Referendum

To Grexit, or not to Grexit, that is the question

© Ricardo Pinto, 2015, AngloDeutsch™ Blog, www.AngloDeutsch.EU

And so, amazingly and beyond most Europeans’ wildest imagination, it has come to the single most important Referendum since the beginning of the Eurozone, indeed since the very beginning of the European Union (EU) “project”. The Greek nation is voting in a historic referendum that will shape its future, as well as that of the 18 other nations of the Eurozone and the 28 nations on the EU.

As a Briton, I belong to one of the 9 countries that are not part to the Eurozone, but I live and am based in Germany, so I am contributing to the various bailouts. My views of the historic vote the Greeks are casting are shaped by both sets of experiences, which is valuable, since Greece may soon be one of the 9, following a probable default, probable exit from the Euro and possible exist from the EU, the so-called Grexit.

Let me start by saying that I fully understand the Greek’s anger and frustration with the current situation. Unemployment of around 25%, youth unemployment of 60%, wage reductions, pension reductions, poverty reaching unprecedented levels, pensioners desperate to get some money and all the rest of it. Whatever you may think about Germany and the Germans, you will surely be aware of the suffering of the German civilian population after two world wars, hyperinflation, devaluation, two periods of devastation in the last century. The Britons have also gone through traumas. So have the Irish, Portuguese, Spaniards and Cypriots to varying degrees at the same time as the Greeks. No one wants to see this whole sorry situation drag on endlessly.

I am tired of and increasingly frustrated with all the accusations, bickering, tantrums and all the rest that all our politicians have been guilty of since January 2015, reaching a crescendo in the last two weeks. At a historical turning point in European history, it is sad and worrying to see just how divided Europe is. This does not bode well for Greece, the other 18 countries in the Euro or the 28 nations of the EU, not mention the large number of countries that aspire to join the EU in the future. Only one country will be quietly satisfied observing that is going on: Russia.

There have been all sorts of claims and arguments from politicians and economists, many of them totally contradictory. I am just an interested observer who is contributing through my taxes to the bailouts, who may be affected by a possible Euro collapse and who will be affected by the future shape of Europe resulting from today’s referendum. I would like to highlight some issues that Greeks may or may not be considering in casting their vote, but which are probably impossible to pay adequate attention to. given the chaotic and febrile situation, as well as the compressed timescale for this critical referendum:

