Politics

Moral Hazard and the Future of the Eurozone

The blame game

I greatly sympathise with the argument that Greece and its citizens have been through the meat grinder, otherwise known as austerity, in the last six years. But this is categorically not because of the EU, the euro, the Troika or Germany. It is down to Greece and the Greeks. Ask the Britons about their own version of austerity, which is nowhere near its end stage with a further GBP 50 bln of cuts in public expenditure scheduled in the next five years. Britain is in the EU but not in the euro, however, there are similarities in the causes that have led to the austerity that both countries are facing for the foreseeable future. The difference is that Britain retains control over its currency and interest rates and is able to manipulate both, while still needing to undergo a painful process of austerity. Despite the most serious economic and social stresses and strains since WWII, the political parties are consistent about the journey in the next five-year term of office.

Contradictions galore

The Greeks chose to join the EU and the euro. In their last two general elections, they have chosen to remain in both. They must either live with the consequences or leave one or both. If Greece chooses to stay in the euro, the only option is to submit to the process of internal devaluation so as to regain competitiveness. Greece can choose to leave the euro but it knows full well that it will still have to submit to a different and rather more unpredictable form of pain that would follow as surely as night follows day. What Greece cannot do is to continue to want to have it both ways, namely to blame everyone else, row back completely from its obligations and totally unshackle itself from any conditionality connected with on-going eurozone support.

I have already written two other posts about the future of the eurozone, centred on Greece and the current phase of uncertainty about the future of Europe:

  • The first focuses on Syriza and its commitments, which are contradictory and impossible to achieve given Greece’s current financial circumstances. It has also chosen a completely unsuitable coalition partner, when it had various more reasonable options. This is a serious miscalculation by its Fine Young Radical leadership.
  • The second focuses on the demands of the Greek leadership, which amounts to the world’s biggest game of chicken. The Greeks are assuming that the rest of the eurozone will blink first and simply cave-in to its demands so as to keep Greece in the euro, avoid contagion in the eurozone and possibly save the EU project as a whole. The new Greece wants to have its euro cake and eat it at the same time, but at the expense of all the other eurozone countries that have been standing by it through various rescue schemes. This approach is inconsistent with the principle that rescue packages must be time-limited, clearly earmarked and subject to conditionality otherwise, they become permanent transfers, which are illegal under both EU and national constitutional law.

Moral hazard and financial crises

This post focuses on the third reason why the Greek will, in the end, be unable to bounce the other eurozone countries into agreeing to its demands, leading ultimately to an abandonment of its major electoral platform. That reason is “moral hazard”, a pervasive and inevitable feature of the financial system and of the economy. Moral hazard arises when a contract or financial arrangement creates incentives for the party(ies) involved to behave against the interest of others.

Many of these moral hazards involve increased risk-taking: if I can take risks that you have to bear, then I may as well take them; but if I have to bear the consequences of my own risky actions, I will act more responsibly. Thus, inadequate control of moral hazards often leads to socially excessive risk-taking—and excessive risk-taking is certainly a recurring theme in the current financial crisis.

Turning back to the latest eurozone crisis, it is not so hard to see where the moral hazard arises from the Greek stance.

Greece, as well as the other countries bailed out by the eurozone countries, namely Spain, Portugal, Ireland and Cyprus, have benefited tremendously from being members of the EU in the first instance, as well as the ultra-low interest rates and other advantages of being part of the euro. All experienced sustained growth which delivered much higher levels of income and prosperity. The cause of the problems they commonly face was almost entirely self-imposed: they borrowed too much, paid themselves too much, relied on the construction sector too much and deregulated too much, all of which fuelled their economic growth until the bubble burst.  They can blame the banks and the fatcat banksters, they can blame the government, they can blame the establishment and clientelist elites, they can blame the EU, they can blame the euro, they can blame the troika, they can blame the Germans and they can blame the immigrants… and they certainly do. But facts are facts. Citizens borrowed too much, spent too much, focused too little on productivity, competitiveness and innovation, and kept voting-in politicians for more of the same. They did this for generations prior to even joining the EU and the advent of the euro, then accelerated the process until the music inevitably stopped.

To blame the EU and the eurozone countries for their plight, as Greece is currently, amounts to wilful collective amnesia. The Greeks want to stay in the EU and euro. They have taken on obligations connected with the various euro rescue packages which they now wish to roll back. There is no doubt that there has been and continues to be massive suffering and not just in Greece. I am all for finding solutions that generate economic development that allows Greece and others to turn the corner as soon as possible. I am all for productive, long-term investment. Greece desperately needs this, as does the rest of Europe.

There is no such thing as a free lunch

But I am not for debt forgiveness combined with rolling back all the commitments that the new Greek leadership insists upon. The reason is that it would amount to a permanent transfer union from all other eurozone countries to Greece, something which is not only forbidden but also increases moral hazard. If the other eurozone countries are expected to assume the resulting risk, then it cannot work. If I were Greek, I would be thrilled to reduce my own burdens while at the same time increasing my pension, my wages, my social benefits and all the rest of it, knowing that someone else will foot the bill. I would certainly agree with the thinking: “Let the strong eurozone countries carry the burden. They can afford it. I have suffered enough.”

This is at the one and same time totally logical and yet totally unconscionable, but it is precisely what would happen. Once the Greeks are granted their 50% debt relief and released from the conditionality of the eurozone rescue packages why should the country reform itself as the new Greek leadership promises? More importantly, why should the rot stop there? It is quite clear that the Podemos movement in Spain is carefully watching developments and others also look on with great interest. Once the principle of debt relief and release from conditionality is established, what is likely to happen at the next general election in those countries? If other anti-austerity parties are elected, would they not reasonably expect similar treatment from the eurozone countries?

It might be possible to absorb the resulting losses and implied on-going costs in the case of Greece, but the euro game would be up soon after. No one could afford it. This applies to Germany as much as to any other eurozone country that has been backstopping the various eurozone rescue packages.

I am resident of Germany and a taxpayer there and I can assure you that I do not fancy this scenario at all. You can take it for granted that my neighbours, no matter how Europhile they may be, care for it even less. While they may go on holiday to other countries of the EU, they have not lived and worked elsewhere and therefore do not have the friendships and family networks that I do and even I am dubious about this future. Germans are financially conservative not by nature but as a direct result of horrific experiences with financial and other catastrophes within living memory. Its ageing population structure simply reinforces this tendency. If moral hazard takes hold in the eurozone, it is not beyond the realms of possibility that Germany might experience a rapid and pronounced disenchantment with the EU and the euro. Were this to occur, it would be an unmitigated disaster for Europe.

I believe the new Greek government will fail with most of its contradictory anti-austerity drive. Its programme is completely unrealistic (except for their insistence that austerity must be counteracted with a pro-growth, productive investment programme), EU and national constitutional law forbid a transfer union and the obvious moral hazard connected with all other eurozone countries mean that this simply cannot be accepted.

The current Greek position would directly increase moral hazard in the EU to an unprecedented degree. If other countries were to follow suit, moral hazard will reach hitherto unimaginable levels. If I take a risk, I should bear the consequences. But if I take a risk at someone else’s expense, then it becomes moral hazard and I would consider this new EU and eurozone, where I would have to pay on an on-going basis for other countries’ decisions, to be little short of an economic nightmare. I would be in hock to third parties for the rest of my life, as would my children and my grandchildren.

I would remind the Greek Fine Young Radical leadership, as well as all the economists out there pushing for the eurozone to give-in to the Greek’s apparently reasonable anti-austerity, pro-growth demands, of a universal truth: there is no such thing as a free lunch. Someone will have to pay for it and I have no intention to be paying lunch for complete strangers from elsewhere in the EU for the foreseeable future.

Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Transfer Union and the Biggest “Game of Chicken”

The Greek David vs. the EU Goliath?

A cursory glance of much of recent media reporting and one could easily conclude that the EU is bullying Greece as a means of advancing its agenda of propping up the euro at the expense of the Greek economy and on the back of the Greek people. Our instinctive reaction is to support the plucky underdog in its monumental fight against the Eurocrat Goliath, especially if the undertone is that the bailout has only succeeded in helping the fat cat foreign banks, who have been making hay with the EU rescue funds while the Greek citizens starve. This could not be further from the truth, as I have previously written.

The recent media reporting has consistently demonstrated that the Syriza rhetoric which went down so well with the Greek electorate is failing to gain traction with the other eurozone countries that have been keeping the Greek economy afloat for the last few years. Instead of Mr Alexis Tsipras and Mr Yanis Varoufakis, Greece’s Fine Young Radicals getting their way with their contradictory demands, they are discovering that their European partners are not for turning, despite the high stakes game of poker being played.

Game of Chicken: who blinks first, loses

This is the world’s most dangerous game of chicken and everyone can see a potential crash looming ahead. Neither the EU nor the Greeks are giving way. The Greeks want to tear down the agreed programme of reform and the as they see it unreasonable conditions imposed on them by the hated “troika” (EC, IMF and ECB) and take back their sovereignty while at the same time staying in the EU and the eurozone and demanding a long list of concessions while being clearly not in position to pay for them either today or any time soon.

The obvious implication of the Greek stance is that the eurozone has foisted austerity upon the Greeks, that it is not working and that the eurozone owes the Greek people for the suffering that has been imposed on them against their will. There should be a significant debt write down, an immediate end to austerity and presumably continuing transfers from eurozone countries for the privilege of Greece not pressing the reset button by leaving the euro and defaulting on their debts. Such eurozone transfers would be expected by Greece not only now, but potentially for the foreseeable future until its economy has recovered fully and it is able to pay back its debts. Many cheer the Greek stance and their pluck in the face of the pro-austerity forces of the establishment, such as the Troika.

Interestingly though, none of the eurozone countries seem to be buying into this fairy tale despite the potentially catastrophic chain of events that could flow from such a game of chicken if contagion were to take hold in other similarly stricken eurozone countries. The lack of eurozone cave-in appears to have taken the Greek young radical leadership by surprise. Moreover, the public pronouncements being made, and not only by the Germans, appear to be hardening over time. Time is running out for Greece. The world‘s biggest game of chicken is unfolding before our very eyes with potentially disastrous consequences for Greece and eurozone. Many must wonder why the eurozone countries don’t simply press the financial reset button? Why must the poor Greeks continue to suffer, whereas through a magical stroke of the EU pen, they could simply forgive the Greek debt and move on?

The Germans always pay…

When it comes to the EU, the three most significant countries have always played a consistent game. The French are the visionaries that drive the ever closer union agenda, including in the establishment of the euro. The Germans are the ones that sign the blank cheques and effectively traded off their beloved DM for reunification. The Brits are the pragmatists that have only ever been interested in trade and finance, but been sceptical about almost everything else connected with the EU and would not touch the euro with the proverbial barge pole. In this story, the simple fact is that the much vilified Germans would almost certainly have signed on the dotted line and rescued the Greeks (and probably others) were it not for two seemingly innocuous words which few people ever mention in relation to the game of chicken currently being played, namely the “transfer union”.

