsoft in its core areas of business.
Supporters of Microsoft tend to conflate various issues. First, they accuse the Commission of undermining competition and hence innovation by placing constraints on dominant firms in the IT sector. According to this argument, dominant companies will only make big investments if they are confident they will face no significant competitors. Second, they argue that the Commission should focus on the impact on the consumer and not on the level of market dominance; that is, it doesn’t matter how much of a market a company (in this sense, Microsoft) controls, if its dominance benefits the consumer.
There are obvious weaknesses to these arguments. If it were the case that companies only innovate when they are confident that they will be allowed a monopoly, no company operating in a competitive market would invest in product development. But of course they do. They have to do so in order to ensure that their product or service is better than that of the competition. Only then can they hope to win a profitable share of the market. It is this need to be better than the opposition that drives innovation and productivity growth.
Similarly, it is not clear how Microsoft’s dominance benefits consumers. Is it because the company’s size (and hence ability to leverage huge economies of scale) allow it to offer products at low prices? If so, this would be an argument for abolishing competition policy. Or is it because consumers benefit from the ubiquity of Microsoft products? This ubiquity almost certainly does provide short-term benefits to consumers. But it is hard to see how allowing such dominance could serve consumers in the long-term if it precludes innovative companies challenging Microsoft.
Just because Microsoft won the race does not mean it should be permitted to dominate huge markets indefinitely. This would not be tolerated in any other market, including other high-tech markets. The IT market is a fast-moving one, but this is hardly a unique characteristic.
EU competition policy is already under attack from member-states that would like to provide their companies with more support and who want to promote national champions to positions of market dominance. A ruling by the Court of First Appeal in favour of Microsoft could not come at a worse time. It would play into the hands of those like France’s President Sarkozy that want to dilute EU competition policy, and who question what competition has done for the EU.
Simon Tilford is chief economist at the Centre for European Reform.
Wednesday, August 29, 2007
Sarkozy on America and the world
by Tomas Valasek
In his first 100 days in the office, Nicolas Sarkozy turned France’s domestic political scene on its head. He trounced and marginalised the far-right National Front in the May presidential elections. In parliamentary elections a few weeks later, he wiped out Francois Bayrou’s bid to form a centrist party. And once firmly installed in the Elysée palace, he emasculated the leading opposition party, the Socialists, by poaching their best minds.
What in the world, one might wonder, will he do to France’s foreign policy when he puts his mind to it?
Well, on Monday we got our first hint. Sarkozy gave a speech to an assembly of French ambassadors from around the world. The presentation was typical Sarkozy. It oozed confidence. The speech showed him prepared. And, in a number of important ways, it showed him willing to depart from policies of Jacques Chirac.
The most interesting part of this speech was about Iran. Before even mentioning the country by name, he notes that France has an obligation to help the rise of emerging states by giving them access to nuclear technology for peaceful use. In saying so, he seems to be pre-emptively addressing Tehran’s accusations of double-standards. But then, when Sarkozy starts talking directly about Iran, he hammers. To France, a nuclear-armed Iran is simply unacceptable. France will support a new round of UN Security Council sanctions (when only last month it was said to be lobbying in New York against it because French companies may be among the most affected). And finally, the coup de grâce: unless Iran respects its obligations it will not escape “the catastrophic alternative: a nuclear-armed Iran or the bombing of Iran”. Sarkozy is effectively laying the blame for possible US intervention at Tehran’s feet. He is making Iran the issue, not the US. He does not condone bombing but suggests that he may not be entirely opposed either. And if it happens, it will be Iran’s fault. This is a significant change from Jacques Chirac’s days.
Washington’s joy at the speech will not be unqualified. Sarkozy is not warm to America. When addressing it directly, he calls for “pragmatic” relations. Sarkozy’s agenda for the French presidency of the EU in 2008 is not particularly US friendly. The emphasis on immigration, energy and environment offers little hope of rapprochement. With the exception of energy these are issues that are either intra-European (immigration) or on which the EU and France do not see eye-to-eye (environment). On NATO, Sarkozy says he wants the alliance to co-operate smoothly on military matters with the EU. But he makes no hint of how to resolve the impasse that effectively keeps the EU and NATO from talking to each other. Worse (from the US perspective) he wants to strengthen the EU’s operational planning capacity, which has been a thorn in the side of both London and Washington.
On the other hand, where Sarkozy talks of issues that matter to the US – China, Iran, the Middle East – he strikes a line similar to Washington’s. That is true not only for Iran but also for the Middle East, Russia and China. Sarkozy comes down stronger on the side of Israel than any other French leader in recent history. He proudly calls himself a friend of Israel. He says peace with Palestine is very important but it will not happen if the Palestinians cannot form a government. Sarkozy called the Hamas takeover of Gaza “the first step toward establishing Islamic radical foothold on Palestine territories” and said that the Palestinian Authority must be rebuilt under its president Mahmoud Abbas.
On Russia and China Sarkozy strikes a realist tone. He ignores their domestic affairs altogether. Their foreign policies come for criticism. Sarkozy chided China for using monetary policy as a power tool, and Russia for using energy as a “brutal” weapon. (Interestingly, nowhere does he raise issues that made his foreign minister, Bernard Kouchner famous: the slide toward authoritarian regime in Russia, or violations of freedom of speech in China. In foreign policy, as in everything else, Sarkozy seems determined to run things directly from the Elysée.)
The overall impression Sarkozy leaves is that he is neither anti-American nor pro-American. He does not take cheap shots: although he notes that France was right on Iraq, he does not gloat. He states in the preamble that “the leaders of the past twenty years failed to construct a workable post-Cold war order”. But he is both right and diplomatic in saying so, so America should not take offence. The speech effectively removes America as the defining issue of French foreign policy. France will not view foreign policy as an opportunity to score points at America’s expense; it will judge the world’s problems on their own merits. Where Sarkozy does so, he finds that he has a lot in common with the US. But he will not go out of his way to restore America’s good standing in Europe; the Americans will need to do that work themselves.