  1. Europe is not to blame for Greece’s woes. This is first and foremost Greece’s own responsibility.
  2. The EU is not to blame for the Greeks’ troubles. Greek governments have consistently promised more than they could deliver and its citizens have knowingly voted them in one after the other, including the current Syriza. If what politicians are offering sounds too good to be true, it probably is and in other countries, the electorate generally acts accordingly.
  3. The Euro is not the reason why Greece needs bailouts. Greek government, Greek businesses and Greeks individually have lived beyond their means for decades and then used the historically low interest rates generated by (fraudulently) joining the Eurozone to over-borrow even more than previously. But we know full well that what is borrowed must eventually be repaid – and so do they.
  4. Greece has systematically lost competitiveness through its own actions and inactions. Generation upon generation of politician has borrowed too much, created too many public sector jobs, feathered the nests of their supporters through unaffordable perks such as early retirement, failed to collect the taxes due from certain segments of society, refused to implement needed reforms and again and again paid itself too much. In the 10 years until the crisis, the Greeks awarded themselves a 100% increase in wages, not to mention anything about early retirement or other perks. The loss of Greek competitiveness is not due to the EU, the Euro, the banks, the capitalists, the oligarchs, the politicians etc. They have collectively failed to maintain or improve their own competitiveness. The last 5 years have reinforced an entrenched the pattern and austerity has made the pre-existing situtation a lot worse, which is the main criticism which is justifiable. But the last five years were not the cause.
  5. The German, French and other banks are not to blame for the Greeks´ ills. These and other banks saw the opportunity to expand their business in this and other similar countries (as have Greek banks in the whole of the Balkans region) and lent according to the regulatory principles of the Greek Central Bank, according to the contracts that the Greek government, businesses and individuals signed. All three took the money that was lent and did not concern themselves unduly about its origin, though this has become an issue when it comes to payback. The banks naturally want to be repaid the huge sums involved otherwise they go bust, meaning losses for all the individuals that save with them, businesses that bank with them, shareholders that invest in them and others. They are no different from the Greek banks operating in Greece, the Balkans and elsewhere. If the banks (including Greek ones) had not been rescued or propped up, the consequences for the Greeks and for us in the Eurozone and non-Eurozone countries would have been disastrous. The Eurozone has acted correctly in avoiding this scenario. All the talk of paying French and German banks but failing to mention all the others, including Greek banks is hypocrisy. This has happened in all countries where it had to happen, including Britain, Ireland and the United States. If push comes to shove and governments have to make a similar choice again, the same pattern will be repeated because the alternative is worse.
  6. Greece has been the whipping boy for the Eurozone, but not the only one. The fact is that the Eurozone could easily have suffered “contagion” if Greece had defaulted at the time of the first and second bailouts. Furthermore the vast majority (around 90%) of the bailout has gone to the banks rather than the people of Greece. However, this was neither premeditated nor designed to impoverish, punish or humiliate the Greek people. I have already discussed the likely consequences of allowing a Lehman-style ”letting go” of the commercial banking sector. The failsafe mechanisms were simply not in place at the time (who knows if they really are this time around). The Eurozone was doing whatever was necessary to stop a doomsday scenario in Greece and potentially the other weak countries, as well as the whole of the Eurozone area. They succeeded, but at an even greater cost to Greece. But Greece chose to remain in the EU and the Euro. It did not have to.
  7. The Eurozone is not responsible for past, present or future Greek prosperity. There is no transfer union in the EU and it is not possible to have permanent bail outs of one nation by any other nation. Therefore Greece does not have an automatic right to be bailed out by anyone and certainly not on an on-going basis. Solidarity stretches only so far and cuts both ways. The Greeks should reflect on the fact that many of the nations bailing them out are notably poorer than them. If Greece is being bailing out, it is not to create a long-term dependency culture, but to help it to help itself and to be economically sustainable as soon as possible. Greece is entirely responsible for its present and future prosperity, not others.
  8. Greece has chosen so far to remain in the EU and Euro and must live with the consequences. Greece has held two national elections at which its electorate has categorically insisted upon remaining in the EU and the Eurozone. There is a price to be paid for this decision on their part and that price is called “internal devaluation”. The way that the Greek nation can regain competitiveness and eventually stand on its own two feet, is to reduce wages and other costs to levels which are compatible with their economic performance. The other option is to leave the Euro, but this is exactly what Greeks have insisted upon avoiding so far. The decision today enables the country to choose its own path for the third time. If they choose the same path as the rest of the Eurozone countries, then they have to abide by the implications. Please, let us not have any more accusation of blackmail, terrorism, humiliation of the Greek nation and all the rest of it.
  9. No one is taking sovereignty away from the Greeks. The Eurozone does not owe Greece anything and certainly not on a permanent basis (which is actually illegal in the EU and rightly so). So far Greece has chosen to remain in the Euro and swallow the bitter pill of internal devaluation that goes with the bailouts. The bailouts involve clear conditionality and the other Eurozone governments will only provide further tranches of funds if they accept the conditions/reforms connected with the bailouts. No one can or should get money for nothing. The conditionality is designed to enable Greece to get back on its own two feet as soon as possible, including priority reforms which previous Greek governments have systematically failed to implement over decades. Most people are totally unwilling to pay for a free Greek (Irish, Spanish, Portuguese, Maltese) lunch and certainly not for ever. And the same applies to these countries in reverse. Greece has a duty and responsibility, to itself as well as the Eurozone countries, to reform and regain its competitiveness as soon as possible. The conditionality is not for the benefit of the other countries, except in the sense that they and their electorates / taxpayers wish fervently not have to have to continue to bail out other countries.
  10. No one has twisted Greece’s arm and forced it to take the bailouts and accept the associated conditionality. Greece asked for the bailouts arising directly from its own actions over decades. Its politicians signed-up to the money and the conditionality. If it takes the cash but fails to deliver on the conditionality, shit happens. But as the popular saying goes: “Fool me once, shame on you; fool me twice, shame on me.” EU voters in other countries will not allow further bailouts that fail to deliver the promises of reform for ever. Our politicians know this and they are not suicidal. They have a responsibility towards the Greek citizen by virtue of Greece being part of the Eurozone. However, they have a much greater responsibility towards their own electorates and to fulfil their own mandates. This will always trump Greece in a democratic environment comprising 28 nation states, and rightly so.
  11. The last general election resulted in a Syriza majority despite the electorate knowing full well that its programme was both contradictory and unaffordable without continuing bailouts from the Eurozone countries, debt relief and a cancellation of numerous conditions attached with the present bailout agreement. The nightmarish last five months have been the direct consequence of the mandate that the Greek people have given Syriza to end austerity. This is pie in the sky. This will not happen for a decade, regardless of whether Syriza is able to extract all the concessions it wants and certainly regardless of whether Greece remains part of Euro/EU or not. The mandate to end austerity in Greece is pure political opportunism on the part of Syriza: it amounts to a populist policy that cannot be delivered. Messrs Tsipras and Varoufakis know this full well and so does the Greek electorate.