… except if they simply cannot: transfer union

Firstly, let us be clear about the definition. A “transfer union” is basically characterised by permanent, direct and horizontal transfers between eurozone countries.  Quite simply, this is forbidden under EU and national law. The taxpayer in German and other EU countries has always been concerned that s/he might end-up assuming liability for the debts and deficits generated by other Member States. Consequently, the Maastricht Treaty and its successor treaties provided safeguards not least Article 125 of the Treaty on the Functioning of the European Union (TFEU), which contains the so-called “no bail-out” clause.  It requires that EU institutions (including the European Central Bank) must not assume liability for the debts of central, regional or local governments of the member states of the eurozone, nor must one member state assume liability for the debts of another. A recent amendment to Article 136 TFEU authorises eurozone members to set up the European Stability Mechanism on an inter-governmental basis, but this does not invalidate the no bail-out clause which forbids debt burden-sharing amongst eurozone members.

These legal restrictions are reinforced by others in the national constitutions of certain member states such as that of Germany. The German Federal Constitutional Court based in Karlsruhe has been particularly vociferous in blocking anything which affects Germany’s ability to act as a fully self-governing sovereign state.

Had it not been for the constraints blocking transfer union on the basis defined above, I believe that most German politicians would have already done whatever it takes to rescue Greece and the euro. They would have written a blank cheque in 2009, they would have done so today and they would have continued to do so for the foreseeable future until their own financial system was corroded. Never underestimate the importance of war guilt in German policy-making. The instinctive reaction of German politicians, certainly until the advent of Chancellor Gerhard Schroeder, was to pay first and think last about the consequences for the German taxpayer. Fortunately for the German citizen (or more to the point, unfortunately for the Greek citizen), the problem of the transfer union is a major stumbling block which inhibits the normal course of EU politics and results in the biggest game of chicken ever.

To be sure, some vertical transfers do take place between member states and the EU and back to member states. Article 3 III of the EU Treaty refers to economic, social and territorial cohesion and solidarity between the member states as one of the aims of the Union. Measures that are financed must correspond with the aims of the Union and have been agreed by the member states in the framework of the European Treaties and secondary legislation. The competitiveness and cohesion budget focuses on three elements: i) economic convergence of the least developed regions and member states ii) regional competitiveness and employment and iii) cross-border cooperation and the integration of regions and SMEs.

But the situation becomes much trickier in the case of the euro rescue package which now comprises three elements: i) the European Financial Stabilisation Mechanism (EFSM) run by the Commission, ii) the European Financial Stability Facility (EFSF) financed by the member states and iii) IMF aid. There have been numerous attempts to block the rescue packages on the legal grounds previously mentioned. All have failed because the rescue packages have been considered to be time-limited, with clearly earmarked loans and subject to strict conditionality. Funds are not paid out until economic policy conditions connected to the framework of the structural adjustment programme, are complied with. This is the basis of the euro rescue packages, otherwise they could not have been offered. This is the basis that Greece accepted the offered rescue packages.

New Greece or eating the euro cake and having it too

Prior to the advent of Syriza, it could be questioned if the loans would ever be repaid by Greece or if the conditions attached were being met in the manner anticipated. But with the new, explicit Greek demands, the position changes radically . As I have previously discussed, Syriza goes against all uneasy compromises which have been hammered out under the previous euro rescue packages. In essence it insists on the following:

  • Stay in the EU and the Euro.
  • Negotiate the level of the debt burden (175% of the GDP or €318 billion) immediately
  • Reboot the economy and create 300,000 jobs
  • Immediate end to austerity:
    • Tax reductions (abolish taxes & social contributions for 7 years & income tax of 30%)
    • Raise the minimum wage from €586 to €751
    • Re-introduce 13th month payment for the lowest retirement pensions
    • Distribute electricity or housing coupons and free access to public transport for the poorest 300,000 households
  • Introduce free healthcare for all.
  • Stop privatisation on its tracks.

This is the new Greece wanting to have its euro cake and eat it at the same time, but at the expense of all the other eurozone countries that have been helping it through various rescue funds. These demands, which its Fine Young Radical leadership is pursuing with vigour, would effectively overturn the current rationale of the rescue packages totalling €240bn and contravene the principle of no transfer union since it would lead to permanent, direct and horizontal transfers between eurozone countries. By requiring an immediate renegotiation of the debt burden by half (bearing in mind that many eurozone countries are significantly poorer than Greece on a per capita basis yet would have to bear the costs of debt reduction), it would represent a clear and unambiguous bailout by the other eurozone countries. By stopping privatisation and reintroducing a raft of measures which the country simply cannot afford to pay for, it would effectively amount to permanent, direct and horizontal transfers between the other eurozone countries and Greece, since the country cannot afford them now and is unlikely to afford them for decades. In other words, the current Greek negotiating position would represent a direct contravention of the EU treaties and, if successful, would trigger challenges at the EU level, as well as in the German Federal Constitutional Court, something which the German government rightly fears. And this is even before we discuss how the average tax payer and voter in eurozone countries will feel about contributing to increasing the minimum wage or pension in Greece to levels which they themselves do not enjoy in their countries.

In this game of chicken, Greece’s leadership has been betting that when push comes to shove, the rest of the eurozone will blink first and simply cave-in to its demands so as to keep Greece in the euro, avoid contagion in the eurozone and possibly save the EU as a whole.

But Greece’s Fine Young Radicals have underestimated the legal importance of the EU treaty and national constitutional barriers to the establishment of a transfer union. A European financial equalisation, with permanent, direct and horizontal transfers, is simply not possible, otherwise Germany and other leading eurozone national would probably have long ago given-in to the mounting economic and political pressures.

The limits to the EU and the euro

The day when the Greek citizen or any other EU citizen votes to increase its wages, pensions, social expenditure, etc. yet simply expects the taxpayers of other EU countries, be it the Germans or any other nationality, to foot the resulting bill on an ongoing basis is the day that the EU and euro will be dead and buried as far as I am concerned. This massive game of chicken potentially affecting the lives of the Greeks, the eurozone countries and other including Britons (though they may feel immune to it because of their own currency)  may go on for a while, but it will not last long. There will probably only be losers in this game started by Greece’s Fine Young Radicals. They will lose if things go wrong by accident or design, but nowhere as badly as the Greek people themselves who, in their desperation, have voted them in.

Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU


British Voters and EUroscepticsm: much ado about nothing?

A Historic Turning Point Coming Up?

British voters are weighing up their options, but a strong element of anti-EU sentiment can be detected. The General Election scheduled for 05 May 2015 may well be turn out to be historic. If the Conservative Party wins, it is committed to holding a straight in/out referendum in 2017 about whether Britain is to remain in the EU or not. Previous posts have discussed the role of the eurosceptic Conservative wing and the role played by the Ukip party in the hardening Conservative and Labour Party stance in relation to the EU and EU-related immigration. Previous posts have also discussed a growing anti-Euro and anti-Islam sentiment in Germany, though it is materially different and not as pervasive as in the UK. No obvious anti-EU sentiment can be detected, which is why this post focuses mainly on Britain.

A reading of opinion polls illustrates that the balance of British public opinion, which has never exactly been EUphoric since joining in 1973, appears to be turning stringently EUrosceptic. The common assumption among quite a few politicians and a large segment of the media seems to be that life would become instantly better if only Britain would jettison membership of the EU, regain “control over its borders”, thus stopping “uncontrolled” migration along with excessive “interference” from Brussels in British affairs. But is this really the case? How much would actually change overnight, as far as the voters’ priorities are concerned?

Voter Priorities (2010-2015)

With the British general election not so far away, it is worth asking: just how much would actually change in people’s lives if the UK were to leave EU in terms of immediately improving life in Britain, based on the issues that matter to voters? To address this thought experiment, I have used the latest Ipsos MORI poll which asks about the top concerns of British voters.

British voter priorities 2010-2015

In January 2015 four issues predominated in terms what is important to voters, namely healthcare (almost half), economy (one-third) followed by asylum and immigration (27%) and education/schools (20%). Europe/EU as an issue is on par with unemployment, which at present is a pretty low rate in the UK (less than 10% note it as being important). A further five issues are of some importance in terms of voting intentions (benefits, taxation, housing, foreign affairs and pensions).

Table 1 shows some change since 2010, but the top four priorities have been fairly consistent. What is noticeable, however, is that whereas economy and education have not changed, both health and immigration have risen significantly in importance to British voters since 2010. Perhaps surprisingly, housing is increasing in importance but remains a secondary priority for British voters.

Voter Priorities and UK vs. EU Responsibilities

On the basis of the voter’s priorities, it is worth asking the question: what exactly are the responsibilities of the British Government and what is affected by the EU? On the basis of this question, it is possible to assess what might change for Britons.

UK EU competencies

Below I discuss these issues briefly, focusing first on the top four voter priorities:

  • Health: The Department of Health is entirely responsible for the NHS in terms of budget, priorities, reforms, etc. The main EU influence is in enabling the citizens of the EU-28 to be fully covered when they go to other EU countries without the need for additional health insurance for work, holidays, study, etc. It also allows people to choose where they wish to be treated, if the services are better or waiting lists are shorter. Health Tourism is an issue concerning non-EU citizens, rather than for EU ones. Nothing dramatic would change tomorrow, if the UK were to leave the EU in terms of quality of care, waiting lists, response rates or any of the other key issues of concern to the British voter. If anything, choice is likely to be reduced and extra costs incurred when British citizens travel to the EU. In terms of EU residents living in the UK and their use of the health service, not much would change. If they are working, they are also paying for the NHS through their National Insurance contributions. Otherwise, they would have to insure themselves privately and still have access to health in Britain. The exception would be if the UK chooses to deport, something that is barely imaginable. Verdict: no change. There are no magical solutions to the problems of the health service in Britain. The trends are neither recent nor connected with membership of the EU.
  • Economy: the UK is entirely in charge of its macro- and micro-economic destiny, since it is not part of the euro and thus not affected by the eurozone rules. The UK can affect its interest rates and implement quantitative easing to its heart’s content. The Stability and Growth Pact does have requirements, such as no budget deficits greater than 3% of GDP, no public debt exceeding 60% of GDP without diminishing by 5% per year on average over 3 years. Verdict: nothing would change. The UK and many other countries have greatly exceeded these limits at a time of serious economic and financial concerns. Britain is 100% in charge of its destiny, unlike Greece, Spain, etc. The Chancellor has already set in train further drastic reductions in public expenditure in the next period of Government. There is nothing about the programme of austerity that the British Government can pin on the EU, which is probably why this has not been tried, unlike for example Greece.
  • Asylum/immigration: as I have previously discussed, there are three elements here. Firstly, the UK is entirely in charge of its asylum policy and can choose who to let in and who to keep out. The same applies to non-EU immigration, which Britain is entirely in charge of. These elements comprised over 68% of immigration (together with Britons returning to the UK). The EU cannot and does not interfere with this but the balance (32%) is EU migrants. Many international companies are based in Britain that require access to the global pool of human resources to maintain their standards and profitability. On balance, basing a decision to leave the EU because of the freedom of movement of people principle and perceptions of “uncontrolled immigration” in the last decade does not appear to be justified. The unemployment rate remains at 5.8% (compared with 6.5% in Germany and 11.4% in the EU), despite a long period of intense economic and financial crisis. A critical issue that affects voter sentiment is net wages, which is determined by the companies located in Britain, as well as the public employers. If Britain were to stop EU and any other form of immigration (it is doubtful that employers would welcome this) the perceived pressures on health, housing and social services would not change since most EU immigrants would presumably remain. The exception is if such a police were to be combined with (forced) repatriation, which is unimaginable at the present time. If so, in theory Britain would have to make allowance for the 1.3 million Britons in other EU countries to return from EU countries to the UK. Verdict: possible short-term gain but likely long-term loss. The change would affect 32% of Immigration (2012 data) at the very most, but asylum and immigration would not end. There would only be perceptible changes, if a policy of terminating EU immigration were to be combined with deportation. I cannot imagine the average British voter wanting this or the consequences of enforcing such a policy.
  • Education/schools: this is entirely the responsibility of the UK and the pressures have been decades in the making. The issue that the EU has concentrated on is harmonizing qualifications and certification to ensure greater scope for freedom of movement of workers. This is advantageous for Britons as well as for others. Verdict: no change. The children of EU migrants make-up a small percentage of all children in schools across the country. If their parents are working here, they are entitled to study in Britain unless the Government and the British electorate wishes to evoke the deportation route.