Overall this is a very strong presentation. He clearly thought about foreign policy a lot. We have come to associate Sarkozy’s France with exuberant confidence but it bears remembering that only three years ago, the world looked very different through French eyes. The then-Foreign Minister Michel Barnier, also speaking in 2004 to assembled French ambassadors, lamented the decline of France in Europe (because of enlargement of the EU to include pro-US countries). Sarkozy could not have struck a more different note.
Tomas Valasek is director of foreign policy & defence at the Centre for European Reform.
In his first 100 days in the office, Nicolas Sarkozy turned France’s domestic political scene on its head. He trounced and marginalised the far-right National Front in the May presidential elections. In parliamentary elections a few weeks later, he wiped out Francois Bayrou’s bid to form a centrist party. And once firmly installed in the Elysée palace, he emasculated the leading opposition party, the Socialists, by poaching their best minds.
What in the world, one might wonder, will he do to France’s foreign policy when he puts his mind to it?
Well, on Monday we got our first hint. Sarkozy gave a speech to an assembly of French ambassadors from around the world. The presentation was typical Sarkozy. It oozed confidence. The speech showed him prepared. And, in a number of important ways, it showed him willing to depart from policies of Jacques Chirac.
The most interesting part of this speech was about Iran. Before even mentioning the country by name, he notes that France has an obligation to help the rise of emerging states by giving them access to nuclear technology for peaceful use. In saying so, he seems to be pre-emptively addressing Tehran’s accusations of double-standards. But then, when Sarkozy starts talking directly about Iran, he hammers. To France, a nuclear-armed Iran is simply unacceptable. France will support a new round of UN Security Council sanctions (when only last month it was said to be lobbying in New York against it because French companies may be among the most affected). And finally, the coup de grâce: unless Iran respects its obligations it will not escape “the catastrophic alternative: a nuclear-armed Iran or the bombing of Iran”. Sarkozy is effectively laying the blame for possible US intervention at Tehran’s feet. He is making Iran the issue, not the US. He does not condone bombing but suggests that he may not be entirely opposed either. And if it happens, it will be Iran’s fault. This is a significant change from Jacques Chirac’s days.
Washington’s joy at the speech will not be unqualified. Sarkozy is not warm to America. When addressing it directly, he calls for “pragmatic” relations. Sarkozy’s agenda for the French presidency of the EU in 2008 is not particularly US friendly. The emphasis on immigration, energy and environment offers little hope of rapprochement. With the exception of energy these are issues that are either intra-European (immigration) or on which the EU and France do not see eye-to-eye (environment). On NATO, Sarkozy says he wants the alliance to co-operate smoothly on military matters with the EU. But he makes no hint of how to resolve the impasse that effectively keeps the EU and NATO from talking to each other. Worse (from the US perspective) he wants to strengthen the EU’s operational planning capacity, which has been a thorn in the side of both London and Washington.
On the other hand, where Sarkozy talks of issues that matter to the US – China, Iran, the Middle East – he strikes a line similar to Washington’s. That is true not only for Iran but also for the Middle East, Russia and China. Sarkozy comes down stronger on the side of Israel than any other French leader in recent history. He proudly calls himself a friend of Israel. He says peace with Palestine is very important but it will not happen if the Palestinians cannot form a government. Sarkozy called the Hamas takeover of Gaza “the first step toward establishing Islamic radical foothold on Palestine territories” and said that the Palestinian Authority must be rebuilt under its president Mahmoud Abbas.
On Russia and China Sarkozy strikes a realist tone. He ignores their domestic affairs altogether. Their foreign policies come for criticism. Sarkozy chided China for using monetary policy as a power tool, and Russia for using energy as a “brutal” weapon. (Interestingly, nowhere does he raise issues that made his foreign minister, Bernard Kouchner famous: the slide toward authoritarian regime in Russia, or violations of freedom of speech in China. In foreign policy, as in everything else, Sarkozy seems determined to run things directly from the Elysée.)
The overall impression Sarkozy leaves is that he is neither anti-American nor pro-American. He does not take cheap shots: although he notes that France was right on Iraq, he does not gloat. He states in the preamble that “the leaders of the past twenty years failed to construct a workable post-Cold war order”. But he is both right and diplomatic in saying so, so America should not take offence. The speech effectively removes America as the defining issue of French foreign policy. France will not view foreign policy as an opportunity to score points at America’s expense; it will judge the world’s problems on their own merits. Where Sarkozy does so, he finds that he has a lot in common with the US. But he will not go out of his way to restore America’s good standing in Europe; the Americans will need to do that work themselves.
Overall this is a very strong presentation. He clearly thought about foreign policy a lot. We have come to associate Sarkozy’s France with exuberant confidence but it bears remembering that only three years ago, the world looked very different through French eyes. The then-Foreign Minister Michel Barnier, also speaking in 2004 to assembled French ambassadors, lamented the decline of France in Europe (because of enlargement of the EU to include pro-US countries). Sarkozy could not have struck a more different note.
Tomas Valasek is director of foreign policy & defence at the Centre for European Reform.
Friday, August 24, 2007
Poland’s poll and the EU treaty
by Katinka Barysch
Poland’s early election may coincide with the last days of talks on the new EU Reform Treaty. Although the Kaczynskis are unlikely to reopen a deal agreed in June on the treaty's content, last minute political posturing for a home audience could delay the text being signed off.
Many Europeans were relieved when Prime Minister Jaroslaw Kaczyinski sacked his junior coalition partners in August. Kaczynski’s somewhat prickly and paranoid Law and Justice party (PiS) has been difficult enough to deal with. The inclusion of the arch-nationalist League of Polish Families (LPR) and Andrzej Lepper’s populist Self-Defence made it worse. This government has (perhaps understandably) blocked EU talks with Russia, (outrageously) used World War guilt to get more EU votes and (unwisely) threatened to veto the whole Reform Treaty. The spectre of Poland holding an election exactly when the inter-governmental conference (IGC) is supposed to wrap up the treaty talks will haunt many in foreign ministries across the EU.