  12. Mr Tsipras and Mr Varoufakis cannot deliver the mandate they have asked for. They have assumed that the risk arising from Greek default is so high that the Eurozone countries would agree to whatever they demanded and have acted accordingly. They have deliberately and consistently gambled over the last five months with the future of Greece, as well as that of the rest of the Eurozone (and beyond – Britain, take note). I resent this stratagem on the part of the Greek government and I feel indignant about it both on the part of the ordinary Greeks and other Eurozone citizens. Game theory is all very well when it comes to econometric modelling, but not when the future wellbeing of 19 countries is at stake. Newsflash for Mr Varoufakis: we are not a mathematical model comprising 10 million Greek voters and a further 325 million rest-of-Eurozone variables to be number crunched until your previously desired statistical outcome is eventually delivered. The sad reality is that all that the Fine Your Radicals have manage to achieve so far, other than plunging Greece into unneeded and unwanted chaos, it to manage to rename the hated “Troika” to the equally detested “Institutions.” Game theory at its best? We are real people, not some gigantic theoretical experiment. The Greeks are facing enormous stress which goes well beyond any spurious mandate that Syriza believes it has managed to extract from a deeply traumatised nation.
  13. Greece has broken the EU way of doing things and the current state of the country is the result. The only way that it is possible for 19 counties to make decisions on such issues as the future of Greece and the Euro (and possibly the EU) is through compromise. Neither Mr Varoufakis nor Mr Tsipras have proved to be willing or able to play the game according to the established rules. The game theory assumption is that when push comes to shove, the Eurozone countries will back down and agree to more or less whatever Greece wishes. Newsflash for Mr Varoufakis: this hardball strategy, which plays fast and loose with the lives of 350 million people, not just that of the Greeks, has failed. The resulting fall-out is a complete and utter lack of trust on a scale never previously witnessed in Europe (not even during Margaret Thatcher’s period as British Prime Minister) since the end of the Cold War period. It does not serve Greece’s interests. It does not serve Eurozone interests. It does not serve EU interests. And it does not serve global interests.
  14. The current chaos in Greece only serves Russian interests. The geographers out there would agree that Greece is undoubted located at a pivotal geo-political position in Europe. The USA, EU and Greece know this, and so does Russia. Mr Tsipras´ attentive and persistent courting of Russia has been deliberate and has not failed to grab our attention. Europe is at a turning point and Russia, despite the ongoing economic weaknesses due primarily to low petrochemical prices, is resurgent. This is game theory with serious global implications which go potentially beyond mere economics and finance. The obvious and explicit threat is that Greece will turn its back on Europe and fall straight into the arms of mother Russian. Good luck with that. Greece is part of the European Union and Greeks feel European. There is nothing in the mandate that the Greek that citizens have given to Syriza to justify this approach and it can only entrench feelings against Syriza in the first instance and the Greek nation thereafter.
  15. Austerity cannot and will not be stopped tomorrow or any time soon. What the Greek or any other politicians imply, say or promise count for nothing as far as austerity is concerned. Not much will change, regardless of whether Greece votes Oxi (yes) or Nai (no). The choice is between “shock therapy” by defaulting and leaving the Euro or “muddling through” with EU bailouts. Neither option is quick nor palatable, though the shock therapy route does offer the promise of regaining competitiveness faster than the “muddle through” option, since Greece would then be totally in charge of its own currency and its own monetary policy, instead of the Euro straitjacket. However, there is no guarantee that its politicians will be able to agree, implement or maintain the long-term reforms necessary to achieve greater and faster economic dynamism than the current path. Presumably this lack of confidence in their own politicians is the reason why the Greeks are bending over backwards to remain in the Euro and the EU, rather than to entrust their own leaders with their future. The chaotic last 6 months are not a good omen: who can blame them?
  16. A flip-flopping government has run out of credibility, friends and trust. The negotiating position of Greece fluctuated over time but unilaterally pulling out of negotiations at a critical time, calling a snap referendum, the decision by Messrs Tsipras and Varoufakis to solicit a “no” vote, not to mention the increasingly bellicose language used, means that there is no longer any trust in the current Greek government. How Messrs Tsipras and Varoufakis can imagine that Greece’s negotiating position will be strengthened by a “no” vote is beyond me but this must obviously be the conclusion that their game theorising has led them to. The main counterparts in the whole process, not least IMF, EC and the principal contributor to the bailouts, Germany, have stated that they will not be able to work with Mr Varoufakis while remaining a vague about whether the same applies to Syriza.
  17. The EU cannot achieve regime change, only the Greek people can. The Institutions/Troika can say whatever they like (and they are, presumably because of their exasperation) but only the Greek people can decide on their own future and which party will lead them. The rest of Europe will have to like or lump it: that is the nature of democracy. But what exactly are the Greeks deciding on in this referendum? Do the people understand the convoluted question? Do they have enough time to consider the options properly? Even if the answer is “yes” twice over, is there an EU bailout on offer to vote on? The answer is “no”. The only thing that the voters are deciding on is whether they want to be part of the Euro or not. Already, with funds running low, there are chaotic and heart-rending scenes that are nothing to be proud of, either in Greece, the Eurozone or the rest of the EU. If this goes on, whatever the announcements by the Syriza government that they have stock-piled food and medicines (when did they do this and why did they do so, unless they did not expect their negotiations to succeed?), we shall all be diminished and the Greek people will indeed be desperate. Who knows what kind of chaos will break out? Has this really been factored in by Syriza? I very much doubt it. I suspect that they are just winging it.
  18. Neither option will be palatable to Greek people: it is a case of damned if you do and damned if you don’t. A yes vote could mean easier negotiations with Syriza since they will then have another mandate (but they already have the mandate of remaining in the Eurozone) to negotiate the terms of the bailouts. This will be awkward but not impossible to roll up the sleeves and find a workable compromise this time around. We expect no less from our politicians. But a resignation by Syriza is the more likely outcome based on their intransigent approach in the last five months. There would be another general election, with the possibility of an even more radical government coming to power and the crisis being drawn-out even longer. Or it could mean a “traditional” government that will agree debt relief, combined with an acceptable bailout programme and conditionality. Either way, the Greeks cannot expect higher minimum wages, pensions, etc. than exist in the various countries that are contributing to keeping their economy afloat but do not enjoy the same level of benefits. This is not feasible and will not be agreed to. Living within their means has to be the way forward, even with the significant debt relief combined with serious investment for growth and development that I sincerely hope will be hammered out next time round.
  19. The present is bleak, but the future could be worse. No European, indeed no human being, can look upon the scenes in Greece with aloofness. My parents are pensioners and I would not wish this sort of thing upon them or any other person. However, should the Greeks choose the “no” path, followed by default and introduction of a new Drachma, they will have delivered themselves into an unpredictable roller-coaster ride which will test the nation well beyond the limits of anything they have endured so far. There is plenty of not-so-distant experience of “shock therapy” in most of Central and Eastern Europe, including Russia. Whatever the alluring promises on the part of duplicitous politicians or contradictory prize-winning economists, the bloody reality will result in economic and human carnage in the short-term. This will, hopefully, quickly be followed by much more rapid recovery and prosperity than possible under the current “muddling through” option within the Euro. But don’t bet on it: economic theory and reality are usually out of sync, as the last five years should have once gain proved.
  20. A last word on the matter. Good luck to the Greeks today. I would not like to be in their shoes and I can only hope that they will make the right decision for Greece, as well as for the rest of us.