So in terms of the most important issues to UK voters, there is not a huge amount of immediate gain from Brexit, based on the top four voter priorities. I am not even going to discuss the possible losses which would be the consequence of gaining control over EU immigration. Britain is already in charge of two of the three key elements of immigration, which makes up the majority of immigration. It is an island, which gives it more protection than others in the era of globalisation. The fear that there is uncontrolled immigration from the EU is overdone. When the economic downturn started, many EU migrants simply left the UK of their own accord and the migratory pattern turned towards Germany instead, the only EU country experiencing strong economic growth. When the UK economy started growing again in mid-2014, the immigration trend started reversing (though probably influenced by the A2 countries,namely Romania and Bulgaria). In any case, if the unemployment rate is 5.8% and decreasing, it is worth asking the question: who is employing the EU migrants and benefiting from their contribution to the economy, to tax inflows and to company profits? Might the answer be Britons and Britain? If the real issue is decreasing net wages and benefits in Britain, the question is who is gaining from this development? Might the answer be certain segments of British society?

Below I address the remaining voter priorities:

  • Europe/EU: The issue which the EU insist on is that the freedom of movement of people (as well as goods, services, capital) be maintained, allowing all EU citizens to travel for tourism, study, work and retirement purposes. Many, if not most Britons, enjoy some or all of these freedoms in one way or another. 1.3 million Briton live in other EU countries, and a large number travel, work, study, invest (e.g. second homes and pension funds) or retire in EU countries. This is something which is currently taken for granted at present. I believe the loss will be felt much more rapidly and keenly than most British voters may realise.
  • Unemployment: leaving the EU might result in less European migrants, but it would not put an end to EU immigration or lead to zero unemployment. British-based enterprises compete globally for many skills essential to maintain productivity and innovation. I doubt that there would be a significant reduction in qualified labour coming from the EU.It is not certain that the agricultural, tourism, hospitality, etc. businesses would be able to satisfy their needs simply from UK-based sources. There might be a reduction in less qualified labour and thus in unemployment but this is unlikely to be more one or two percentage points and will lead to other pressures. Verdict: possible short term gain but likely long term loss.
  • Benefits: very few EU migrants claim benefits. Immigrants were 45% less likely to receive state benefits or tax credits than UK natives during 2000-2011. They are also less likely to live in social housing than the UK born population. EU migrants of working age who are not students, not in employment and receive some kind of state benefit, amount to 39,000 or less than 1% of all foreign nationals in the UK and 1% of all EU nationals in the UK.  Recent analysis of 23 out of 27 EU countries shows that there are at least 30,000 Britons claiming unemployment benefit in countries around the EU. In other words 2.5% of Britons in other EU countries are claiming unemployment benefits, roughly the same as EU nationals doing the same in Britain. The numbers are tiny: the political and media coverage of this issue is completely disproportionate. If this is the case, an even smaller sub-set of them are living in Britain for benefit tourism/abuse purposes. Verdict: no change (but one less emotive topic for certain parts of the media and politicians to bang their biased drum about).
  • Taxation: the UK is in entirely in charge of all its taxes, including Corporate Income Tax, Income Tax, Capital Gains Tax and VAT. Verdict: no change.
  • Housing: The UK is entirely in charge of its housing policy, construction, planning system, etc. There would be fewer EU immigrants, which might affect the housing situation in terms of rent levels and house prices. However, this would only be a marginal effect since the trend in housing supply, demand and pricing is a long term trend of over 30 years and any nationality is able to buy property in Britain. I have already referred to the fact that fewer recent immigrants claim benefits and live in social housing than the UK born population. Verdict: no change. I have written the first of my blog posts comparing the British and German housing systems to illustrate aspects of this point.
  • Foreign affairs: in terms of foreign affairs this role is, to some extent, coordinated with the High Representative of the Union for Foreign Affairs and Security Policy for specific issues. In the main, each EU nation does its own thing and Britain is no different.
  • Pensions: the UK is entirely in charge of the retirement age, contributions, qualifying years, minimum state pension pensions, etc. The EU facilitates freedom of movement of people and capital, so develops rules to ensure that if people work in different countries, that their contributions are acknowledged and count towards their overall pension entitlement. Furthermore, it seeks to ensure, under the same two freedoms, that Britons and others can receive their state pension in any of the EU-28 countries without suffering from arbitrary reductions, cancellations, fees, etc. Since many Britons enjoy their retirement in the sun and have bought second homes in other EU countries (rather more than is the case in terms of EU nationals buying properties in the UK), it would appear that to be well worth remaining in the EU.

EUroscepticism: much ado about nothing?

Ultimately, it is up for each voter to assess their personal gain or loss from staying in or leaving the EU. Based on the analysis above, the anti-EU sentiment is much ado about nothing, as far as the most important issues to voters are concerned, except for the freedom of movement of people. The EU has helped to secure so many rights and opportunities across all 28 nations that it is hard to imagine life without them. It is not simply that not much would change overnight. A moment of reflection on what would be rolled back as a result of leaving the EU, should show just how much we perceive as being normal and do not even actively consider. The fact is that we usually do not miss that which we take for granted… until it is no longer there.

Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU

 

 

 

 

 

 


Syriza’s Electoral Success in Greece: the future of austerity in Europe

Syriza has just pulled off the most amazing of political coups. There is little doubt that the Greek voters were simply sick and tired of the parlous state of their economy, combined with years of austerity which have undoubtedly caused economic and social havoc. Things simply could not go on as before; something had to give. Politics gave, resulting in a stunning electoral success for Syriza and its young leader, Alexis Tsipras, already dubbed Sexy Alexi. The reality though, is that there is little of an appealing nature about the aftermath of the Greek election. There is nothing ahead but more turbulence and socio-economic strife in the short-term for Greece and the other countries undergoing austerity in the eurozone and beyond.

Demonizing Germany

Greek society has been traumatized by what has been happening since 2008/9. However, there seems to have been a strange collective loss of memory about the role of the Greeks in this tragedy. Instead there has been a deliberate and consistent demonization of the eurozone, the Troika and, most prominently, Germany itself, which has characterised this stunning electoral victory. On the eve of the election, Mr Alexis Tsipras said at his final campaign meeting: “On Monday we shall be done with national humiliation. We will have finished with orders from abroad,” 23rd January 2015. This theme was consistent during the lead up to the election and has continued since.

Let us consider the Greek role in that national humiliation and the role of those issuing orders from abroad, an euphemism for the EU, the Troika, the Eurozone generally and Germany in particular:

  • Greece’s problems did not start with joining the EU or the Euro.
  • They are the product of generation upon generation of decisions made by Greek leaders.
  • These same Greek leaders, at least since 1975, have been democratically elected.
  • Joining the EU in 1981 gave a massive social and economic boost to Greece.
  • Through its own macroeconomic decisions, it has built-up unsustainable levels of debt.
  • Through its lack of wage restraint, combined with lack of reform, Greek decisions led to a systematic loss of competitiveness during the long economic boom until 2008.
  • Extensive tax avoidance and evasion combined with corruption remains a problem.
  • During the last general election, the Greek people voted to remain in the EU and Euro.
  • The Greek government chose not to exit the Euro and thus sought support from the EU.
  • Even though EU treaties forbid eurozone states from assuming the debts of other states (bailouts), emergency rescue funds were formed to support debt crisis states to meet their financial obligations and buy time for reforms to regain competitiveness.
  • The Eurozone has provided various rescue funds which have avoided default and massive social and economic disruption. A long and painful “internal devaluation” is occurring.
  • The price of these rescues is a programme of reform and cuts, agreed with and signed off by the Greek government as the pre-condition for the various rescues.
  • The price, in terms of human suffering and the effects on the economy have been huge. Internal deviation has finally delivered growth but at the price of a reduction of 25% of GDP, 25% unemployment, 50% youth unemployment and 23% poverty rate.
  • This is now interpreted as humiliation, bullying and dictatorship, with Germany singled out.

It is a delusion almost gleefully perpetuated by certain parts of the media, to imagine that the EU, and Germany are responsible for all the above. This is the end-product of Greek voters’ decisions and their chosen democratically elected Governments, even if the average person now feels completely divorced from the traditional parties. People can bang on as much as they like about the EU, eurozone, Euro, Troika and Germany being responsible for the lot of the Greeks, but it rings hollow for anyone that cares to reflect on the reality. They may put-up their anti-EU and anti-Germany slogans, posters and graffiti to express their rage and helplessness, but the facts are different. None of this is to imply or deny that the Greek people have suffered tremendously or indeed to blame them for wanting a change from a downward vortex that they find themselves trapped in.

This is indeed a national humiliation, but one made in Greece. It is a travesty to leave unchallenged the assertion that Greece is simply taking orders from “abroad”. Greeks voted to remain in the EU and the euro at the previous General Election and this is what their previous democratically elected government delivered. The EU and Eurozone have made extensive efforts to meet the wishes of the Greek electorate, while also keeping the economy afloat and the country in the euro. No one suggested that there would not be a price pay in terms of painful reforms required from internal devaluation, as opposed to default which would have been at least as painful.

There was an outpouring of joy about the Greek election results and the expression of solidarity in many European countries. The hope is that this election result will spell the end of “Germanic” austerity in Europe. So let us examine what exactly the Greeks have just voted for.

Unsustainable to the Nth Degree

For those that are not aware of it, Syriza stands for the Radical Left Coalition. The Greeks have voted (36%) for a party which has a series of policies which stretch credulity beyond breaking point:

  • Stay in the EU and the Euro.
  • Negotiate the level of the debt burden (175% of the GDP or €318 billion) immediately
  • Reboot the economy (New European Deal and Investment Bank) and create 300,000 jobs
  • Bring about an immediate end to austerity:
    • Tax reductions (abolish taxes & social contributions for 7 years & income tax of 30%)
    • Raise the minimum wage from €586 to €751
    • Re-introduce 13th month for the lowest retirement pensions
    • Distribute electricity or housing coupons and free access to public transport for the poorest 300,000 households
    • Introduce free healthcare for all.
  • Stop privatisation on its tracks.
  • Various other pledges, depending on the source considered.

Individually all the above items are logical, especially in a country which is in economic and social turmoil. Collectively they certainly are not. The only radical thing about this programme is that Syriza wants to have its cake and eat it, and has managed to persuade the exhausted Greek voter to buy a ticket for a bumpy ride. How is all this possible to achieve given the parlous state of the Greek economy?

If Greece wants to finish with “orders from abroad”, it could have done so at the last general election and it can certainly do so now by leaving the euro and/or the EU, but it cannot have it both ways. It cannot insist on staying in the EU and euro but require everyone else to prop-up the country and its standards of living for the foreseeable future. This is not a eurozone or an EU that almost anyone else would wish to be part of. The transfers from other countries implied are, rightly, forbidden by EU treaties.