The Polish parliament has postponed the final decision of whether and when to hold an early election to September 7th. The PiS minority government has little reason to hang on while the opposition Civic Platform (PO) would love to capitalise on its current poll lead. The earliest possible date –and the one most widely mooted – is October 21st. That is three days after EU leaders are supposed to sign the Reform Treaty.
The Kaczynskis (Jaroslaw and his twin brother Lech, who is president) would gain little from making the treaty an election issue. After all, they had claimed victory after the June summit. Although the other Europeans had refused to re-open talks on the EU voting system – Poland had insisted on sticking with the Nice formula, then pushed for a rule based on the square root of populations – they did agree to delay the introduction of the ‘double majority’ system until 2017. Polish officials afterwards grumbled that an agreement on blocking minorities was not sufficiently spelled out. But this is not a big enough issue to re-open the entire treaty package.
The PO does not like the June deal: it was PO leaders who had come up with the memorable “Nice or death” slogan and first pushed for the square roots system. But on the whole, the PO’s attitude towards the EU is similar to that of the PiS, although less anti-German (which is why Jaroslaw has recently been portraying the PO as Berlin’s puppet). To gain votes, the PO will want to stress what makes it different from the PiS, such as administrative competence, pro-business policies and more liberal attitudes towards social issues.
Neither the LPR nor Self-Defence can be sure to overcome the 5 per cent threshold for parliamentary representation. So they will run together, and do their utmost to steal nationalist and conservative votes from the more mainstream PiS and PO. Their eurosceptic rants and calls for a referendum on the treaty could put the PiS and the PO on the defensive. Despite the Poles’ generally pro-EU attitudes, many Polish party leaders appear to have convinced themselves that elections are won on the right.
The lone pro-European voice in the forthcoming election will be Aleksander Kwasniewski, the popular former president, and the Left and Democrats, a movement put together from bits of the former Communist party. Although the left almost faced political oblivion in the 2005 election, it is now rising steadily in the polls.
For most Poles, Europe is not a major concern at the moment. Life is good: the economy is growing at a brisk 7 per cent, unemployment is at a post-Communist low and EU money has started to flow in. In the latest Eurobarometer survey, almost 80 per cent of Poles said their country has benefited from being in the EU.
Nevertheless, Europe could become an issue in the election campaign, not least because the Commission is asking for radical restructuring of the iconic shipyard in Gdansk. To prevent the radical parties from benefiting from anti-EU sentiment, the Kaczynskis could seek to postpone final agreement on the treaty. This would be no disaster: signing it at the December summit would still leave EU members enough time to ratify it before the 2009 deadline. But the Portuguese presidency would be peeved (it wants to focus on Africa in December), as would be Gordon Brown who wants to get the treaty ratification out of the way as quickly as possible. Poland would once again be singled out as the EU’s troublemaker.
Those who are hoping for a fundamental shift in Poland’s EU stance after the election may be disappointed. The PO’s Europe policy would be more polished and constructive, but no less assertive when it comes to Poland’s national interest. Moreover, the PO is unlikely to gain an outright majority. Although the PO and the PiS agree on much, personal animosities would make ruling together fiendishly difficult. The PO and the Left, on the other hand, share a dislike of the Kaczynski twins. But it is doubtful whether this would be enough to overcome the PO’s suspicion of the former Communists, as well as programmatic differences. As long as Poland is ruled by unstable and often short-sighted coalitions, the EU will remain a tempting platform for politicians to showcase their nationalist credentials.
Katinka Barysch is chief economist at the Centre for European Reform.
Poland’s early election may coincide with the last days of talks on the new EU Reform Treaty. Although the Kaczynskis are unlikely to reopen a deal agreed in June on the treaty's content, last minute political posturing for a home audience could delay the text being signed off.
Many Europeans were relieved when Prime Minister Jaroslaw Kaczyinski sacked his junior coalition partners in August. Kaczynski’s somewhat prickly and paranoid Law and Justice party (PiS) has been difficult enough to deal with. The inclusion of the arch-nationalist League of Polish Families (LPR) and Andrzej Lepper’s populist Self-Defence made it worse. This government has (perhaps understandably) blocked EU talks with Russia, (outrageously) used World War guilt to get more EU votes and (unwisely) threatened to veto the whole Reform Treaty. The spectre of Poland holding an election exactly when the inter-governmental conference (IGC) is supposed to wrap up the treaty talks will haunt many in foreign ministries across the EU.
The Polish parliament has postponed the final decision of whether and when to hold an early election to September 7th. The PiS minority government has little reason to hang on while the opposition Civic Platform (PO) would love to capitalise on its current poll lead. The earliest possible date –and the one most widely mooted – is October 21st. That is three days after EU leaders are supposed to sign the Reform Treaty.
The Kaczynskis (Jaroslaw and his twin brother Lech, who is president) would gain little from making the treaty an election issue. After all, they had claimed victory after the June summit. Although the other Europeans had refused to re-open talks on the EU voting system – Poland had insisted on sticking with the Nice formula, then pushed for a rule based on the square root of populations – they did agree to delay the introduction of the ‘double majority’ system until 2017. Polish officials afterwards grumbled that an agreement on blocking minorities was not sufficiently spelled out. But this is not a big enough issue to re-open the entire treaty package.
The PO does not like the June deal: it was PO leaders who had come up with the memorable “Nice or death” slogan and first pushed for the square roots system. But on the whole, the PO’s attitude towards the EU is similar to that of the PiS, although less anti-German (which is why Jaroslaw has recently been portraying the PO as Berlin’s puppet). To gain votes, the PO will want to stress what makes it different from the PiS, such as administrative competence, pro-business policies and more liberal attitudes towards social issues.
Neither the LPR nor Self-Defence can be sure to overcome the 5 per cent threshold for parliamentary representation. So they will run together, and do their utmost to steal nationalist and conservative votes from the more mainstream PiS and PO. Their eurosceptic rants and calls for a referendum on the treaty could put the PiS and the PO on the defensive. Despite the Poles’ generally pro-EU attitudes, many Polish party leaders appear to have convinced themselves that elections are won on the right.