 

 


The Queen of the Referendum: Elizabeth II in Germany

© Ricardo Pinto, 2015, AngloDeutsch™ Blog, www.AngloDeutsch.EU

Queen Elizabeth II has just completed a four-day state visit to Germany, included a visit to the Bergen-Belsen prisoner of war and concentration camps (where Anne Frank wrote her famous diary and died shortly before liberation), met the President Joachim Gauk and the Chancellor Angela Merkel, and visited Berlin and Frankfurt. The German people went bananas about the state visit – it was almost as if Germany had become the 54th member of the Commonwealth!

The Royal Family is very popular among ordinary Germans despite the recent history of two World Wars. Royal marriages, divorces and births are followed closely and there is an obvious affection for the Queen. The pomp and ceremony, including the flag waving, are just not part of the culture in modern Germany, though it is noticeable that they have become a lot more at ease about waving the German flag since the football World Cup was staged in Germany in 2006. Partly because the Germans are much more buttoned-up about the whole concept of patriotism, the Royal visit was an occasion to dress up, go mad and just enjoy the state visit. English flags were still a lot more visible than German ones.

Queen Elizabeth in Germany 2015

Picture: John MacDougall/Pool Photo via Associated Press

Of course, there are strong connections between the British Royal Family and Germany, going back quite some time. But even in terms of the present, few realise that Prince Philip is a member of the House of Schleswig-Holstein-Sonderburg-Glücksburg and that he was partly educated in Germany. But at the end of the day what matters is quite simply that Germans admire the Queen’s charm and sheer will-power; it is a rare sight for an 89 going 90 year-old to perform her role so competently. A rapidly ageing nation such as Germany certainly knows how to appreciate this.

The royal couple’s first visit to Germany was actually back in 1965. It was an important state occasion, involving a marathon 11 cities and it is a generally acknowledged that it helped heal the wounds of World War II. As in the case of the first visit, the fifth and quite possibly last one, also drew large, enthusiastic crowds and generated significant media coverage.

Rex

Rex

Picture: Rex

Neither Mr David Cameron nor Mrs Angela Merkel would have had one-tenth of the pulling power of the Queen, let alone one-hundredth of her influence in terms of building positive international relations between the people of Germany and the UK citizens. And, let us face it, after the on-going centrifugal forces generated by a possible Grexit, not to mention a possible Brexit, as well as the austerity drive which, rightly or wrongly, is associated with the EU and Germany, Europe can certainly do with a lot more of this sort of thing – it is a precious glue binding two nations together.

However, what has been the most significant aspect of the official state visit is actually the speech she gave, which is not normally reported (other than the Opening of Parliament Speech). The Queen’s speech was widely discussed and reported in the British media. What she said was:

“The United Kingdom has always been closely involved in its continent… Even when our main focus was elsewhere in the world, our people played a key part in Europe.”

Blink and you would have missed what all the fuss is about, not least because the crucial word uttered only contained three letters, namely the reference to the UK and “its” continent. The Queen could easily have chosen the word which would normally have been used in the sentence, namely “the” rather than “its”, but for whatever reason chose to do otherwise.

It is very easy, indeed dangerous, to over- or mis-interpret the supposed meaning of a single word. Nevertheless, given the febrile discussions in the UK about the forthcoming referendum on whether to remain or exit the EU, the Queen’s speech is being widely regarded as an indication that the Queen favours continuing UK membership of the EU.

But the greater controversy concerned the speech delivered in Berlin on Wednesday, where she warned of the “dangers” of division in Europe and the need to “guard against it”. What she said was:

“We have witnessed how quickly things can change for the better. But we know that we must work hard to maintain the benefits of the postwar world… We know that division in Europe is dangerous and that we must guard against it in the west as well as in the east of our continent.”

This part of the speech, which could be read at different levels, is what has caused consternation among Eurosceptics in the Conservative Party as well as UKIP. The main reason is that it could be interpreted as being for the EU status quo and such speeches are normally done in conjunction with government officials. In other words, the suggestion is that the Queen is uttering that which Mr Cameron shirks saying himself.

Despite the protestations emanating from Buckingham Palace and Downing Street that the Queen was not setting out a position in favour of the UK remaining in the EU, the speech resonates. The sentences chosen by the Queen made it clear that Britain is part of the European continent, that it is not a matter of “us and them”, as some would wish to portray things and that Europe (EU?) should remain united (though the Greeks appear to be doing their best to do the opposite).

The Queen is supposed to be above politics but this is clearly nonsense. After all, she opens parliament. She appoints the Prime Minister and meets with him or her on a weekly basis. Not only does the Queen have a mostly ceremonial role in the Parliament of the whole of the UK, she also has formal responsibilities within the devolved assemblies of Scotland, Wales and Northern Ireland. It is therefore naive to maintain that she is a neutral observer and that and the Royal Family is above politics.

Yet this is precisely what Buckingham Palace maintains and the average Brit is happy to believe, despite the recent “Black Spider” memo letters written by Charles, Prince of Wales, to the British government ministers and politicians over the years. Despite the British monarchy being supposedly politically neutral, the letters sent by Charles may be interpreted as an attempt to exert influence over British government ministers on a wide-ranging set of issues including farming, genetic modification, global warming, social deprivation, planning and architecture. If this is the case with Charles’ private letters, surely the Queen is able to influence politics, not to mention her subjects.

If she is really trying to influence British voters to vote in favour of remaining in the EU in the forthcoming referendum on the matter, I would agree fully with her instincts. But the fact remains that she would not be politically neutral and neither should Bucking Palace, Downing Street nor anyone else pretend otherwise.

Besides, this would not be the first time that the Queen has waded into referendums and possibly influenced their outcome. The most recent example of this was in September 2014. Shortly before the voting day on the Scottish referendum, the English Establishment, not least Downing Street, was panicked by the exit polls suggesting that there would be a majority in favour of Scotland becoming independent, into using every means possible to sway the vote in favour of Union.

By all accounts, the Queen was encouraged by Downing Street to speak out on the issue. Her views on the matter had been made clear in her silver jubilee address to a joint session of parliament in 1977, when she said:

“I cannot forget that I was crowned Queen of the United Kingdom of Great Britain and Northern Ireland. Perhaps this jubilee is a time to remind ourselves of the benefits which union has conferred, at home and in our international dealings, on the inhabitants of all parts of this United Kingdom.”

In the end, the plea issued by Buckingham Palace, with perfect timing, was to urge voters in Scotland to “think very carefully” about the referendum in an apparently spontaneous response to someone in the crowd. Needless-to-say, this too was widely reported by the media shortly before the vote.

Like the words “its continent,” dangers of “division in Europe” and the need to “guard against it”, small things can make a significant difference in a country where her subjects revere the Queen. It is widely assumed that the urge to “think very carefully” was sufficient to influence swing voters during the Scottish referendum, resulting in a last-minute surge in favour of retaining the Union. That said, it is far from clear that the outcome of that particular referendum in favour of of retaining the Union will be the last word on the matter, as far as the Scottish National Party and the Scottish people are concerned.