That’s not all, folks

As if this was not challenging enough, Syriza has just made the situation a lot worse than it needed to be. Three seats short of an outright majority, it had to select its coalition party. Instead of going for the more moderate To Potami party (The River, 6% of the vote), Syriza selected the Independent Greeks Party (4.6% votes) as its coalition partner. So let us examine the Independent Greeks Party’s key election pledges:

  • Revoke the loan agreements between Greece, EU and International Monetary Fund (Troika) and prosecute those who negotiated them.
  • Repudiate part of Greece’s debt because it was created by speculators in a conspiracy to bring Greece to the edge of bankruptcy.
  • Require German war reparations for the invasion and occupation of Greece during WWII.
  • Oppose multiculturalism, reduce immigration and develop a Christian Orthodox-oriented education system.

Its leader Mr Panos Kammenos makes much play of the fact that ‘The Troika’ has turned Greece into a “laboratory animal” in an austerity experiment using “… public debt as a means of control.” Mr Kammenos concentrates his ire on Germany: “Germany is not treating Greece as a partner but as its master. … It tries to turn a Europe of independent states into a Europe dominated by Germany.”

He does not seem to focus much on the role his own countrymen have played in creating this Greek Tragedy for generations, even before joining the EU, before joining the euro 10 years ago and then going into a massive debt-fuelled public and private spending spree. No, apparently it is all the responsibility of the German banks that pushed piles of cash into the unwilling hands of Greek public and private borrowers. Apparently it is all the responsibility of the Troika for responding to the express wishes of the Greek electorate to remain in the euro at all costs. And it is all the fault of the hard-hearted Germans, hell-bent on European domination once again. The reality is different. All serious commentators agree that Germany is a “reluctant European hegemon.” Mrs Merkel leads because there is no one else to lead, with France imploding and Britain vacating the EU stage.

In selecting the Independent Greeks Party as its coalition partner over To Potami, Syriza has made a major miscalculation that will complicate the tough negotiations with the EU to come and the massive reforms which will continue to be needed for the foreseeable future, even if all of the Syriza pledges were to be achieved, which they most certainly will not.

Endgame: pressing the reset button

The endgame will not be long in the making both for Greece and for the whole of austerity Europe. The Spaniards, Portuguese and others including Italy and France look on curiously. Britain stands aloof, perhaps feeling protected by its own currency, yet still gripped by its own variant of austerity which is no less cruel. There is no doubt that what happens in Greece will have repercussions throughout Europe and not just in the eurozone.

A decision is imminent since the next round of discussions on the EU support to Greece is due. The newly minted Greek government is maintaining its tough talk but it is a high stakes poker game for both sides. Quite simply, the game is up for Greece if it fails to agree the next EU rescue. It will have to default and go through all that which it tried so hard to avoid since the last general election. The difference is that the suffering experienced so far with be a cakewalk compared with what would follow. On the other hand, if the EU does not compromise on austerity, the whole eurozone edifice could crumble. The chances are that a compromise will be found and the eurozone will simply muddle through, but there would need to be a very significant change to the current Syriza / Independent Greeks Party electoral programme to achieve a workable compromise.

But default is not out of the question. Many economists and commentators in Britain, Germany and USA are increasingly portraying default and dropping out of the euro as the lesser of two evils for Greece. The argument is that it would be best for Greece to pull out. What would follow is bound to be a short, sharp shock or so says economic theory (which did not prove all that sound in predicting the current financial and economic crash). The argument continues that countries such as Argentina have done it and the experience shows that default and a new currency is normally followed by rapid economic recovery. Their conclusion is that this scenario would be infinitely better than death by a thousand cuts via the current internal devaluation in the eurozone.

Maybe, maybe not.

I ask these economists and commentators: have you and you families experienced anything remotely like what the average Greek family already has in the last six years? Who are you to suggest to the Greeks that a round of short, sharp “shock therapy” arising from sovereign default is bearable for a country that has already suffered so much? What makes you so confident that Greece will arise Phoenix-like from the ashes, ready for rapid growth and regenerated from such a catharsis? How can you be so sure that contagion will not take hold in other eurozone countries?

Eastern Europe went through variants of shock therapy in the 1990s and the Russians, Poles and all the others will confirm that very little was predicted by economic theory, that recovery took much longer than anticipated and that they have absolutely no desire to ever experience such wanton destruction again. I would not wish this upon Greece or any other nation. I would much rather another round of muddling through in the classical European way instead of the destructive, unpredictable catharsis that is being floated. But I also know that many would disagree and not just in Greece.

So step-up to the plate Syriza / Independent Greeks Party: a lot rests on you so let us see what you can do.

Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Freedom of Movement of People and Recent Immigration Trends in Britain and Germany

There is a great deal of discussion about immigration in Britain and Germany and the extent to which this is driven by the EU’s freedom of movement principle. In the case of the Britain, this is resulting in increasingly Eurosceptic public discourse due to perceived uncontrolled immigration and border, resulting in questions about whether to stay in the EU or  not. In the case of Germany, the concerns revolve around benefit abuse, especially the recent EU member countries such as Romania and Bulgaria, which acquired freedom of movement rights in 2014. This post examines EU and non-EU migration trends, including those from old, recent (A8) and new (A2) countries.

Recent Immigration has been at a Historical High

First things first: it must be noted that the net migration figures in Britain in the last decade are unparalleled. During the period until 1982, the UK actually experienced a net outflow of people. This means that more Britons, on balance, chose to leave Britain and were obviously received by other countries. Until 1997 there was an average net annual inflow of 50,000. With the accession to the European Union (EU) of the A8 countries (e.g. Poland, Slovakia, etc.) and, crucially, with the UK decision to allow people from these countries to work in Britain well in advance of being required to do so under the transition rules of the EU, this rose to a peak of 244,000 in 2004. It has been decreasing since then and reached 177,000 in 2012. The latest data suggest that net migration is increasing once again (209,000 in 2013), probably because of the influence of Romanian and Bulgarian immigration, combined with the fact that Britain’s economy is growing once again. Since these have much smaller populations that the A8 countries, this is not likely to last long. Broadly the same trend was evident in Germany but see below for variations, particularly in recent years where net migration has taken-off.

 Asylum seekers

In a previous post, we defined the key types of immigrant; asylum seekers are basically a sub-set of immigrants. According to Eurostat data, in 2013 there were 434,450 applications made to all EU-28 countries. The largest volume of applications was to Germany (126,705 or 29.1% of all applications in the EU), France (66,265) and Sweden (54,270). The UK received the fourth largest volume of applications (29,875) but this was noticeably less than the several other EU countries (6.8%). Given the size of its population and economy, the UK received a relatively modest number of applications during a humanitarian crisis which is considered to be the worst since WWII and is concentrated on Afghanistan, Syria, and Somalia. Nevertheless, the Office of national Statistics estimates that asylum seekers accounted for around 4.5% of UK immigration. The German equivalent is bound to be higher since it approves about 30% of the applications. But the fact is that the public perception of the volumes of asylum seekers is out of kilter with reality as discussed in a separate post.

Let us be clear about this part of the immigration debate: the Conservative-led Government does not propose turn asylum seekers away and, as an aside, neither does Ukip at the present time. The same applies to the German Government as well as AfD (and as far as I know PEGIDA) in Germany. This is only as it should be in humane, modern societies. It should be stressed that although there are international conventions governing this issue, each country makes its own decisions and determines which applicants to accept or not. Neither is this an area which the EU is involved in.

Net migration

The net migration is the difference between immigration (arrivals) and emigration (departures) since all countries exhibit a degree of turnover in their population. Ultimately, in terms of social and economic, cultural and other pressures that may build-up in a country, net migration is that really matters. Given our focus on UK and Germany, Table 1 shows two contrasting trends. Germany has been experiencing a very sharp increase in net migration during the period 2009-2012, a trend which has continued up to today. In 2014, the net migration in Britain reached 260,000 and 470,000 in Germany. We have seen in the previous posts, the public perception of asylum seekers and immigration in Germany contrasts somewhat with that of the UK. This is not to imply or suggest that immigration is not an issue in public discourse in Germany – far from it. However, in terms of public perception and public discourse, it is relatively equable, except in the case of the PEGIDA movement, which is specifically targeted at Muslims (see the recent a post on this issue), though there is a chance that it will implode following the resignation of, for the lack of a better expression, its colourful ex-leader. Generally though, the contrast with UK is evident. Yet the statistics show that new migration in the same period had been declining in the UK until 2014, undoubtedly influenced by Conservative party’s target of “tens of thousands” (i.e. up to 100,000) immigrants per annum, whereas it is increasing steeply in Germany. The German population rose to 81.1 million people in 2014, the fourth annual increase in a row, boosted by the highest level of net migration in more than two decades.

Table 1: Net migration in Britain and Germany (2009-2012)

  2009 2010 2011 2012
Germany 59,634 151,599 240,377 352,174
United Kingdom 229,000 256,000 205,000 177,000

Source: Table 7c: Net migration in European Union countries, 2002-2012, House of Commons Library, 2014

There be Foreigners in EU Countries: Freedom of Movement at work

Looking at the total figures, the countries with the largest number of foreign-national residents in 2013 were Germany (7.7 million), Spain (5.1 million), UK (4.9 million), Italy (4.4 million), and France (4.1 million). The countries with largest number of foreign-born residents were Germany (10.2 million), UK (7.8 million), France (7.5 million) and Spain (6.2 million). These figures include very large numbers of Britons (1.3 million), Germans (1.4 million) and other EU nationals living in other EU countries, not least in Spain and France. EU migrants accounted for 35% of the total migrant stock in the EU countries as a whole in 2010 living, studying, working and retiring in elsewhere than in their own country. This is, after all, one of the wonderful things that are taken for granted in the EU, right?

Of  Natives and Foreigners

Another interesting dimension is the proportion of migrants relative to the overall population. The table below illustrates that, overall, the UK and Germany had very similar levels of foreign-born inhabitants (12.3% and 12.4% respectively) as a percentage of the overall population. The latest figures are around the 14% mark for both countries.

Table 2: Foreign-national and foreign-born populations of DE and UK (at 1 Jan 2013)

  Foreign National, Number Foreign National % of total population Foreign Born, Number Foreign Born % of total population Total, Number Density of Foreign Born (x per 1000)
Germany 7,696,413 9,4 10,201,192 12,4 82,020,578 123
United Kingdom 4,929,710 7,7 7,828,376 12,3 63,896,077 124

Source: Table 10: Foreign-national and foreign-born populations of EU countries, at 1 Jan 2013, House of Commons Library, 2014

It should be noted that the percentage of foreign-born populations in the UK and Germany are in fact relatively modest compared with many EU countries such as Luxemburg (42.4%) and Cyprus (23.2%), both outliers, well as others such as Belgium (15.7%), Ireland (16%), Austria (16.1%), Sweden (15.4%), etc. The percentages do not appear to be out of line with similarly developed and advanced countries. Indeed, given Britain’s extensive colonial past, unlike Germany, Ireland, etc., suggests that the percentage could have been higher still. What is out of line though is the public perception of how many foreigners there are in the UK (47% more than is really the case), Germany (24%), something which is repeated in other European countries (see a previous post on the perceptions and reality of immigration). This misalignment in public perceptions and reality is even more pronounced when it comes to estimates of Muslims: UK (76% more than is really the case) and Germany (69%).