The lone pro-European voice in the forthcoming election will be Aleksander Kwasniewski, the popular former president, and the Left and Democrats, a movement put together from bits of the former Communist party. Although the left almost faced political oblivion in the 2005 election, it is now rising steadily in the polls.
For most Poles, Europe is not a major concern at the moment. Life is good: the economy is growing at a brisk 7 per cent, unemployment is at a post-Communist low and EU money has started to flow in. In the latest Eurobarometer survey, almost 80 per cent of Poles said their country has benefited from being in the EU.
Nevertheless, Europe could become an issue in the election campaign, not least because the Commission is asking for radical restructuring of the iconic shipyard in Gdansk. To prevent the radical parties from benefiting from anti-EU sentiment, the Kaczynskis could seek to postpone final agreement on the treaty. This would be no disaster: signing it at the December summit would still leave EU members enough time to ratify it before the 2009 deadline. But the Portuguese presidency would be peeved (it wants to focus on Africa in December), as would be Gordon Brown who wants to get the treaty ratification out of the way as quickly as possible. Poland would once again be singled out as the EU’s troublemaker.
Those who are hoping for a fundamental shift in Poland’s EU stance after the election may be disappointed. The PO’s Europe policy would be more polished and constructive, but no less assertive when it comes to Poland’s national interest. Moreover, the PO is unlikely to gain an outright majority. Although the PO and the PiS agree on much, personal animosities would make ruling together fiendishly difficult. The PO and the Left, on the other hand, share a dislike of the Kaczynski twins. But it is doubtful whether this would be enough to overcome the PO’s suspicion of the former Communists, as well as programmatic differences. As long as Poland is ruled by unstable and often short-sighted coalitions, the EU will remain a tempting platform for politicians to showcase their nationalist credentials.
Katinka Barysch is chief economist at the Centre for European Reform.
Thursday, August 02, 2007
Europe in the US-UK special relationship
by Tomas Valasek
Gordon Brown scarcely mentioned Europe during his visit to the United States, certainly much less than Tony Blair used to. That is understandable. The current prime minister is blessed with the fortune of sharing his time in office with Angela Merkel and Nicolas Sarkozy, two pragmatic, Atlanticist leaders. Unlike Tony Blair, Gordon Brown does not need to worry about keeping the US and EU strands of UK foreign policy from coming apart. This gives him a freer hand in reviewing US-UK co-operation on key foreign policy issues.
Tony Blair sided with Washington over Iraq in part to keep the European Union’s common foreign policy from slipping into an openly anti-American stance. While he believed that removing Saddam Hussein was important in its own right, he also calculated that allying the UK with the US would keep Europe from trying to collectively weaken the US position on Iraq, and possibly elsewhere. (The exact intentions of messieurs Chirac and Schröder will always be subject to different interpretations. But their words and actions during the Iraq crisis strongly suggest that, in addition to heartfelt opposition to the US-led war, they also viewed the crisis as an opportunity to build the EU into a tool for balancing US power worldwide.)
The EU is now shaping the US-UK special relationship in subtle yet sometimes decisive ways. In the case of Iraq Tony Blair would likely have supported Washington irrespective of French or German views. But he clearly also felt that their opposition gave him little option; and that by breaking with Washington the UK would fuel anti-American tendencies around Europe, and possibly precipitate a permanent transatlantic split. The previous prime minister was dealt a terrible deck of cards: siding with Washington, Blair knew very well, meant plunging the EU into a foreign policy crisis – which it did, in 2003.
If only Blair had Gordon Brown’s current options. Four years later, both Chirac and Schröder are gone. Angela Merkel and Nicolas Sarkozy are far more pragmatic and Atlanticist than their predecessors. They are far less tempted than Chirac and Schröder to construct a European foreign policy identity on the basis of opposition to the US. And President Bush, too, has been chastised by the Iraq experience. His second administration is distinctly more multilateralist, less guns and more butter.
The role of Europe in the US-UK relationship has changed correspondingly. Unlike Tony Blair, Prime Minister Brown can afford to not worry about Europe as he reassesses the relationship with Washington. His European counterparts, by and large, have good working relations of their own with the US. Brown is far freer than his predecessor to refashion the priorities of US-UK foreign policy co-operation, knowing that a possible occasional strain in the relationship is not going to have wider repercussions in Europe.
Arguably, Britain has lost some of its usefulness to the US, too. Many find the idea of the UK acting as a bridge between the US and Europe fanciful. But, without UK leadership, the other Atlanticist EU countries, mostly new member-states in Central Europe, would have come under tremendous pressure from Germany and France to form a united EU front against the US. Tony Blair’s words and deeds demonstrably helped shore up support for the US in Europe. Gordon Brown is not likely to be called upon to play the same role. EU members are making far more pragmatic and less ideologically-driven decisions on their relations with the US than they were in 2003. As US-European ties become less confrontational, there is less need for the UK to play its balancing role within Europe.
Now that Gordon Brown is free to judge the US foreign policy on its own merit, without worrying about the EU context, what use did he make of this manoeuvring room at his meeting with George Bush over the weekend of July 25th- 26th?
Arguably, not much. Most of the change that stemmed from the summit was cosmetic. Gordon Brown clearly went to the US resolved to shake off the poodle image without undermining the special relationship. He succeeded in this. His cool, reserved demeanor with the US president restored dignity to London’s standing in the US and in Europe.
As far as substance is concerned, Brown sounded surprisingly hawkish on Iran (although more in his pre-trip press conferences than at the summit itself), while gently creating a little distance from Washington on the issue of a timetable for withdrawing troops from Iraq – Britain wants to be out sooner. But he may have missed an opportunity to clearly state his differences on the Middle East peace process. Britain is gingerly moving towards engaging Hamas and working with it to make it a legitimate and responsible actor. The White House has struck out in the opposite direction. President Bush last week announced a raft of initiatives meant to isolate Hamas and bolster its main rival, President Abbas. Gordon Brown remained largely silent on this point during his press conference with George Bush. This could mean that he agrees or – more likely – that he wanted to avoid a dispute in the open. And that is a pity. Because of the change of leadership in Europe, the prime minister is less constrained in his dealings with Washington than his predecessor. If he believes US policy on the Middle East to be wrong, this was the time to say it.