When it comes to the most profound issues facing the UK and its future, I believe that the Queen is not quite as politically impartial and Buckingham Palace would suggest. I suspect that Elizabeth II may well turn out to be, among other things, the Queen of the Referendum.


Britain’s post-election reform priorities: a stony path ahead

In my last post, I predicted the outcome of the British General Election and the post-election reform priorities that the resulting British government would pursue. Now that the election outcome is clear, it is worth reviewing how accurate my pre-election predictions were and whether it is time for me to eat my hat. It also presents an opportunity to reflect on some of the key reform priorities in the next few of years. It is clear to me that Britain will emerge transformed, while also impacting directly on the future of the European Union (EU).

The future is blue

In advance of the General Election, unlike the vast majority of polls and media pundits who were convinced that there would be a hung parliament, I wrote: “My main prediction is that the Conservatives will win more seats than any other political party, even if the polls suggest that the election might be a close call. I also predict that the Conservatives will gain an overall majority.” For someone who normally lets his heart rule his head at election time, this was bull’s-eye!  Just reflect on what.

The pollsters are taking the heat and the leading newspapers and other media commentators are reflecting on how they could have got things so badly wrong in advance of the exit polls on election night. But this is not the first time that the opinion polls have been badly out of kilter with reality (Neil Kinnock anyone?) and it will certainly not be the last.

The blame game starts

The blame lies fully and squarely with the Labour Party’s inadequacies during the General Election. This was not an election that was won by the Conservatives whatever their post-election euphoria may suggest. The fact is that too few voters trusted the Labour Party to do better than the previous government. I wrote in my post“The main reasons for this prediction are all to do with Labour, rather than the Conservatives or their policy initiatives… Many voters will switch to the SNP in Scotland and the Conservatives and/or UKIP in England… Large segments of the general public neither relate to nor trust either Ed Miliband or any of the current crop of Labour leaders.” These are the core challenges that Red Ed’s successor will have to grapple with, with the changes in Scotland and the attractiveness of UKIP to former Labour voters at the heart of it (but see below).

Hail the Scots

On Scotland and the Scottish Nationalist Party, I wrote: “The clear winner is going to be the Scottish National Party (SNP) and with this development, the dynamics of Westminster-based politics will change dramatically, especially for the Labour Party.” I added that: “Labour is going to be decimated in Scotland and the other political parties will have almost no influence there.” There are only three non-SNP members of parliament in Scotland out of 59. This is a stunning development and is one of the three critical issues in terms of the future of the UK (see the other two below), something that is already acknowledged by the new Conservative government.

The British bulldog bites… itself

In terms of UKIP, I wrote: “… the UKIP vote, though significantly understated in the opinion polls, nevertheless does not seem to be as much of a threat to the Conservatives as previously anticipated. This is as much to do with the current electoral system as UKIP’s almost wilful self-destruction through incompetence.” This prediction was spot-on. The party gained almost 4 million votes, mostly in England, yet managed only to win one seat. As I have previously written, I consider them to be an anti-immigration verging on racist (and homophobic) party, which is dangerously fanning the flames of angry nativism, as the only remaining UKIP MP, Douglas Carswell, famously put it. But we cannot fail to recognise that the first-past-the-post system can have seriously negative repercussions for democracy – imagine the dismay of the 4 million voters who voted for UKIP and have one MP for their efforts.

Nigel Farage did the right thing by resigning for UKIP’s disastrous performance. He then did the wrong thing by un-resigning immediately afterwards. This takes UKIP beyond the “almost” into the “wilful self-destruction through incompetence” territory. The key issue is whether Farage can emerge phoenix-like from the resulting ashes. Even if he does re-emerge victorious from the unedifying in-fighting, he will not remain unscathed and neither will UKIP as a party. The thin patina of “being different from the rest of the political herd” has worn off and voters will take notice. This is not to imply that UKIP will not be a powerful force to reckon with, especially in relation to the forthcoming EU referendum. It will play a crucial role with or without Nigel Farage as their leader; indeed, UKIP might be even more powerful without him. Despite his “I am just an ordinary guy downing his pint and puffing his fag” routine, his impulsive style of leadership may prove to be difficult to convert into a coherent and consistent campaign against remaining in the EU. Others might well do better.

Reinventing the Brand

I wrote very little about the LibDems – it has been clear for quite a while that it was a party in meltdown. They are in many ways the party with the most realistic reform package and I would have considered voting for them (were it not the for 15 year rule which robs me and others of our democratic rights). I only wrote: “… the LibDems would have to perform much better than anticipated to have a chance of running the country” in another coalition government, that is. As expected, the LibDems have taken the brunt of the political punishment meted out by the voters while the Conservatives have taken the prize of running the country on their own. This was hard and unjust in my view, but such are voters and such is politics. The LibDems face a bigger challenge than the Labour Party, namely of reinventing themselves (once again) and re-establishing the trust of the voters.

I also discussed the two main post-election reform priorities for the new British government (I could have added the Scotland issue as a third, but did not). Judging by the political pronouncements made and the media reporting so far, both predictions appear to be on-track to be implemented.

To leave or not to leave… that is the question

The Conservative Party’s promise of holding a straight in/out EU referendum has been the subject of various posts in this blog. The Conservatives remain committed to holding the referendum by the end of 2017 at the latest. In my previous post I floated the possibility of it being held in 2016 in the context of a coalition with UKIP: “… the political price to be paid to UKIP will be a Conservatives campaign to leave the EU and to hold the in/out referendum in 2016, rather than 2017.” Now a referendum in 2016 is an increasingly realistic scenario, rather than 2017. It is increasingly clear, now that the election is over, that it might destabilise the government and the economy to have an ongoing debate for two years on the pros and cons of Brexit. I have little doubt about the economic, social, environmental and political benefits of continuing EU membership. To my mind, Britain would emerge a vastly diminished nation from a no vote.

