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Eurocrash: a dagger at the heart of the project
Interestingly, I left last night's piece with the Irish Times saying that Greece had to drop out of the euro, but this takes it a stage further.
I know we've said it before, but this really is end game territory. And young Daniel says that Britain should capitalise on this, leaving the EU to set up "a looser association of peripheral countries, linked to the core by free trade and inter-governmental collaboration rather than common political structures".
As always, he's behind the curve. It is the core which is collapsing and soon there will be nothing to coalesce around. Merkel was right when she said that the end of the euro is the end of "Europe". In the not too distant future, we will be looking at re-drawing the post-war settlement – the changes are going to be that profound.
The deepest of all ironies, though, is that it will be Germany, not Britain, which drags the project down. And the proximate cause will be the German Basic Law, which was drafted after the war with the help of British lawyers.
Central to the issue, as Deutsche Welle points out, is the "eternity clause" - a legal colloquial name for Article 79, paragraph 3 – which clearly limits the transfer of authority to a European level.
This clause stipulates which regulations in the Basic Law may not be changed, including the provisions in Article 20, which declare: "All state authority emanates from the people".
In our Harrogate Agenda, this is exactly where we are with our first demand, where we state: the people in their collective form comprise "the ultimate authority of their nations and the source of all political power".
And now, that provision is the Basic Law is going to prevent the German europhile élites handing over the last of the sovereignty to the EU, in the form of a fiscal and final political union. The power isn't theirs to give away.
Such issues were explored in detail in Frankfurter Allgemeine Zeitung over the weekend, where it was concluded that further demolition of the sovereignty of nation states was not the answer to "the state of emergency in Europe". On the contrary, what was needed was "its sharpening".
This is the dagger at the heart of the project. This is why we see a rush of politicians calling for a referendum. They need the people to assent to the transfer of power before fiscal union can go ahead - and it is doubtful even if that can be permitted.
Short of that, the dream is over. There is a lack of a European sovereign, and it is going to stay that way.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: Germany's trillion-euro liability
Throughout its brief life, what has sustained the euro has been the doctrine of ineivitability, but all that has gone, lost in the recriminations and squabbling of (largely) German politicians who dared to question the great secular religion of the age.
Latest of those trying to shore up the breach, however, is a blast from the past in the form of Gerhard Schröder, one time chancellor and earnest supporter of the project.
Bringing him out of retirement are the attacks of the FDP and the CSU against Greece. The "bashing" must stop immediately, he says. This is not conducive to the European idea and will not help the euro. "The continuation of Greece in the euro area is not easy but is possible, provided that there is solidarity and common effort", he insists.
In the German mainstream, though, a battle is shaping up between Merkel's coalition and the SPD, the representatives of the one arguing for a "stability union" while accusing the Socialist challengers of favouring a debt or "liability" union.
Enter SPD budgetary policy spokesman of the parliamentary group, Carsten Schneider, who is trying to turn the argument by suggesting that, whether left, right or centre, all parties are already lumbered with a debt union.
Says Schneider, talking to the Berliner Zeitung, the total exposure far more than the €310 billion Greek bailout funds, as the operations of the ECB have to be underwritten as well – the so-called "target II" balances, which Germany stakes to the tune of 27 percent. And there, Schneider estimates, the German liability now stands at a "breathtaking" €1 trillion.
Schneider also questions the assumptions on which the austerity programmes are based. If the Spanish package was transferred to Germany, he says, on a pro rata basis, that would require savings of about €250 billion, roughly the entire tax revenue of the federal government.
Such austerity would not be feasible for us, says Schneider. There would be a social uprising. The last major austerity package Merkel presented, in 2010, was only €80 billion, and that was spread over several years. And even now it has only been half implemented.
On that basis, the Spanish austerity plan is not realistic, and the Greek plan even less so, being much more extreme, at least on paper. To halt the death spiral, says the Irish Independent, Greece must leave the euro. The pain cannot go on much longer.
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Richard North 16/08/2012 Eurocrash: "the current imbalances will blow Europe apart"
It was at that time that he admitted that a Greek exit from the euro had "lost its horrors", evoking a wry comment from Spiegel that some senior members in Germany's ruling coalition agreed with him. Now he's back, warning against "populism" in the euro debate, stressing the commitment of his party, the pro-business Free Democrats (FDP), to closer European integration.