Tomas Valasek is director of foreign policy & defence at the Centre for European Reform.
Gordon Brown scarcely mentioned Europe during his visit to the United States, certainly much less than Tony Blair used to. That is understandable. The current prime minister is blessed with the fortune of sharing his time in office with Angela Merkel and Nicolas Sarkozy, two pragmatic, Atlanticist leaders. Unlike Tony Blair, Gordon Brown does not need to worry about keeping the US and EU strands of UK foreign policy from coming apart. This gives him a freer hand in reviewing US-UK co-operation on key foreign policy issues.
Tony Blair sided with Washington over Iraq in part to keep the European Union’s common foreign policy from slipping into an openly anti-American stance. While he believed that removing Saddam Hussein was important in its own right, he also calculated that allying the UK with the US would keep Europe from trying to collectively weaken the US position on Iraq, and possibly elsewhere. (The exact intentions of messieurs Chirac and Schröder will always be subject to different interpretations. But their words and actions during the Iraq crisis strongly suggest that, in addition to heartfelt opposition to the US-led war, they also viewed the crisis as an opportunity to build the EU into a tool for balancing US power worldwide.)
The EU is now shaping the US-UK special relationship in subtle yet sometimes decisive ways. In the case of Iraq Tony Blair would likely have supported Washington irrespective of French or German views. But he clearly also felt that their opposition gave him little option; and that by breaking with Washington the UK would fuel anti-American tendencies around Europe, and possibly precipitate a permanent transatlantic split. The previous prime minister was dealt a terrible deck of cards: siding with Washington, Blair knew very well, meant plunging the EU into a foreign policy crisis – which it did, in 2003.
If only Blair had Gordon Brown’s current options. Four years later, both Chirac and Schröder are gone. Angela Merkel and Nicolas Sarkozy are far more pragmatic and Atlanticist than their predecessors. They are far less tempted than Chirac and Schröder to construct a European foreign policy identity on the basis of opposition to the US. And President Bush, too, has been chastised by the Iraq experience. His second administration is distinctly more multilateralist, less guns and more butter.
The role of Europe in the US-UK relationship has changed correspondingly. Unlike Tony Blair, Prime Minister Brown can afford to not worry about Europe as he reassesses the relationship with Washington. His European counterparts, by and large, have good working relations of their own with the US. Brown is far freer than his predecessor to refashion the priorities of US-UK foreign policy co-operation, knowing that a possible occasional strain in the relationship is not going to have wider repercussions in Europe.
Arguably, Britain has lost some of its usefulness to the US, too. Many find the idea of the UK acting as a bridge between the US and Europe fanciful. But, without UK leadership, the other Atlanticist EU countries, mostly new member-states in Central Europe, would have come under tremendous pressure from Germany and France to form a united EU front against the US. Tony Blair’s words and deeds demonstrably helped shore up support for the US in Europe. Gordon Brown is not likely to be called upon to play the same role. EU members are making far more pragmatic and less ideologically-driven decisions on their relations with the US than they were in 2003. As US-European ties become less confrontational, there is less need for the UK to play its balancing role within Europe.
Now that Gordon Brown is free to judge the US foreign policy on its own merit, without worrying about the EU context, what use did he make of this manoeuvring room at his meeting with George Bush over the weekend of July 25th- 26th?
Arguably, not much. Most of the change that stemmed from the summit was cosmetic. Gordon Brown clearly went to the US resolved to shake off the poodle image without undermining the special relationship. He succeeded in this. His cool, reserved demeanor with the US president restored dignity to London’s standing in the US and in Europe.
As far as substance is concerned, Brown sounded surprisingly hawkish on Iran (although more in his pre-trip press conferences than at the summit itself), while gently creating a little distance from Washington on the issue of a timetable for withdrawing troops from Iraq – Britain wants to be out sooner. But he may have missed an opportunity to clearly state his differences on the Middle East peace process. Britain is gingerly moving towards engaging Hamas and working with it to make it a legitimate and responsible actor. The White House has struck out in the opposite direction. President Bush last week announced a raft of initiatives meant to isolate Hamas and bolster its main rival, President Abbas. Gordon Brown remained largely silent on this point during his press conference with George Bush. This could mean that he agrees or – more likely – that he wanted to avoid a dispute in the open. And that is a pity. Because of the change of leadership in Europe, the prime minister is less constrained in his dealings with Washington than his predecessor. If he believes US policy on the Middle East to be wrong, this was the time to say it.
Tomas Valasek is director of foreign policy & defence at the Centre for European Reform.
Tuesday, July 24, 2007
Where next for Turkey?
By Katinka Barysch and Charles Grant
Some of Turkey’s critics say that it has no place in the EU because it is not a European country. Others criticise the quality of its democracy. The first group tends to focus on the Islamist philosophy of the ruling AK party, while the second group complains about the role of the armed forces in public life. The dramatic series of events in Turkey over the past four months should go some way towards reassuring both camps.
In April, the armed forces threatened the AKP over its choice of Abdullah Gul as its presidential candidate. The constitutional court declared the first round of voting in the parliament invalid. Millions marched in the streets in defence of secularism. Prime Minister Recep Tayyip Erdogan called an early election to defuse the crisis. His AK party won enough votes to form another single-party government.
These events show that Turkey’s democracy is maturing fast. Having hinted that it might launch a coup, the army has respected the democratic process and stayed in its barracks. The AKP won voters’ confidence by promoting a moderate brand of Islamism, and by adding more secular candidates and women to its electoral list. Celebrating his re-election, a statesman-like Erdogan called for reconciliation, reform and universal respect for Turkey’s secular constitution.