My prediction was that: “The outcome of the EU referendum will be a narrow “yes” majority to remain in the EU.” I did not predict this because of an economic study or other. If you were to hold the referendum today, I think the majority of Brits would choose to leave. I predicted a small majority for remaining in the EU principally because: “If the Conservatives are able to form a majority Government, as the traditional party of business, it will ultimately side with remaining in the EU, whatever the pressures of UKIP or the antics of its noisy Eurosceptic wing. After all, the Conservative policy of offering an EU referendum in 2017 was a strategic move calculated to defang UKIP and yet placate the more rabid anti-EU Tories; it was not a decision to leave the EU per se.” I stand by that assessment.

I also predicted that: “The political price to be paid for campaigning to remain in the EU is that this will prove to be the second and final term of office for David Cameron as the Prime Minister and possibly as an MP.” Upon stepping into 10 Downing Street he immediately announced that he will not contest a third term as Prime Minister. Perhaps my gut feeling is not so outlandish that: “Their shambolic position on the EU reflects the fact that David Cameron and other senior members of the Conservative Party, on balance, favour remaining in the EU.” With a sound majority, Cameron can face-down the Eurosceptic wing and finally lance the Conservative Party’s long-festering EU boil.

Regardless of whether the Conservative Party has the balls to declare its position on the EU or not (as opposed to allowing MPs to follow their own convictions), I maintain my prediction that: “The SNP, LibDems and Labour will campaign in favour of remaining in the EU. Moreover, the business sector will make its views in an increasingly vocal and forcible manner and the wider pro-EU voice will be more pronounced than has been the case hitherto.” UKIP and other Eurosceptics have been kicking the hell out of the EC and EU football with little or no opposition. As I have previously argued, far too few prominent Britons have stood up to be counted in this debate so far. Such a state of affairs could not be imaginable in any of the 27 other EU countries. This is finally changing and the pro-EU cavalry is beginning to rally around. But the counter-charge is long overdue and forthcoming battle will be a close run thing.

Death by a thousand cuts

As someone who has lived and/or worked in around 35 countries, I can state what most Britons take for granted or have forgotten. Britain is a marvellous country in part because it has a welfare state courtesy of the famous Beveridge Report of 1942, which sought to counteract the “five giants” namely Want, Disease, Ignorance, Squalor and Idleness. Since 1945, the welfare state has become established and was for a long period of time the model for others. But it is apparent that the welfare state has experienced a long drawn-out decline and no longer performs adequately against the five giants despite energetic efforts to reform it and ensure financial sustainability.

With some sadness I wrote: “The last prediction is that the squeeze on the public sector is set to continue for the next few years and it will further transform Britain and its welfare state, resulting in a more divided and fragmented society.”  There is no doubt about the need to reform the welfare state. The concern is that the agenda is driven almost entirely by the Government‘s austerity agenda, resulting in predefined targets of how much to cut so as to balance the national budget by a certain deadline. This does not amount to a serious attempt to reform the welfare state.

Furthermore, the evidence is that the working poor and non-working segments of the British population were not the cause of the economic and financial crisis that plagues Britain and most other European countries. (As an aside, neither was it the EU, the euro, the Labour Party, the EU or non-EU immigrants, the asylum seekers and any of the other convenient scapegoats that keep being bandied around by the politicians and large segments of the British media). But in reality it is the working-poor, the unemployed and other benefit recipients, including the disabled and vulnerable in society that have paid disproportionately the price of austerity, compared with the wealthy (who have done rather nicely during the same period), the retired (who have maintained their standards) and the middle-income families (segments of which are certainly feeling the pinch, but not nearly to the same extent).

In this context, I predicted that this trend is set to continue: “The Conservative Party does not deny that further cuts in the order of GBP 12 billion  in social expenditure are in the pipeline, even if it is rather coy about how exactly this will be achieved. If the last Parliament was anything to go by, the brunt of the cuts will continue to be borne by the more vulnerable members of society, while corporations and the wealthy are spared.”

Somewhat gloomily, I also predicted that: “… some of the things that Britons are most concerned about such a shelter (sufficient, affordable and good quality housing), health (NHS, access and quality) and education (primary, secondary and tertiary) will continue to experience gradual deterioration… Instead, the (EU and non-EU) migrants will continue to act as the lightning rod for people’s frustration with a slowly crumbling system, while those that have been running these very systems for decades or generations are largely spared the British citzens’ ire.” I certainly hope that this prediction misses its target by a proverbial country mile.

What is already apparent is that the Chancellor, Mr George Osborne, is not wasting his time in continuing the process of financial and fiscal reform, otherwise known as austerity (but see Paul Krugman’s piece on The Austerity Delusion). He has announced that there will be a further Budget on 8 July 2015 to set out how the Conservatives will eliminate the gaping national deficit. He stressed that it will be a budget for “working people” but the centrepiece will be how £12bn can be shed from Britain’s welfare bill. It is almost certain that this Budget will usher in a fresh wave of austerity measures that will presumably not be so good for the “non-working people” of Britain.

Just to be clear, there are 33 million (78%) economically active people (16-64 years of age) in the UK, of which 1.8 million or 5.5% are unemployed. There are a further 9 million economically inactive (22%) people. If you are part of this group of 27.5%, this is clearly not going to be a Budget designed to make you happy. Since very few of these people will fall into the category of “skivers”, “benefits cheats” and similar (something which the government is well aware of despite the rhetoric deployed), it is hard to see any justification for yet another assault on their already low or precarious standards of living. Why can the cuts not fall proportionately on the wealthy, profitable businesses and others that have high incomes instead, other than for the usual sordid short-term, partisan politics with a small “p”?

Britain is not is the same category as Greece. I have always been convinced that Britain is one of the wealthiest, fairest and most compassionate societies that I have come across, something which makes me proud to be a Brit. After the next five years, following the Budget of 8 July 2015, I might well have grounds for revisiting that impression.