He is also breaking ranks with the dissidents in the ruling coalition, picking on the likes of Markus Söder, Bavarian finance minister, who has called for a Greek exit. The Christian Social Union (CSU), Rösler says, needs either make party members moderate their views or it should isolate them.
This was after Söder had told Bild am Sonntag that "an example must be made of Greece … Everyone has to leave Mom at some point and that time has come for the Greeks". This had prompted from foreign minister Guido Westerwelle a warning: "The tone of the debate is very dangerous … We need to be careful not to talk Europe to death".
Rösler's comments also apply to the CSU general secretary, Alexander Dobrint, who is another to have called for a Greek exit. Rösler, himself no stranger to the genre, now echoes Westerwelle, declaring populism "extremely dangerous", contrary to European values, which include "the principle of give and take".
Nevertheless, Rösler concedes that, if reforms are not made Athens, there can be no third rescue package. We do not want Greece to become insolvent, he says, but if necessary we could deal with the consequences.
What has brought on this sudden outbreak of responsibility to this controversial politician is not clear, and nor is it clear that he is driven by electoral imperatives, even if next year's election is looming large and the FDP is not doing well.
There are indications, though, that the economy minister is adrift from the mainstream, as Greece has today announced truly appalling economic news, with the economy shrinking 6.2 percent in the last quarter, making this the fifth year of economic depression.
With nearly a quarter of the workforce (23.1 percent) unemployed, undermining efforts to meet revenue targets and reduce the budget, Athens is asking for more time to meet its austerity programme, evoking a favourable response from Westerwelle. He appears open to compromise, even if he is stating that there can be no substantial changes to the reform agreements.
On Monday last, Greece managed to sell €4 billion-worth of short-term (3-month) government securities, to meet its public sector payroll, but needs another €20 billion to keep it going. So it will all have to come out in the wash next week, when prime minister Antonis Samaras meets Merkel.
On the meantime, despite the political hyperactivity, the German people seem to be taking a relatively laid-back view of events. According to a TNS poll, eighty percent of the population want a "new economic order" and are not bothered by short-term goals.
People, we are told, have become accustomed to the crisis. Concerns triggered by the euro crisis are now replaced by other fears. "Health" is on the top spot, followed by "Satisfaction with personal life situation" and the "protection of the environment". Secure money and growth featured lowest on the list of wants.
Deutsche Welle however, doesn't share these priorities, asserting: "What we need is a new European economic policy, a new monetary union". "The current imbalances will blow Europe apart", it adds. "The deteriorating economic outlook is just a first small pointer. But there is still time to repair the damage. But the situation must be addressed decisively. And that is what is needed right now".
Richard North 15/08/2012 The Harrogate Agenda – an elected prime minister
However, in a land where so much store is placed on the "democratic" legitimacy conferred by elected office, it is quite remarkable that we do not already have this in place.
As is stands, we have David Cameron occupying the office on the basis of 33,973 votes in the 2010 general election, all in the constituency of Witney which boasts 78,220 electors. Commanding 43.4 percent of the electorate, he did not even achieve of majority amongst his own local voters.
It is ironic then to see Daniel Hannan, a Tory MEP, complain about "the disturbing contempt for democracy at the heart of the EU", when less than 0.2 percent of the 46 million-strong electorate are allowed to vote for their prime minister in a general election.
Furthermore, when Cameron holds office on the back of 10,703,654 Tory votes, from an electorate of 45,844,691, representing only 36 percent of the votes cast and less than a quarter (23 percent) of the electorate, Hannan and his colleagues are in no position to complain about lack of democracy in the EU.
Direct elections for a prime minister would, therefore, go a long way to address this huge anomaly in British democracy, although the actual process of election needs to be only one part of a raft of sweeping reforms.
First and foremost of a suite of allied reforms, it is absolutely essential that the prime minister should not be an MP. Amongst the main tasks of parliament is scrutinising the executive and holding it to account. It stands to reason, therefore, that you cannot be a member of the executive – much less lead it – and then scrutinise yourself, and hold yourself to account.