Erdogan will need all his considerable political skills to get through the challenges of the next twelve months. The election outcome was good for the AKP but it showed a country split down the middle. With 47 per cent of the vote, the AKP did significantly better than in 2002. Then, much of its support was due to voters’ disillusionment with a bickering and self-serving political establishment. This time round, its victory was a reward for good economic management and – despite the occasional backtracking – political moderation.
Some 38 per cent of Turkish voters opted for nationalist parties, if one adds up the votes of the hard-line MHP, the nominally centre-left CHP and Cem Uzan’s radical GP. There is little that unites these parties, apart from their attempts to portray the AKP as radical on Islam and limp-wristed on security. But the scare tactics of the secular establishment and the army obviously failed to convince most Turks.
Three of the 14 parties that ran in the election overcame the 10 per cent vote threshold for parliamentary representation; in the previous parliament it was only the AKP and the CHP. Now they are being joined by 71 MHP members and 28 ‘independents’, most of whom are from the Kurdish party, the DTP. So although the AKP received a higher share of the vote than in 2002, it will have fewer seats in parliament. With 342 MPs, the AKP still has enough votes to pass laws, but not to change the constitution or, importantly, elect a new president.
Turkey will hold a referendum on an AKP proposal to move the presidential election from the parliament to the people, but not until the autumn. So the next president will once again be chosen by Turkey’s 550 MPs. Two-thirds (or 367) of them need to be present to make the first round of voting valid, following a constitutional court ruling in April. If the CHP and the MHP boycotted the presidential ballot to prevent an AKP candidate winning, there would probably be another early election. Erdogan might try to push through his candidate with the help of the ‘independents’. But then the army would decry an Islamist-Kurdish conspiracy and roll back onto the political scene. It will not be easy to find a candidate that looks acceptable to both the secular-nationalist opposition and the more conservative parts of the AKP. But Erdogan should be able to do it. He may placate his own AKP by hinting that he could himself stand in the first popular presidential poll. If, as seems likely, Erdogan finds a compromise presidential candidate, he would undermine the army’s claim that Turkey’s secular order is under threat.
The AKP also faces tricky decisions over Iraq. It was perhaps no coincidence that General Yasar Buyukanit, Turkey’s army chief, asked for a mandate to take action against outposts of Kurdish PKK guerrillas in Northern Iraq, just a few months before the election. The government had little choice but to say No. Such cross-border incursions would wreck what is already a tense relationship with Washington and create considerable strains with the EU. And then there is the risk of the military getting bogged down in a prolonged guerrilla war on foreign territory. Nevertheless, the army’s persistent hectoring made the government look weak on the security front, and probably helped to increase the MHP’s share of the vote. If the PKK is sufficiently provocative – for example letting off big bombs in tourist resorts – the government would have little choice but to endorse a military intervention.
Once the presidential election is out of the way, the new government will have to get down to work. The AKP gets a lot of its legitimacy from its impressive economic record. Markets jumped with joy over the AKP’s re-election. But the government now faces the tricky task of putting its reform successes on a more sustainable footing. This will include continued privatisation (not least to attract the money to finance a current-account deficit that hit a worrying 8 per cent of GDP last year); an overhaul of social security; further improvements in the budget; better infrastructure (two million people a year are moving from the rural areas into already overcrowded cities) and labour market reforms. In this young country, around a quarter of a million jobs need to be created every year, just to keep the unemployment rate constant at 10 per cent.
The AKP will have to navigate these tricky waters at a time when the EU anchor has become loser. Nicolas Sarkozy has vetoed the opening of the chapter on economic and monetary union in Turkey’s accession negotiations, because he says that only full members need to bother with single currency rules. And Turkey, he claims, will not achieve that status so long as he is president. He wants the EU have another big debate about the future boundaries of Europe in December. His views on that are clear.
Erdogan is to be congratulated for his measured response to Sarkozy’s tactics. In the past, Turkish politicians often warned that EU wavering would result in a nationalist backlash and political instability in Turkey. But now Erdogan’s government is promising to soldier on with its EU preparations. “We will be ready in 2014”, he says, “irrespective of what the EU does”.
Much of the AKP’s positive agenda since 2002 has been inspired by the objective of EU accession. The party’s pro-EU credentials helped it to mitigate the deep suspicions it encountered among the urban elites. What would happen to the AKP’s reform plans and its legitimacy if Sarkozy succeeded in ruling out Turkey’s full membership? The new government needs the EU anchor to consolidate its successes.
Katinka Barysch is chief economist and Charles Grant is the Director of Centre for European Reform
Some of Turkey’s critics say that it has no place in the EU because it is not a European country. Others criticise the quality of its democracy. The first group tends to focus on the Islamist philosophy of the ruling AK party, while the second group complains about the role of the armed forces in public life. The dramatic series of events in Turkey over the past four months should go some way towards reassuring both camps.
In April, the armed forces threatened the AKP over its choice of Abdullah Gul as its presidential candidate. The constitutional court declared the first round of voting in the parliament invalid. Millions marched in the streets in defence of secularism. Prime Minister Recep Tayyip Erdogan called an early election to defuse the crisis. His AK party won enough votes to form another single-party government.
These events show that Turkey’s democracy is maturing fast. Having hinted that it might launch a coup, the army has respected the democratic process and stayed in its barracks. The AKP won voters’ confidence by promoting a moderate brand of Islamism, and by adding more secular candidates and women to its electoral list. Celebrating his re-election, a statesman-like Erdogan called for reconciliation, reform and universal respect for Turkey’s secular constitution.
Erdogan will need all his considerable political skills to get through the challenges of the next twelve months. The election outcome was good for the AKP but it showed a country split down the middle. With 47 per cent of the vote, the AKP did significantly better than in 2002. Then, much of its support was due to voters’ disillusionment with a bickering and self-serving political establishment. This time round, its victory was a reward for good economic management and – despite the occasional backtracking – political moderation.