As I wrote in my previous post, I would have gladly eaten my hat for getting these predictions wrong. Sadly, it appears as if the great majority of them have either been correct or are on-track to be realised in the next term of government. Britain will emerge from it a poorer nation in almost every sense.

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


Predicting the British General Election Result and the next few years

A humorous but apt Danish proverb is that “Prediction is difficult, especially when dealing with the future.” As the politicians finally stop pushing the merits of their policies and the British voters reflect on which way to cast their vote on 07 May 2015 general election, I will hazard some predictions about the likely general election result, as well as the political priorities that are likely to be pursued in the next few years in Britain. Most if not all of the predictions will probably come back to haunt me, but here goes nothing…

And the winner is…

My main prediction is that the Conservatives will win more seats than any other political party, even if the polls suggest that the election might be a close call. I also predict that the Conservatives will gain an overall majority, rather than a hung parliament. The main reasons for this prediction are all to do with Labour, rather than the Conservatives or their policy initiatives:

  • Labour is going to be decimated in Scotland and the other political parties will have almost no influence there. The clear winner is going to be the Scottish National Party (SNP) and with this development, the dynamics of Westminster-based politics will change dramatically, especially for the Labour Party.
  • The British public, including many traditional Labour voters, remain extremely sceptical about the final Blair / Brown years, which they blame a lot of the issues confronting society, not least being drawn into recent wars, immigration trends and the state of the economy. Many voters will switch to the SNP in Scotland and the Conservatives and/or UKIP in England.
  • Large segments of the general public neither relate to nor trust either Ed Miliband or any of the current crop of Labour leaders. In this respect, I cannot help but experience a sense of déjà vu in respect to the Michael Foot / Neil Kinnock era which bodes ill for the Labour Party.

The Conservatives will profit from the above and will form the next government. This is particularly the case because the UKIP vote, though significantly understated in the opinion polls, nevertheless does not seem to be as much of a threat to the Conservatives as previously anticipated. This is as much to do with the current electoral system as UKIP’s almost wilful self-destruction through incompetence combined with persistent gaffes by its candidates that undermine the message that it is neither anti-immigration nor racist. Despite it all, UKIP retains strong support in parts of England.

My other two predictions concern the issue of austerity and its implications on British society, as well as the future of Britain in the European Union.

EU Referendum: plus ça change…

Regarding the in-out EU referendum scheduled for 2017, the Conservative Party will finally have to break cover and clarify whether it belongs to the yes or no camp. If the Conservatives are able to form a majority Government, as the traditional party of business, it will ultimately side with remaining in the EU, whatever the pressures of UKIP or the antics of its noisy Eurosceptic wing. After all, the Conservative policy of offering an EU referendum in 2017 was a strategic move calculated to defang UKIP and yet placate the more rabid anti-EU Tories; it was not a decision to leave the EU per se.

Their shambolic position on the EU reflects the fact that David Cameron and other senior members of the Conservative Party, on balance, favour remaining in the EU.  The political price to be paid for campaigning to remain in the EU is that this will prove to be the second and final term of office for David Cameron as the Prime Minister and possibly as an MP. The SNP, LibDems and Labour will campaign in favour of remaining in the EU. Moreover, the business sector will make its views in an increasingly vocal and forcible manner and the wider pro-EU voice will be more pronounced than has been the case hitherto. Unlike the present time where few speak up, others, such as art, culture and sport personalities will do likewise as a means of counteracting what will remain, in the main, a strongly anti-EU media.

Should a coalition Government arise, the LibDems would have to perform much better than anticipated to have a chance of running the country. The other possible coalition partner to the Conservatives, despite protestations to the contrary, is UKIP. If the latter coalition government were to emerge, the political price to be paid to UKIP will be a Conservatives campaign to leave the EU and to hold the in/out referendum in 2016, rather than 2017. A combination of the Conservatives and UKIP running to leave the EU would be a disaster for Britain (as well as the remaining EU countries already battered by the travails of Greece and holding the Eurozone together), which would be very hard to counteract, especially with the majority of the British media supporting their position. Britain would come to regret the likely outcome in the medium to long-term.

Under any scenario involving a referendum, the EU will have to show flexibility and do whatever it takes in to facilitate the UK remaining in the EU. As I have previously argued, there will not be fundamental EU treaty amendments for the sake of keeping Britain in the EU boat, such as a reform of the freedom of movement or the other three fundamental freedoms of movement, namely of capital, services (which is extremely underdeveloped) and goods. However, the EC and the EU will be more flexible in areas such as benefit entitlement in the EU area, which in any case is almost entirely determined by nation states, rather than EU directives and regulations.

If the referendum were to be held today, I believe the outcome would be an outright rejection  of the EU. The great majority of British media is extremely anti-EU and anti-immigration and would contribute to a no vote. However, there could be up to two years for business, society and voters to reflect on the not insignificant advantages of being part of the EU, as well as the potential consequences of Britain going it alone in an increasingly globalised world. A re-orientation towards the old and new Commonwealth and North America is no longer adequate to guarantee current, let alone future prosperity. An emphasis on trade at the exclusion of everything else that the EU brings simply does not cut the mustard in the modern era, where problems such as environmental issues and tax agreements require regional or global responses, rather than national ones. Turning our back on 27 other next door neighbours around us in Europe is simply not sustainable in an economic, social, political or any other sense.

I retain great faith in the capacity of the British public to eventually do the right thing. The following Winston Churchill quotation springs readily to mind: “The Americans will always do the right thing… after they’ve exhausted all the alternatives.” Substitute “Brits” for “Americans” and you get the gist of what I mean. The outcome of the EU referendum will be a narrow “yes” majority to remain in the EU. The alternative does not bear thinking about.

Austerity ad nauseam

The last prediction is that the squeeze on the public sector is set to continue for the next few years and it will further transform Britain and its welfare state, resulting in a more divided and fragmented society. There will be a repeat of the pattern set in the previous Parliament, namely a dramatic public expenditure squeeze in the first two years, followed by a gradual let-up as the term of office peters out and politicians look to be re-elected.