It is just as important, however, that ministers should not be MPs either, nor even peers. Not least, having to select ministers from the 650-strong House of Commons is dangerously narrowing the gene pool, and more so when the candidates are usually drawn from the largest grouping. But, more crucially, MPs cannot be part of the executive and scrutinise themselves.
Here, the US system has something to offer, where an elected president selects his own cabinet, which must then be approved by Congress. By this means, there is a proper separation of power, as between the executive and the body which holds it to account.
Perversely, a not entirely dissimilar system applies in the EU – certainly in the sense that there is full separation between the executive (the commission) and the EU parliament. No-one can simultaneously be a member of both and, in that very specific context, the EU is more accountable than the British system.
Thus, separation of powers, per se - and an elected prime minister - will not necessarily improve the state of our democracy. At best, these improvements can only be small steps towards that end.
But then, as Hannan points out, democracy comprises two parts, demos, the people, and kratos - the power. Our egregious MEP seems very keen on addressing the demos issue but, as an advocate of representative democracy, seems less keen on people taking real power. At his heart, young Dan is an élitist, concerned mainly about the transfer of power from one élite to another. The people don't get a look in.
Here, the bottom line is that, had we had true democracy in this country, we would never have joined the EEC. When Heath took us into the Common Market, entry had not been on the preceding general election manifesto, and he thus lacked any democratic mandate for his action.
Parliament, as then constituted, rather than acting as a watchdog, simply rolled over. Without even being aware of the terms of entry, after a six-day debate culminating on 28 October 1971, MPs gave Heath a Commons majority of 112, achieved with the support of Labour pro-marketeers, without whom entry would have been rejected by 36 votes.
Subsequently, with the exception of the rigged poll of 1975, the people have been denied a referendum on continued membership by our elected representatives. Even when the EEC was transformed into the EU, our representatives have consistently defied public sentiment in keeping us in this failed construct.
In our search for democracy, therefore, we need to look closer to home. It is the failure of the British system, not the lack of democracy in the EU, that has got us where we are. Election of our prime minister and separation of powers are indeed small steps towards an improvement. But we need much more than this.
COMMENT THREAD
Richard North 15/08/2012 Eurocrash: the BBC misleads
Even the online report is neutral, telling us, against the background of the eurozone economy shrinking by 0.2 percent, that: "Europe's biggest economy, Germany, grew by 0.3 percent in the second quarter, helped by exports and domestic consumption".
We then get: "Germany has asserted itself thanks to growing exports to countries outside the eurozone," said Christian Schulz at Berenberg Bank. "It's hardly a surprise that consumption has increased due to low unemployment, rising wages and a low rate of inflation".
Go to the Speigel report, though, and the tenor is altogether different. Thanks to consumer spending and rising exports of consumer goods, the German economy grew in the second quarter, the paper says - "but only a bit". The 0.3 percent increase was lower than earlier this year and, already, the third quarter is facing a deficit.
There is no doubt that, compared with other eurozone countries, Germany is still doing well. In Italy, GDP was down 0.7 percent; in Belgium and in Spain by 0.6 percent to 0.4 percent. France's economy stagnated.
But the current statistics tell only part of the story. In the third quarter, the German economy is expected to decline. Exports, production and industrial contracts are all down and the Ifo business climate index is at its lowest level since March 2010.
The problem is that, while the German economy is in good shape, it cannot escape the recession in the eurozone and the weaker global economic growth. Thus, Commerzbank chief economist Joerg Kraemer, tells us that: "Until further notice, the current figures are the last good news from Germany".
Nothing of this came over in the BBC report, and although Flanders does concede that there are some problems, she also tells us that Germany's cumulative GDP growth since the start of the single currency is ahead of the rest of the eurozone.
So, it's finally official, the lady burbles: "After 13 years with the single currency, Germany has been one of the winners".
But, with Die Welt claiming that every federal citizen from baby to old man in the past five years paid an average of €3,125 for the crisis, we are paying a license fee for Stephanie's tosh?
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Richard North 15/08/2012
Thursday, 16 August 2012
In the years to come, it would not surprise me if we looked back on this summer as the time when the single currency passed the point of no return in its journey to obscurity.
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