Some 38 per cent of Turkish voters opted for nationalist parties, if one adds up the votes of the hard-line MHP, the nominally centre-left CHP and Cem Uzan’s radical GP. There is little that unites these parties, apart from their attempts to portray the AKP as radical on Islam and limp-wristed on security. But the scare tactics of the secular establishment and the army obviously failed to convince most Turks.
Three of the 14 parties that ran in the election overcame the 10 per cent vote threshold for parliamentary representation; in the previous parliament it was only the AKP and the CHP. Now they are being joined by 71 MHP members and 28 ‘independents’, most of whom are from the Kurdish party, the DTP. So although the AKP received a higher share of the vote than in 2002, it will have fewer seats in parliament. With 342 MPs, the AKP still has enough votes to pass laws, but not to change the constitution or, importantly, elect a new president.
Turkey will hold a referendum on an AKP proposal to move the presidential election from the parliament to the people, but not until the autumn. So the next president will once again be chosen by Turkey’s 550 MPs. Two-thirds (or 367) of them need to be present to make the first round of voting valid, following a constitutional court ruling in April. If the CHP and the MHP boycotted the presidential ballot to prevent an AKP candidate winning, there would probably be another early election. Erdogan might try to push through his candidate with the help of the ‘independents’. But then the army would decry an Islamist-Kurdish conspiracy and roll back onto the political scene. It will not be easy to find a candidate that looks acceptable to both the secular-nationalist opposition and the more conservative parts of the AKP. But Erdogan should be able to do it. He may placate his own AKP by hinting that he could himself stand in the first popular presidential poll. If, as seems likely, Erdogan finds a compromise presidential candidate, he would undermine the army’s claim that Turkey’s secular order is under threat.
The AKP also faces tricky decisions over Iraq. It was perhaps no coincidence that General Yasar Buyukanit, Turkey’s army chief, asked for a mandate to take action against outposts of Kurdish PKK guerrillas in Northern Iraq, just a few months before the election. The government had little choice but to say No. Such cross-border incursions would wreck what is already a tense relationship with Washington and create considerable strains with the EU. And then there is the risk of the military getting bogged down in a prolonged guerrilla war on foreign territory. Nevertheless, the army’s persistent hectoring made the government look weak on the security front, and probably helped to increase the MHP’s share of the vote. If the PKK is sufficiently provocative – for example letting off big bombs in tourist resorts – the government would have little choice but to endorse a military intervention.
Once the presidential election is out of the way, the new government will have to get down to work. The AKP gets a lot of its legitimacy from its impressive economic record. Markets jumped with joy over the AKP’s re-election. But the government now faces the tricky task of putting its reform successes on a more sustainable footing. This will include continued privatisation (not least to attract the money to finance a current-account deficit that hit a worrying 8 per cent of GDP last year); an overhaul of social security; further improvements in the budget; better infrastructure (two million people a year are moving from the rural areas into already overcrowded cities) and labour market reforms. In this young country, around a quarter of a million jobs need to be created every year, just to keep the unemployment rate constant at 10 per cent.
The AKP will have to navigate these tricky waters at a time when the EU anchor has become loser. Nicolas Sarkozy has vetoed the opening of the chapter on economic and monetary union in Turkey’s accession negotiations, because he says that only full members need to bother with single currency rules. And Turkey, he claims, will not achieve that status so long as he is president. He wants the EU have another big debate about the future boundaries of Europe in December. His views on that are clear.
Erdogan is to be congratulated for his measured response to Sarkozy’s tactics. In the past, Turkish politicians often warned that EU wavering would result in a nationalist backlash and political instability in Turkey. But now Erdogan’s government is promising to soldier on with its EU preparations. “We will be ready in 2014”, he says, “irrespective of what the EU does”.
Much of the AKP’s positive agenda since 2002 has been inspired by the objective of EU accession. The party’s pro-EU credentials helped it to mitigate the deep suspicions it encountered among the urban elites. What would happen to the AKP’s reform plans and its legitimacy if Sarkozy succeeded in ruling out Turkey’s full membership? The new government needs the EU anchor to consolidate its successes.
Katinka Barysch is chief economist and Charles Grant is the Director of Centre for European Reform
Wednesday, July 18, 2007
Of mice, men and the language of EU reform
by Hugo Brady
Beware the humourless, especially in politics. At a CER/Clifford Chance conference last week, Guiliano Amato, Italy’s interior minister, pronounced that the Reform Treaty was a return to familiar territory for the EU: an unreadable treaty. A few refused to get the joke, portraying Amato’s playful observation as an explosive revelation that the Reform Treaty is indeed the EU constitution encrypted. ("Loathsome smugness", seethes Open Europe’s blog).
How odd. The conference was clearly on the record and Amato's warmly ironic tone was anything but pompous. But Open Europe also missed the bigger point in Amato’s speech: his admission that we never had a real constitution to start with. Amato, a widely admired statesman and former prime minister, was vice-chair of the convention that first wrote the EU constitution in 2003. The convention, he said, had wrongly dressed up a set of fairly good ideas, designed to make the EU’s institutions, foreign and justice policies work better, as being something it was not: a grand constitution.
The governments stuck with the name ‘constitution’ in the hope, rather than the expectation, that it might grab the attention of citizens and make the EU more popular. But according to Amato, the document was always much more a ‘boy’ than a ‘girl’, referring to the French words ‘le traité’ (masculine) and ‘la constitution’ (feminine). This reflects the nature of the EU itself, which Amato christened a "hermaphrodite": not merely an inter-governmental organisation but far from being a state.
True, much of proposed Reform Treaty is to be taken from the wreck of the so-called constitution. But, aside from the name, other controversial aspects are being amended or dropped: there are about 20 significant changes in all. The new treaty will be completely stripped of any pretensions to be a US constitution-style founding charter. As the communications commissioner, Margot Wallström, who also addressed the conference, quipped: mice are genetically 90 per cent identical to human beings "but the remaining ten per cent makes all the difference".