 EU and non-EU immigration

Another important dimension is the origin of the immigrants. Eurostat data demonstrate that in the case of Germany, a notable proportion of the immigrants (14.7%) are actually citizens returning to their own country. However, half are citizens from other EU countries, with the balance (34.8%) being non-EU citizens. The distribution is somewhat different in the case of the UK (16.1%, 31.4% and 52.2% respectively). In other words, Germany has mainly EU and own nationals as immigrants, whereas the UK has a similar proportion of nationals returning home, but a much larger proportion of non-EU immigrants. This may be explained by the greater influence of the old and new Commonwealth on the migratory patterns of the UK, as well as the economic malaise of the country in 2012. However, it should be made clear (see definitions post) that the UK is fully in charge of its own borders and of its own immigration policy when it comes to UK and non-EU nationals. The latter is not the responsibility of the EU.

The EU-related immigration (31.6% of the total) is the key element that the UK not in charge of because of the principle of freedom of movement of people, one of the four basic freedoms of the EU. Based on the data from 2012, the bulk of the immigration issue, as far as the UK is concerned, was not the EU and its freedom of movement, contrary to what one might conclude from the current political debate and the media reporting in the UK. The contrast with Germany, which does receive more than half of its immigrants from other EU countries, could not be greater. The German Chancellor and the President have gone out of their way to make it clear that asylum seekers and immigrants generally, including Muslims, are a part of the country. They have also made it clear on numerous occasions that the EU’s freedom of movement principle is not up for renegotiation.

Table 3: Immigration by Citizenship in DE and UK (2012)

Citizens of own country % Other EU countries % Non EU Countries % Total
Germany 87,245 14.7 298,541 50.4 206,389 34.8 592,175
United Kingdom 80,196 16.1 157,554 31.6 260,290 52.2 498,040

Source: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=migr_imm2ctz&lang=en

The EU Accession Countries

The EU freedom of movement principle affected about a third of the immigration flows, whereas half were subject to immigration controls in Britain. Furthermore, the recent Accession countries that have been subject of such extensive debate in the media and political circles (the so-called A8 or Eastern European countries that acceded to the EU in 2004, including Poland, Slovakia, etc.) actually made-up 12% of all immigrants in 2012.

The above point reinforces the extent to which the immigration debate in the UK is distorted, though A8 immigration was certainly important during 2004 – 2010. Based on the data available relating to 2012, half of the immigration flows are entirely controlled by the UK and are subject to border controls. This has little to do with the recent Accession or “new” EU countries. Presumably the public is not particularly interested in reducing immigration from the “old” EU (15) countries such as France, Italy and Germany (i.e. 17.1% of the total). In terms of the recent members that are now eligible to work throughout the EU, namely Bulgaria and Romania (the so-called A2), 2014 started with a trickle of immigrants, but this increased steadily, so that net immigration is on the up. Consequently, the EU immigration debate has increasingly focused on the A2 countries where, in addition to the numbers involved, the implicit debate is often about the Roma communities from those countries.

Let us be clear about one thing: it is not the EU’s freedom of movement principle that has historically contributed the largest percentages of immigrants to the UK, except for a short period of time (2004 – 2010). This period coincided with a concerted effort on the part of the UK to actively court people from the A8 countries to migrate to the UK. The UK had made a political and economic decision that A8 immigrants were needed to sustain the economic boom and associated prosperity of Britain at the time. These decision cannot be used to subsequently blamed either the EU (after all, the transition arrangements were in place and the UK chose not to make use of them) or the people who heeded these official overtures from the duly elected British government of the time. Nothing can change these facts. The real immigration story, if there is one, is, has always been and will continue to be the old/new Commonwealth (ca. 26%) and the Other Foreign countries (another ca. 26%), as illustrated in the Table below.

Table 4: Immigration to the UK by Nationality, 2009-2012

2009 2010 2011 2012 % 2012
British 96 93 78 80 16.1
European Union 167 176 174 158 31.7
EU 15 82 76 83 85 (17.1)
EU A8 68 86 77 60 (12.0)
EU Other 17 14 14 13 (2.6)
Non EU 303 322 314 260 52.2
Old Commonwealth 30 31 29 31 (6.2)
New Commonwealth 141 156 151 98 (19.7)
Other Foreign 132 135 135 131 (26.3)
Total 567 591 566 498 100

Source: Table 2a: Immigration to the UK by nationality, 2000-2012, House of Commons Library, 2014

EU15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, the Irish Republic, Italy, Luxembourg, Netherlands, Portugal, Spain and Sweden; A8: Eastern European countries that joined the EU in 2004, namely Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia; EU other: includes all other EU 27 countries (Croatia joined the EU later); Old Commonwealth: Australia, Canada, New Zealand and South Africa; and New Commonwealth: all Commonwealth countries not part of the Old Commonwealth, including those of the Indian sub-continent and African Commonwealth countries other than South Africa.

It would be great if we would refrain from denying the importance and value in economic, cultural and social terms of the EU’s principle of freedom of movement (of people, goods capital and services) to all European citizens. This applies particularly to Britons and Germans, who are themselves far from averse from making full use of the freedom of movement to study, work, retire and invest (e.g. second / retirement homes) elsewhere in the EU. For its part, the German government has always nailed its colours firmly to the mast, as have all other EU nations: freedom of movement is the foundation of the EU and is simply not up for discussion. To put it crudely, Britain can either like it or lump it, otherwise it has to leave the EU.

To make a decision about leaving the EU on the basis of a “swamping” by EU citizens or in response to “benefit tourism” (I a plan a separate post in the so-called abuse of benefits) and other vague anti-EU sentiment may make for good short-term domestic politics in a pre-election period but it is not logical or in Britain’s long term interest. I agree that there are criticisms to be levelled at the EU and that there is a legitimate debate to be had about the role of the nation-state and the principle of subsidiarity but the EU immigration debate is being used excessively to castigate the EU.

Conclusions

I am only too aware of the quotation: “There are three kinds of lies: lies, damned lies and statistics.” I do not expect all readers to be swayed let alone persuaded by the statistics that I have presented above, not least because some of them are quite dated as per the December 2014 House of Commons Library report used. I am sure that others can and probably will make an even more convincing case that Britain continues to be “swamped” by immigrants, that the key problems are the EU and the freedom of movement and that the sooner the UK takes full control over its borders and immigration policies, the better the UK will be much the better for it. So I only ask for consideration to be given to the following issues:

  • The numbers of asylum seekers has declined to pretty small numbers in the UK but an opposite trend is taking hold in Germany, especially because of the Syrian crisis. The numbers accepted by Britain are relatively small but larger in Germany. There is broad consensus about the importance of receiving asylum seekers as long as they are not bogus.
  • The UK had a major surge of net immigration during 2004-2010 and much of this was from the new EU member countries. The UK did not have to let in immigrants from the A8 countries at the time but chose to actively court them to come, live and work in the UK so as to satisfy its overheating labour market and prolong its economic boom at the time. The flows have declined dramatically since 2010, as has overall net migration to the UK but are increasing again, not least because the British economy is growing once again and Britons are employing the immigrants.
  • There is now significantly less immigration from the A8 countries such as Poland, so the debate has moved on to the A2 countries, namely the Bulgarians (population of 7 million) and Romanians (population of 22 million) and implicitly the Roma community (population of 10-12 million in the whole of Europe). The debate on welfare tourism and EU’s freedom of movement will continue in the UK and Germany, though in the latter case it focuses on specifically on benefit fraud/abuse.
  • The majority of immigrants to the UK in 2012 were either UK nationals or non-EU immigrants from the Commonwealth (68.3%) and beyond. This is an issue which the British government is entirely responsible for and exclusively in charge of its own borders. It is not an EC/EU issue.
  • Unlike the UK, the number of net migrants is peaking in Germany, contributing to population growth in the last four years. There is a lively debate about immigration and the PEGIDA movement has been growing. However, there is nowhere near the same degree of emotive talk on immigration, of being swamped, of uncontrolled immigration and so on, despite having almost identical levels of foreign-born population and absorbing increasing levels of immigration.

At the end of the day, the issue is not so much about numbers but about perceptions, emotions, geographical concentrations, etc. There are very real stresses and strains in society at large in Britain and Germany and immigration is a contributor to them. The politicians and media are tapping into those voter concerns but merely debating the symptoms of those concerns by focusing almost exclusively on the ills of the EU, the freedom of movement of people (but not capital, of course) and EU immigration. Would life suddenly be that much better in terms of housing, education, health, wages, employment, benefits, taxes, social services, environment, transportation, etc. as a result of leaving the EU (see the related post on the British Question)? Since the EU has either limited or no responsibility at all for almost all these I very much doubt it. The real causes of the stresses and strains, greatly exacerbated by austerity in Britain and long-term real reductions in net incomes in Germany, will be the topic of future blog posts. I believe that the real causes are to be found much closer to home than either politicians or much of the media care to acknowledge, especially in the build-up to a General Election.

Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The British Question: shall we stay or shall we leave the EU?

Since joining the European Union (or EEC at the time) in 1973, the United Kingdom has had an ambivalent attitude to being a member of the European Union (EU). The British general election due in May 2015 will determine whether Britain will hold a referendum over whether to stay or leave the EU. The skirmishes over the “British Question” or “Brexit”, in other words, whether Britain is to remain a part of the EU or not started long before the General Election.

EU Red Lines for Britain Staying

When Mr Jean-Claude Juncker sought to become the President of the European Commission (EC) his election manifesto had five priorities, the first four of which were:
• Creating jobs and growth.
• A European energy Union (diversify our energy sources, and reduce the energy dependency).
• A balanced trade agreement with the USA.
• Reform of the monetary union with a greater focus on social aspects (governance in the Eurozone beyond the ECB, reform of support to Eurozone countries in financial difficulties to take into account of the social impacts and strengthen the Eurozone’s voice in the IMF).

So far so good – nothing unexpected there. However, it is Mr Jean-Claude Juncker’s fifth priority (reproduced below with the original emphasis) that was a little bit unexpected and gave rise to the title of this post.

A fifth and last priority for me as Commission President will be to give an answer to the British question. No reasonable politician can ignore the fact that, during the next five years, we will have to find solutions for the political concerns of the United Kingdom. We have to do this if we want to keep the UK within the European Union – which I would like to do as Commission President. As Commission President, I will work for a fair deal with Britain. A deal that accepts the specificities of the UK in the EU, while allowing the Eurozone to integrate further. The UK will need to understand that in the Eurozone, we need more Europe, not less. On the other hand, the other EU countries will have to accept that the UK will never participate in the euro, even if we may regret this. We have to accept that the UK will not become a member of the Schengen area. And I am also ready to accept that the UK will stay outside new EU institutions such as the European Public Prosecutor’s Office, meant to improve the fight against fraud in the EU, but clearly rejected by the House of Commons and the House of Lords. We have to respect such clear positions of the British Parliament, based on the British “opt out” Protocol. David Cameron has recently written down a number of further key demands in an article published in the Daily Telegraph. As Commission President, I will be ready to talk to him about these demands in a fair and reasonable manner. My red line in such talks would be the integrity of the single market and its four freedoms; and the possibility to have more Europe within the Eurozone to strengthen the single currency shared so far by 18 and soon by 19 Member States. But I have the impression that this is as important for Britain as it will be for the next President of the Commission.

 

This was a remarkably explicit statement from a man seeking high political office at a point in time when he was far from certain of being successful in his bid to lead the EC. This uncertainty was largely due to a high-profile initiative on the part of the British government, led by the Prime Minister himself, to ensure that Mr Juncker did not become the President of the EC. Yet Mr Juncker won resoundingly, despite colourful rumours floating around about his alleged drinking habits.

There was a steely underlying determination to recognise but not pander to UK demands: the four freedoms of movement (of capital, people, goods and services) are non-negotiable, the UK can continue to opt out, but the Eurozone will continue its march towards further integration, so as to strengthen the Euro. But it is interesting to note the absence of a broad commitment towards “an ever-closer union”, 1957 Treaty of Rome, except in the context of the Eurozone countries.

Six months into his mandate as President of the EU, Mr Juncker has underlined his views of the British Question. On the 18 January 2015, he publicly floated the idea of a British exit (or Brexit) from the EU for the first time. Mr Juncker not only compared Britain’s membership of the EU to a “doomed love affair” but also suggested that it might be time to call it a day. He rounded off his comments by warning David Cameron that he will not be “grovelling” for the UK to stay in the EU during future negotiations. What was previously a personal “red line” prior to his election to the most influential of the EU’s Presidential posts, has now become the official EU one.

British Red Lines for leaving the EU

An answer to the British Question it is due now, in the run-up to the British General Election on 05 May 2015. Britain has been largely ambivalent towards the EU, tending to focus on the economy and trade issues and, for a period of time when it suited its economy and voters, enlargement of the EU. Due to a combination of the Eurosceptic wing within the Conservative Party and the growing influence of the Ukip, should they win the election, the Conservative Party has pledged to allow the voters a referendum on whether to stay in or leave the EU unless the current terms of membership are renegotiated. There is, of course, the possibility that the Conservatives will not win but the ambivalence towards the EU is more than likely to remain. Mr Juncker’s red lines are presumably of importance, regardless of whether the Conservatives win the general election or not.

The Conservative attempts at EU reform which would satisfy its Eurosceptic wing and win back Ukip defectors included renegotiated of the terms of EU membership, such as the principle of freedom of movement of people. The explicit aim was to find an acceptable half way house between “uncontrolled” and “no” immigration.

David Cameron has stressed that he favours staying in a reformed EU but that Britain will “rule nothing out” if the changes required are not made, some of which will necessitate EU treaty changes. There are several problems with this position, which the British Government is well aware of: treaty change requires the agreement of 28 member states, all member states are highly averse to such treaty changes because of the debacle of the aborted attempt to develop a EU constitution, several countries are required to hold referendums in relation to such changes and, quite simply, there is not enough time to undertake such changes before the UK referendum is due in 2017. Apart from anything else, why should other member states do anything unless and until there is a Conservative Government in power post May 2015? The insistence on EU treaty change appears to be a lot of hot air blown by the British government, which other politicians and the EU representatives are willing to play along with. There are obviously messages to be put out to the British voter between now and the general election.

For the British is it a serious matter: asylum and immigration are among the top four issues that are likely to determine the outcome of the general election. Consequently, the PM David Cameron has set out his own (latest) version of his “red lines” most recently in November 2014:

  • Workers from the EU: ban EU nationals from claiming in-work benefits or social housing in Britain for four years. No child benefits or tax credits paid for children living outside the UK.
  • Unemployed EU migrants: deport jobless migrants if they do not get work for six months.
  • Other: veto EU enlargement unless the new country impose controls on the movement of their workers until their economies reach UK levels, restrict EU migrants bringing in family members from outside the EU, longer bans on rough sleepers, beggars and fraudsters returning to the UK and tougher rules on deporting foreign criminals.

Notice that there is no mention of EU treaty changes, change to the principle of freedom of movement or renegotiation of the current terms of EU membership. The British Red Lines are highly specific and, to my mind, do not amount to a radical change in the British position within the EU. For the British government it seems as it the British Question or whether to remain in the EU or not simply boils down to these issues.

Early skirmishes over the red lines

The British Question is already being addressed by the two most influential people, namely Mrs Angela Merkel and Mr Jean-Claude Juncker. The German Chancellor Angela Merkel has made the position of the German government clear. In the same way as Mr Juncker and any other leader of the other 27 EU members, in her 07 January 2015 visit to the UK she said at the joint press conference with Mr Cameron: “We have no doubt about the principle of freedom of movement being in any way questioned.” Taking his cue from those words, in a speech on 18 January 2015, Mr Juncker said: “When one mentions the end of the free circulation of workers, there can be no debate, dialogue or compromise.” Not much wiggle room for Mr Cameron there. He added that: “We can fight against abuses, but the EU won’t change the treaties to satisfy the whim of certain politicians.” No other EU nation state has questioned the freedom of movement principle. Mr Juncker also added a dimension which is rather pertinent to Britain’s economy, dominated as it is by the financial industry: “if you question the free movement of workers, Great Britain has to know that one day the free movement of capital will also be called into question.” Do I detect an attempt by the EU to outflank Britain?

The Conservative Party if left with a weak hand: despite the threat to pull out of the EU if it does not get its way; its bluff is being called. Britain is on to a loser in terms of both treaty change and/or reform of the freedom of movement principle. The British government knows it, hence the reasons for the watered down version of Mr Cameron’s red lines above.

The only chink of light for the British government is in relation to cracking down on welfare abuse by EU migrants (but many doubt the extent to which this is widespread abuse). But even here, Britain is not being handed carte blanche. The possibility of tackling EU migration abuses been conceded by the German Chancellor, whose country is holding a similar debate connected with the end of the transition arrangements for Bulgaria and Romania: “We are looking at the legal (aspect) and we are looking at legislation here … abuse needs to be fought against so that freedom of movement can prevail.” But there is a sting in the tail for Britain – Mrs Merkel added: “One has to take a very close look at the social security systems of individual member states … and to what extent they have to be adjusted. And that’s something we need to address”. It hardly amounts to a ringing endorsement of reforms that might involve EU treaty changes before a possible 2017 referendum. It sounds as if the emphasis is placed on individual nation states (Britain and Germany?) getting their own house in order in terms of their welfare benefit eligibility rules and regulations.

It is still early days in the battle of the red lines over the British Question, though some of the early skirmishes have already been decisive. The latest British position appears to be mainly designed for domestic consumption in the run up to the General Election. However, the red lines are of importance, so I plan to address them in future posts.

Ricardo Pinto, 21 January 2015, www.AngloDeutsch.eu


Counteracting Intolerance and Xenophobia: lessons from Germany

Recent developments in Germany are illustrating lessons in counteracting xenophobia and intolerance which the rest of Europe, Britain included, could learn a lot from.

In recent posts, I have written about the increase in anti-immigration and anti-EU / Euro sentiment in Britain and Germany. I have also posted about the significant gap in perception and reality between people´s estimates of foreign-born immigrants as opposed to the much smaller numbers in actual fact. This is even more extreme in the case of the Muslim community than in the case of foreigners in general.

It is hardly surprising, therefore, that the anti-Muslim signs are increasing. In the case of Germany, this has been surprisingly swift. Very few people had even heard of Pegida (Patriotische Europäer gegen die Islamisierung des Abendlandes or Patriotic Europeans against the Islamization of the West) movement based in Dresden. Since October 2014 Pegida has been actively protesting against what it considers to be the Islamization of Europe. Initially it drew few supporters to its demonstrations but has since grown dramatically, achieving an 18,000 turnout on 05 January 2015 in Dresden even though Muslims make-up only 0.1% of its population.

Its rapid rise (43,000 Facebook followers), despite the rather colourful background of its founder, Lutz Bachmann, is attributed to the same broad trends also evident in Britain and elsewhere in Europe, not least a general dissatisfaction with economic developments, immigration and asylum policies, combined with a degree of alienation from the mainstream political parties and elites.

In a separate post I have argued that the UK Independence Party (Ukip) and its anti-immigrant and anti-EU message has become increasingly powerful, to the point where apparently the “Ukip tail is wagging the bulldog”.  The main political parties are increasingly attuned to the apparent receptiveness of the electorate simplistically alluring populist messages; they appear to be almost falling over themselves to out-Ukip Ukip. This hits the wrong target; the ills of society and the economy are largely due the decades of mismanagement of the part of the insiders (not outsiders) and magnified by the varying degrees of austerity in Europe. It is also a dangerous trend in a democratic society which may become even worse in the months leading to the General Election in May 2015.

Very few media and politicians are willing to step up to the plate and counteract these messages in the UK. Since initially branding the kippers as “fruitcakes, loonies and closet racists, mostly.” David Cameron has been busy backpedaling to the point where, in addition to offering a straight in-out referendum on whether to remain in the EU in 2017 or not, he is no longer able or willing to rule out a possible coalition government with Ukip after the May 2015 General Election.

Whilst acknowledging that Ukip´s key targets are immigrants generally and the EU specifically rather than Muslims per se, it is interesting to note that the reaction of the German public, media and politicians has been quite different to that of the UK. Rather than perfecting giving the impression of being powerless to counteract these sorts or trends and then simply caving in to them, the President and the Chancellor have been preaching tolerance in relation to immigrants, Muslims and asylum seekers, all of which Germany have had a good deal more than Britain in recent years.

In her New Year´s address, Angela Merkel stressed that: “So I say to all who go to such [Pegida] demonstrations: do not follow those that call for it! Often there are too many prejudices, there is cold, and yes, even hatred in their hearts.”

The public is demonstrating a degree of attraction, especially to the more mainstream Alternative for Germany (AfD), but have largely not gone anti-immigrant apart from the Pegida demonstrations, which are targeted at the Muslim community. If 18,000 turned-up to the demonstration in Dresden, even more citizens are attending counter-demonstrations, with around 30,000 taking a stand against Pegida in marches in Berlin, Cologne, Hamburg, Munster, Stuttgart, etc. Church authorities in Cologne turned off the lights of its cathedral, one of Germany’s most popular tourist attractions, to present Pegida from using it as a backdrop. Other top attractions followed suit, such as the Brandenburg Gate, the Dresden opera house and other museums and public buildings.

There is also an anti-Pegida on-line petition for a “Colourful Germany”, which started on the 23 December 2014 and has collected 330,000 signatures with a target of one million. The numbers are impressive and, at this rate, the target will be reached.

One of the most impressive developments is that rather than certain parts of the media simply tapping into the anti-immigrant sentiment, as might be argued is largely the case in Britain, they have acted to counteract it. A lesson for the UK to learn was evident today. The Bild newspaper, by far the most popular German newspaper, went public on 06 January 2015 with their “No to Pegida” campaign, including 80 prominent Germans from all walks of life including politicians, entrepreneurs, artists, sports people, scientists, etc.

Can you envision The Sun doing the same and motivating 80 prominent Britons to oppose the increasing degree of anti-immigrant sentiment in the UK? Such a process might contribute to moderating society´s views in relation to immigration and the Muslim community.

I firmly believe that there are some lessons from the German anti-Pegida movement for British politicians, media and citizens. Whether these lessons are noted or acted upon remains to be seen.