Nonetheless language, legal and otherwise, matters in the European debate. Hence the outcry over Sarkozy’s deletion of a key reference to ‘undistorted competition’ from the new treaty or Commission president Barroso’s well-intentioned, but foolish, description of the EU as a new "non-imperial empire" (a misnomer in any case: a non-empire empire?). And now, when just about everyone else has finally accepted that the idea of a constitution for Europe is dead, British Eurosceptics cling to the term in a bid to pressure the government into holding a referendum.
Why? Sovereignty is hardly the issue. Sir Stephen Wall, another keynote speaker last Thursday, noted the British are blasé, in contrast with their European counterparts, on key issues of sovereignty like trade liberalisation and foreign ownership of industry. The thought of foreigners owning home-grown car industries makes continental politicians shiver; the British care little. Neither can it be a reaction to British politicians and diplomats having failed to defend national interests the negotiations on the treaty. Peter Altmaier, a minister in Angela Merkel's government, rather ruefully outlined to the conference how the UK had won the most from the three negotiations leading to this treaty: the convention, the 2004 inter-governmental conference on the constitution, and the recent June summit.
No, Eurosceptics here hope a referendum on Europe will be the beginning of the disengagement from the EU they long for. A referendum would be the perfect political arena to portray issues like the role of EU foreign policy or the primacy of EU law as an affront to British sovereignty and awake fears of what Hugh Gaitskill, a former Labour leader, famously called “the end of a thousand years of history”.
In the past, well meaning pro-Europeans and commentators have also called for a referendum in Britain on the EU, as a way of challenging the orthodoxies of the British European debate. This is wrong-headed. Yes, Gordon Brown should encourage passionate debate on Britain’s interests in Europe. But if he fails to stand firm against calls for a referendum, he risks opening a Pandora's box of obfuscation and media-fed nationalism, as well as handing a platform to fringe political forces from across the UK. (I exaggerate? Read Frederick Forsythe's "Pledge a referendum on Europe Mr Cameron", FT July 16th.) To paraphrase Gaitskill's wife, as she listened to the standing ovation elicited by his famous speech: a British referendum on Europe would make all the wrong people cheer.
Hugo Brady is a research fellow at the Centre for European Reform.
Beware the humourless, especially in politics. At a CER/Clifford Chance conference last week, Guiliano Amato, Italy’s interior minister, pronounced that the Reform Treaty was a return to familiar territory for the EU: an unreadable treaty. A few refused to get the joke, portraying Amato’s playful observation as an explosive revelation that the Reform Treaty is indeed the EU constitution encrypted. ("Loathsome smugness", seethes Open Europe’s blog).
How odd. The conference was clearly on the record and Amato's warmly ironic tone was anything but pompous. But Open Europe also missed the bigger point in Amato’s speech: his admission that we never had a real constitution to start with. Amato, a widely admired statesman and former prime minister, was vice-chair of the convention that first wrote the EU constitution in 2003. The convention, he said, had wrongly dressed up a set of fairly good ideas, designed to make the EU’s institutions, foreign and justice policies work better, as being something it was not: a grand constitution.
The governments stuck with the name ‘constitution’ in the hope, rather than the expectation, that it might grab the attention of citizens and make the EU more popular. But according to Amato, the document was always much more a ‘boy’ than a ‘girl’, referring to the French words ‘le traité’ (masculine) and ‘la constitution’ (feminine). This reflects the nature of the EU itself, which Amato christened a "hermaphrodite": not merely an inter-governmental organisation but far from being a state.
True, much of proposed Reform Treaty is to be taken from the wreck of the so-called constitution. But, aside from the name, other controversial aspects are being amended or dropped: there are about 20 significant changes in all. The new treaty will be completely stripped of any pretensions to be a US constitution-style founding charter. As the communications commissioner, Margot Wallström, who also addressed the conference, quipped: mice are genetically 90 per cent identical to human beings "but the remaining ten per cent makes all the difference".
Nonetheless language, legal and otherwise, matters in the European debate. Hence the outcry over Sarkozy’s deletion of a key reference to ‘undistorted competition’ from the new treaty or Commission president Barroso’s well-intentioned, but foolish, description of the EU as a new "non-imperial empire" (a misnomer in any case: a non-empire empire?). And now, when just about everyone else has finally accepted that the idea of a constitution for Europe is dead, British Eurosceptics cling to the term in a bid to pressure the government into holding a referendum.
Why? Sovereignty is hardly the issue. Sir Stephen Wall, another keynote speaker last Thursday, noted the British are blasé, in contrast with their European counterparts, on key issues of sovereignty like trade liberalisation and foreign ownership of industry. The thought of foreigners owning home-grown car industries makes continental politicians shiver; the British care little. Neither can it be a reaction to British politicians and diplomats having failed to defend national interests the negotiations on the treaty. Peter Altmaier, a minister in Angela Merkel's government, rather ruefully outlined to the conference how the UK had won the most from the three negotiations leading to this treaty: the convention, the 2004 inter-governmental conference on the constitution, and the recent June summit.
No, Eurosceptics here hope a referendum on Europe will be the beginning of the disengagement from the EU they long for. A referendum would be the perfect political arena to portray issues like the role of EU foreign policy or the primacy of EU law as an affront to British sovereignty and awake fears of what Hugh Gaitskill, a former Labour leader, famously called “the end of a thousand years of history”.
In the past, well meaning pro-Europeans and commentators have also called for a referendum in Britain on the EU, as a way of challenging the orthodoxies of the British European debate. This is wrong-headed. Yes, Gordon Brown should encourage passionate debate on Britain’s interests in Europe. But if he fails to stand firm against calls for a referendum, he risks opening a Pandora's box of obfuscation and media-fed nationalism, as well as handing a platform to fringe political forces from across the UK. (I exaggerate? Read Frederick Forsythe's "Pledge a referendum on Europe Mr Cameron", FT July 16th.) To paraphrase Gaitskill's wife, as she listened to the standing ovation elicited by his famous speech: a British referendum on Europe would make all the wrong people cheer.
Hugo Brady is a research fellow at the Centre for European Reform.
Subscribe to:
Posts (Atom)