Ricardo Pinto, AngloDeutsch™ Blog, www.anglodeutsch.eu


“Angry nativism must have no part in it”: take a bow, Douglas Carswell

If you have been following the AngloDeutsch™ Blog, which was just launched in December 2014, you will be aware that the first theme reflects my growing concerns about the issue of immigration in Europe generally and Britain in particular. You will also be familiar with my concerns that the anti-immigration debate is being increasingly linked, inappropriately, with the issue of the European Union (EU). The growing anti-EU and anti-immigrant sentiment is something which the Ukip has been able to exploit to great effect.

There must be something about the Spirit of Christmas and the Festive Season, because this is the only way to explain what has just happened today. The Ukip’s first elected Member of Parliament, Douglas Carswell, astonished and probably alarmed many Ukip supporters, not to mention various Establishment figures in the UK, with the following comments in the Daily Mail. It is worth highlighting some quotations (emphasis added) from the article:

There has never been anything splendid about isolation. It was our interdependence that put the Great into Great Britain – and it is what sustains our living standards today. In such a world, a dislike of foreigners is not merely offensive, but absurd.”

I could not agree more with this statement. In the era of globalisation, which Britain has done so much to contribute to, as well as benefit from, the tone of recent public discourse, led by Ukip and increasingly repeated by others, has indeed been offensive to the foreigners living and working in Britain, to mention the other 27 EU countries. It would be absurd for this sort of tone to be maintained. It is only to be hoped that the rest of Ukip recognises and accepts it. As an aside, there would not be anything splendid about UK isolation from the rest of Europe either, should it choose the Brexit (a blend of the words ‘British’ and ‘exit’ which refers to the possibility of Britain leaving the EU) route.

“Far from being a party that tolerates pejorative comments about people’s heritage and background, Ukip in 2015 has to show that we have a serious internationalist agenda.”

There has been growing criticism of the “kippers” in the media last couple of weeks, with a growing body of evidence showing that, contrary to its protestations, Ukip is indeed tolerating all sorts of rather pejorative views which have no place in a political party with aspirations in local, national, EU and international politics.

“Preparing for the future means putting in place an immigration system capable of saying a cheery, welcoming ‘Yes’ to doctors from Singapore or scientists from south Asia, and a polite ‘No, thank you’ to someone with a criminal record, or an inclination towards welfare dependence. Angry nativism must have no part in it.”

No country, Britain included, should be expected to simply accept criminals from other countries or those that are only interested in claiming social and other benefits without working for them. This is precisely what all 28 countries of the EU are working towards, since it is in their common interest to stop this type of migration. Likewise, it is the practice among all EU member states, as illustrated by the EU Blue Card system, to ensure access to highly qualified labour. Douglas Carswell hits the nail on the head when he stresses that angry “nativism”, the policy of protecting the interests of native-born or established inhabitants against those of immigrants, should not be part of public discourse, especially in the context of the EU.

No Ukip candidate should ever make the mistake of blaming outsiders for the failings of political insiders in Westminster.”

Most interesting of all, he recognises that the anti-immigration (and in my view anti-EU) rhetoric may be convenient but is misplaced. The reality is that many of the issues that people in Britain, Germany and elsewhere in Europe are frustrated and angry about, such as the reduction in real wages and the state of housing, health, education, transport, etc. have little to do with outsiders / immigrants, especially those from the EU. They have been decades in the making and are the direct result of the systemic failings of the leading political parties: the insiders not the outsiders. We could substitute “Ukip” for “political” and “Westminster” for other parliaments in Europe and the rest the quotation would apply to many other EU member countries.

I never imagined I would say this to a member of Ukip, but take a well-earned bow, Mr Carswell. I disagree with the rest of your views, not least your continuing Euroscepticism (stressed in the very same article), but I do admire your moral and intellectual courage in respect to the above quotations. Let us see what the Ukip leadership and activists make of them. Indeed, although your message was mainly addressed at the Ukip, let us see how the leading political parties react to them in the months ahead.

Ricardo Pinto, AngloDeutsch™ Blog, www.anglodeutsch.eu


Mixing Apples and Pears in the Immigration Debate

The great immigration debate is becoming increasingly heated in Europe. It tends to lump all immigrants into one group, mixing apples and pears, and  making little allowance for the important differences in the type of immigrant. The differences between refuges, asylum seekers, migrants and economic migrants are sadly either misunderstood or misrepresented by the general public and the media. Furthermore, the conflation of immigration with the European Union’s (EU) “freedom of movement” principle adds to the general fuzziness of the debate. This loose approach to the differences is contributing to the growing antipathy to immigrants and to the EU itself.

Definitions

We appear to be on the threshold of a much more unrestrained debate on immigration. If so, we may as well be clear about the definitions of the main types of immigration involved, prior to looking at the perception of the level of immigration in the next post. There are four main types of individuals that the media and the politicians refer to, but which tend to be lumped together in the public discourse, despite their heterogeneity. The International Organization for Migration is the leading international organization for migration and defines the following important groups:

Asylum seeker: is a person who seeks safety from persecution or serious harm in a country other than his or her own and awaits a decision on the application for refugee status under international and national instruments. If the decision is negative, the asylum seeker must leave the country and may be expelled, as may any non-national in an irregular or unlawful situation, unless permission to stay is provided on humanitarian or other grounds.

Each country determines their own policy in relation to asylum seekers, though international conventions exist. What the media and politicians rarely acknowledge is that asylum seekers are normally a relatively small percentage of the immigration issue. Almost all Brits and Germans support a policy of supporting this group. What they do not support, is illegal immigration such as asylum seekers staying on after a negative decision. Each country determines its own asylum seeker policy and has little or nothing to do with the EU.

Refugee: is a person who, owing to a well-founded fear of persecution for reasons of race, religion, nationality, membership of a particular social group or political opinions, is outside the country of his/her nationality and is unable or, owing to such fear, is unwilling to avail him/herself of the protection of that country. Each country determines their own policy in relation to refugees, though international conventions exist. Again this is a small part of overall immigration, though the percentage does fluctuate according to crises (about 30,000 applicants in the UK but about 120,000 in Germany in 2013). In 2012 the main country of origin was Afghanistan and at the moment it is Syria. The overall number for 2014 could top 700,000, “the highest total for industrialized countries in 20 years and not seen since the 1990s conflict in former Yugoslavia” according to the United Nations High Commissioner for Refugees (UNHCR). Nevertheless, the great majority Brits and Germans support a policy of accepting legitimate refugees.

Migrant: there is no universal definition but the term usually cover cases where the decision to migrate was taken freely by the individual for reasons of “personal convenience” and without an external compelling factor; it is applied to persons, and family members, moving to another country or region to better their material or social conditions and improve the prospect for themselves or their family.

Each country determines its policy in relation to non-EU migrants. If the numbers are perceived to be too high / low, this is a reflection of the policy priorities of each nation. The situation is different for EU nationals. One of the four “fundament freedoms” of the EU is that of freedom of movement of people (the others being capital, goods and services). These are at the core of the EU, and Brits and Germans have been among those making the extensive use of them such as buying second homes, retiring in the sun, working abroad, etc. EU nations, not least Germany, have made it clear that this freedom is non-negotiable. Britain is questioning whether this freedom can be reformed but is currently in a minority of one out of 28 EU nations. As things currently stand, Britain must decide whether to accept all four freedoms or none of them. What is clear is that it is not feasible to have an explicit immigration policy of 100,000 net migrants per year when Britain is not in a position to control its own borders in relation to non-EU immigrants and thus unable to influence the number of people entering (or leaving) the country from the EU. Moreover, it is Britain and Germany that are broadly in charge of their welfare benefit eligibility rules, not the EU.

Economic migrant: is a person leaving his or her habitual place of residence to settle outside his or her country of origin in order to improve his or her quality of life. This term is often loosely used to distinguish from asylum seekers, and is also used to refer to persons attempting to enter a country without legal permission and/or by using asylum procedures without good cause. It may equally be applied to persons leaving their country of origin for the purpose of employment.

Each country controls its own borders in relation to non-EU economic migrants. Britain and Germany have made and continue to make extensive use of this as exporters and importers of well-qualified workers. Without a work visa, which is issued by each nation-state, there can be no economic migrants from outside the EU. Britain and Germany choose to allow people to come into the county on work visas for them and their respective families because it is in their economic interest to do so.

The situation is different for EU economic migrants, since the freedom of movement applies to everything, including tourism, study, retirement and work. Inevitably, some countries will be more popular or economically dynamic than others and the economic migration trend will vary over time. It is generally understood to be a good thing that those in high unemployment regions can migrate to low unemployment regions within a country, so as to get a job. If this is so, then surely the same applies to the EU region (28 countries) as a whole.

You cannot have your freedom of movement cake and eat it at the same time: either you accept the whole package or you reject it. Britain must decide whether it wants in or not; if not, as things currently stand, the consequence is that Brexit (British exit from the EU) will occur as surely as night follows day. Either way, economic migration will continue from non-EU and EU countries because it is in the economy and society’s interest for it to do so. The flip-side of Brexit is theoretically that Britons currently living and working in other EU countries might have to return to Britain. An estimated 1.1 million Britons were living in three countries of the EU, namely Spain, France and Germany alone.

Mixing Apples and Pears

It is obviously important to distinguish these various categories, but a cursory exploration of UK and German media and politicians’ statements suggest that the distinctions do not appear to be understood, let alone respected in the popular discourse about migration.

The route of capping non-EU immigration is theoretically and practically possible; many countries do so, and it is up to the politicians to implement this if their electorates insist upon it. Having created a “target” of 100,000 for the first time in British history, the failure or otherwise to achieving it is the responsibility of the British government and theirs alone. It has nothing to do with the EU since the freedom of movement has always existed from the very beginning, something that surely must have been known to the British Prime Minister, David Cameron, who in his wisdom, created this particular target in the first place.

Presumably it was a political calculation because of the recent influence of Ukip in British EU and immigration politics. But by doing so, the British Government appears to have achieved little more than to create a large rod for its own back. Ukip has got firm hold of this particular rod and is gleefully availing itself of the opportunity. The Conservative-led government is simply reaping the political whirlwind of an ill-advised, but apparently populist policy. The recent bye-elections have gifted Ukip increasing power and influence, and represent evidence of the folly of such a policy. Attempting to steal the Ukip emperor’s clothes may reinforce the trend and further entrench public opinion, which is increasingly negative towards both immigrants and EU. As discussed in the last post, the two are increasingly portrayed as part and parcel of the same issue by politicians and the media.

Capping EU immigration is simply not feasible without leaving the EU and it is a case of political smoke and mirrors to suggest or pretend otherwise for short-term political gain. It leaves Britain increasingly diminished in the eyes of its other 27 partner nations. Britain and Britons must make-up their mind about whether the British Isles, the so-called special relationship with the USA and the old (and new?) Commonwealth represent a better alternative to the four freedoms offered by the EU28. The Germans are bound to the EU at the hip (and increasingly the other way around). It is inconceivable that such a debate would seriously take place there in the short or medium term, though there is certainly a growing debate about leaving the Euro, driven by the Alternative for Germany (AfD) party.

Releasing the Genie?

The UK cannot go on pretending that it can have it both ways. It is irresponsible for politicians and certain parts of the media to lump all types of immigrants together, paying little attention to the major differences between them, which also deriding immigrants in general and the EU and the European Commission in particular. Society is responding to these populist messages. Scan the comments made in response to newspaper articles, listen to live radio interviews and the views increasingly aired on TV and you will catch the general drift in respect to the twin themes of the EU and immigration. David Cameron, Nick Clegg and Ed Miliband (and indeed Nigel Farage, who is married to a German) seem set on allowing this trend to continue in the period leading up to the UK general election. The question is: will it be easy or indeed possible to put the genie back in the bottle thereafter? Personally, I am far from convinced the everything will be back to normal after May 2015.

Ricardo Pinto, AngloDeutsch™ Blog, www.anglodeutsch.eu


The Anti-EU and Anti-Immigration Fixation: expedient politics?

This post, the first of a series of the AngloDeutsch™ Blog, focuses on the rise of anti-immigration and anti-EU and/or Euro discourse in Britain and Germany, with a focus on the role being played by both the mainstream and the populist parties such as UK Independence Party (Ukip) in Britain and Alternative für Deutschland (AfD) in Germany. It argues that there is a need for a more measured approach, especially in Britain, rather than simplistic analysis which my be politically convenient but serves only to fan the flames of populist fires.

Growing Anti-immigration and Anti-Euro Sentiment in Germany

The increasingly heated immigration debate reached Germany about the same time as it started in the United Kingdom (UK). Mr Thilo Sarrazin published a book called “Germany is doing away with itself” in 2010, which incidentally became the most popular book on politics by a German-language author in a decade. Its central argument was that Germany’s post-war immigration policy has failed, thus catalysing an intense and raucous nation-wide debate about the costs and benefits of multiculturalism. Mr Sarrazin advocated a more restrictive immigration policy (except for the highly skilled) and reduction of state welfare benefits, while making strong statements about Islam and the Turkish and Arab communities. Mr Sarrazin did not shy away from predicting the Germans will eventually be outnumbered by an underclass of Muslims (see below for echoes of Enoch Powell’s views). The popularity of the book (over 1.5 million copies sold) and various surveys illustrated that his arguments struck a chord in the country, especially with male, middle-class, middle-aged and elderly, conservatives.

The book broke an unwritten rule in Germany by discussing migration, ethnicity and Islam so openly and some might say provocatively. Germans have typically trodden lightly on such topics for obvious historical reasons. The debate even affected the leading conservative sister parties, namely the Christian Democratic Union of Germany (CDU) and the Christian Social Union of Bavaria (CSU). The Chancellor Angela Merkel, well-known for being Europe’s most accomplished politician at saying nothing that might upset anyone, even felt sufficiently emboldened to make one of her few unequivocal statements. In 2010 she stated that multiculturalism had “utterly failed” in the country. Despite concerns that it might happen, the furore of 2010 did not result in an anticipated new party to capitalise on the issue. Mr Sarazzin moved on other challenges, publishing another controversial book called “Europe doesn’t need the euro” in 2012, which once again went against the grain of national of public discourse.

Perhaps in recognition of its political value in Britain and elsewhere in Europe, the salience of the immigration debate has been increasing very fast in Germany. The CSU has been focusing on “poverty immigrants” and “benefit tourists” since 2013, causing German politicians to discuss new instruments designed to keep mainly Roma immigrants from Romania and Bulgaria out as far as possible. Last week, the CSU published a policy paper insisting that German should be spoken both in public and at home.The paper made a distinction between EU and non-EU immigrants; the requirement would apply only to the latter, not the former. There was widespread condemnation in the media that it is not for the state to determine which language people, immigrants or otherwise, choose to speak in their own homes.

In Germany, the Alternative for Germany (AfD) initially had a very narrower focus, namely leaving the Euro (not the EU, which currently no partly currently advocates). It is not by coincidence that it started gaining much greater traction with voters when it began to broaden its policies. Like Ukip, it has brought its guns to bear on the EU (the principle of subsidiarity, rather than exiting the EU) and immigration issues (asylum, immigration law on the Canadian model, etc.). Although this may change, for the moment, neither politicians nor the media discuss the issues in quite the same strident manner as in Britain.

Immigration and EU Scepticism in British Politics

By contrast, in the UK the meteoric rise of the UK Independence Party (UKIP), founded in 1993 and led by their jovial, pint-guzzling, fag-smoking Mr Nigel Farage, who like Mr Sarrazin does not mince his words in relation to immigration or the EU, has been remarkable. Under his leadership, UKIP’s star has been on an apparently inexorable rise, which unlike the German situation so far, is having dramatic consequences on Britain and potentially the EU. Whereas in April 2006 the Prime Minister David Cameron felt able to described UKIP members as being “fruitcakes, loonies and closet racists, mostly.” By 2013, its popularity and organisational capacity has increased so much that in the county council elections across England, Ukip poled an average of 23% in the wards where it stood and returned 147 elected councillors. Its biggest success was getting its first two Members of Parliament elected in Clacton and Rochester and Strood in late 2014.

Ukip has rapidly risen to prominence at the expense of a hemorrhaging of voters away principally from the Conservatives, but also from Labour and the Liberal Democrats. Its principal policy is simple but appealing, namely to withdraw from the EU and agree a free trade agreement instead. However, like the AfD it is no longer a single issue party. Ukip extols loudly and repeatedly the virtues of limited, controlled immigration and its intention to “take back control of the UK borders”. Work permits will be permitted to fill skills gaps in the UK jobs market so long as immigrants have a job to go to, speak English and have accommodation and health insurance. Immigrants will only be eligible for benefits (in work or out of work) when they have been paying tax and National Insurance for five years and will only be eligible for permanent residence after ten years.

The intention is clearly to slow down migration to “manageable” levels. Recent figures had shown a steep decline in net migration until 2014 (the subject of a forthcoming post), when they peaked once again, probably connected with a surge is Bulgarian and Romanian immigration now that the transition period is over. Ukip has coupled the anti-EU and anti-immigrant debate to remarkable effect. This double-pronged weapon is paying rich political dividends for them. However, as with many populist initiatives, while they may be superficially appealing, they would amount to a double-whammy with major long-term consequences if enacted by Britain. The fact is that there is a lot of political smoke and mirrors in the debate. The problems in Britain are long-standing and while they may well have been accentuated by immigration and the freedom of movement (though the jury is out on these), to conclude that the solution is to leave the EU in order to regain control of the borders is simply not credible.

The Ukip tail wagging the bulldog

In the UK, the “kippers” are having a dramatic effect, resulting in an increasing clamour in relation to the issue of immigration. Ukip has effectively manoeuvred the Conservative Party (along with its well-known and long-established Eurosceptic wing) into offering, should they still be in power in 2017, a straight in-out referendum as to whether to remain within the EU or not.  Furthermore, it has managed to push the Government, Liberal Democrats included, into a mooted renegotiation of the UK’s membership terms with the EU, including significant reform so as to repatriate powers to the nation-state. Most EU countries share a concern about the abuse of the subsidiarity principle and are inclined to be supportive, not least Germany. But the increasingly shrill nature of the UK position is making such reform harder to secure. Recent demands to abolish the principle of freedom of movement of workers were dismissed out of hand by the President of the European Commission, Mr Jean-Claude Juncker, as well as the key German politicians such as Mr Wolfgang Schäuble (unthinkable) and Mrs Angela Merkel (no tempering with the principle). The spat over the refusal to pay “anywhere near the amount requested by Brussels by December” appears to be little more than political bluster and posturing.

Also, the casual observer would be tempted to conclude that the immigration debate is increasingly histrionic in Britain. Seemingly every other day, the heat is turned up and the rhetoric becomes ever more intemperate. Mainstream politicians on all sides of the political spectrum, with the notable exception of the LibDems, have taken up the UKIP mantra of anti-EU sentiment combined with anti-immigrant rhetoric. This has become a normal part of the public discourse in the Houses of Parliament, on TV, radio and newspapers. It is hardly surprising that the public feels emboldened to express its views in an increasingly no-holds barred manner, verging on racism and xenophobia. Such discourse might well happen behind closed doors in other European countries but it not (yet) so open.

It is also not by chance that the escalation in immigration and anti-EU rhetoric in Britain has coincided with the recent bye-elections which the Conservative party has lost to Ukip in Clacton and Rochester and Strood. As the Ukip ratings went up, Ministers started banging on about the necessity to get rid of the EU’s freedom of movement principle, the PM refused to pay the additional EU tax which his government has agreed, etc. This smacks of short-term electioneering. However, a red line was crossed when the Defence Minister, Mr Michael Fallon claimed that certain towns are being “swamped” by immigrants and their residents are “under siege”. The Prime Minister’s Office reworded “swamped” with “under pressure” but the boat had already left the harbour. The escalation of emotive language being used by Government ministers is a clear trend that the rest of society takes its cue from.

This is nothing new in Britain. In 1978, Mrs Margaret Thatcher stated that large numbers of migrant workers and foreigners (from the new Commonwealth and Pakistan) meant that people were afraid that the country might be rather swamped by people of a different culture. This even before referring to Enoch Powell’s so-called “Rivers of Blood” speech in 1968 which is credited, at least in part, with playing a contributory role in the unexpected 1970 Conservative general election win.

While such political (and media) rhetoric is hardly new in British politics, it does mark a major new departure in the UK where the Government itself (and to some extent the Labour Party) seems to have lost a sense of moderation in relation to the political discourse on immigration and the EU. I expect this trend to intensify in the months until the General Election in May 2015.

If Ukip (and similar parties of its ilk) is indeed the driving force that is dominating the political discourse on the EU and immigration, this is bad news indeed for immigrants, for the EU and for Britain itself. By comparison the German President,Mr Joachim Gauk, frequently stressed the importance of solidarity vis-à-vis asylum seekers, stressing the virtues of immigration and integration. The German Government is paving the way for tightened asylum seeker law but also a more flexible Dual Citizenship law and strongly defending the principle of freedom of movement of people within the EU as being non-negotiable. At a recent immigration and integration event in November 2014 organised at the Headquarters of the CDU, something that would not be imaginable by the leading political parties in Britain, the Chancellor Mrs Angela Merkel stressed that “Germany has the chance to become a great integration country” and that “Islam now belongs to us.” The contrast in the political rhetoric could not be greater for countries that have more or less identical foreign-born as a percentage of the total population (12.3% and 12.4% in Britain and Germany respectively).

Austerity accentuates long standing problems

The omens are not good for the future of immigration and the EU; both are increasingly conflated and damned, especially in Britain. Ukip appears to have cornered the market of British political discourse and the Conservatives (and to a lesser extent Labour) are increasingly dancing to their tune, so as to avoid losing touch with an important segment of voters who are clearly experiencing a strong allure to these simplistic yet appealing overtures. Politicians of all hues and shades are increasingly latching on to this sentiment. The trend is reinforced by the apparent readiness of a notable portion of the media to sing along to these tunes in Britain, especially in relation to the anti-EU discourse. Without doubt increasing stresses and strains are evident in housing, education, health, transportation, etc. but these are long-term and systemic in nature. They have been greatly accentuated by the recent years of austerity, a process which is set to continue in Britain directly through government policies and indirectly in Germany through long-term wage restraint. They are not the consequence of a surge in net migration over several years cause by the EU and its freedom of movement principle. The discourse stressing these two elements at the exclusion of everything else cannot be left unchallenged.

In the next few posts I shall explore various migration themes and issues, from the perspective of Britain, Germany and the EU. I hope to contribute to a debate about this increasingly important topic before moving on to other issues such as the housing crisis and the future of the EU.

Ricardo Pinto, AngloDeutsch™ Blog, www.anglodeutsch.eu