The Conservative Party does not deny that further cuts in the order of GBP 12 billion  in social expenditure are in the pipeline, even if it is rather coy about how exactly this will be achieved. If the last Parliament was anything to go by, the brunt of the cuts will continue to be borne by the more vulnerable members of society, while corporations and the wealthy are spared.

There will continue to be a lot of talk about benefit scroungers (British and EU) to justify the cuts which will fall disproportionately on the working poor and non-working segments of British society. The austerity agenda continues to offer handy political cover for a significant reduction in the size of the state and the social and welfare infrastructure, including local government. This is set to continue, spreading more deeply to areas such as police, judiciary, military, etc. since the other options have been largely exhausted. The alternative would be to put the squeeze (e.g. means testing benefits of various sorts, higher taxes, etc.) on the middle classes, the retired and the wealthy; this will not happen if the Conservatives hope to be re-elected thereafter.

In the meantime, some of the things that Britons are most concerned about such a shelter (sufficient, affordable and good quality housing), health (NHS, access and quality) and education (primary, secondary and tertiary) will continue to experience gradual deterioration. These are simply not great priorities for the Conservatives. Their traditional supporters are capable of by-passing any current or future shortcomings in state provision and directly accessing the highest quality services that money can provide, though the phenomenon of the “squeezed middle” will ensure that political capital and financial resources will still be devoted to these fundamental themes.

Instead, the (EU and non-EU) migrants will continue to act as the lightning rod for people’s frustration with a slowly crumbling system, while those that have been running these very systems for decades or generations are largely spared the British citzens’ ire. After all, if housing is unaffordable and private renting is insecure, the normal response in a modern wealthy country would be to stimulate significant additional supply and/or ensure that appropriate protections are enacted. This will not happen. If there are not enough school places or hospital beds, then public investment should deliver greater supply while still maintaining standards. This is highly unlikely to happen either. Yet it is Westminster that is responsible for recognising, responding to and securing these changes over the medium term, not individual citizens looking to access these services, regardless of their nationality, race or creed.

We shall know the result of the general election soon enough. I sincerely hope that most of the above predictions prove to be wrong, in which case I will gladly eat my hat.

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


Europe is a litmus test: Britain and a possible EU Referendum

As expected, a key battleground of the British General Election due on 07 May 2015 concerns whether Britain should remain in or out of European Union (EU). The position of the main political parties is now clear namely that Labour, the LibDems and the SNP are all fighting the election on the basis that they wish to remain in the EU, whereas the Conservatives are fighting on the basis that if re-elected, they wish to hold a referendum in 2017 on whether to stay in or leave the EU. The Ukip party´s position is to leave the EU as soon as possible, preferably before 2017.  The manifesto positions are summarised here.

I have written about this the possible Referendum in 2017 before (British Voters and EUroscepticsm: much ado about nothing?), namely that it does not actually rank highly in the the average British voter´s list of priorities.  When the Ipsos MORI poll of January 2015 asked British voters about their top concerns, four issues predominated: healthcare (almost half of voters), economy (one-third) followed by asylum and immigration (one-quarter) and education/schools (one-fifth). Europe/EU as an issue is on par with unemployment, which at present is very low in the UK. Indeed, less than 10% of potential voters consider it to be of importance in their list of priorities. The same post also examined the full list of British voter priorities and concluded that they had very little to do with the EU, since they the vast majority of them, with the exception of EU immigration are largely or entirely the responsibility of the British government. In other words, voting for the Conservatives in order to have a referendum resulting in leaving the EU would change precious little in relation to the state of the NHS, the economy, the education system, the housing system and much else besides. The responsibly for these rests squarely with the British government, not with the EU.

There is, in my view, little or no point to quote research and studies regarding the economic and other consequences of leaving the EU. The fact is that both sides of the debate use the assumptions that best suit the conclusions that they they wish to arrive at. Ultimately, each voter will have to weigh up the pros and cons of staying and leaving the EU. The British voter had to do so in 1975 and chose to join the EU. I shall trust them to arrive at an appropriate conclusion in 2017, should the Conservatives regain power after the General Election.

I would note, however, that the Ukip has been simplifying the pros and cons of leaving the EU and, as I have previously discussed, have made strenuous efforts to conflate the issue of migration, use of the NHS, etc. with the EU which also underplaying the consequences of leaving the EU as soon as possible. By contrast the Conservatives have understood perfectly the consequences of leaving the EU but have simply pandered to their Eurosceptical wing while at the same time seeking to stop the hemorrhage of support in their traditional voters which have, until recent months, been increasingly warming to the dubious charms of the Ukip party.

The Labour party, unlike the LibDems and the SNP, initially gave the impression of sitting on the fence on this issue but have ultimately decided to stay in the EU, while reforming the EU budget and ensuring EU migration does not lead to workers’ wages being undercut.

On 07 April 2015, a leading British political figure waded into the debate and, for a change, it was not to denounce the EU, EU immigration, benefit scroungers and all the rest of the anti-EU rhetoric that has become common place in recent British politics. The person in question has this to say about the possible EU referendum, should the Conservatives be returned to power following the General Election:

“For me Europe is an important litmus test. I believe passionately that leaving Europe would leave Britain diminished in the world, do significant damage to our economy and, less obviously but just as important to our future, would go against the very qualities that mark us out still as a great global nation. It would be a momentous decision….

A decision to exit Europe would say a lot about us [United Kingdom] and none of it good: that an adventurous country has become a timid one; that one with global ambitions has opted to be a parochial bystander; that a country known for its openness to the world shuts the open door nearest to it; that a nation which has built its history on confidence towards others defines itself by resentment to others; that, with all the challenges of the world crowding in upon us, demanding strong and clear leadership, instead of saying ‘here’s where the world should go’, we say ‘count us out’. “

At last, a notable politician has the courage to stand up and be counted in relation to the importance of the EU to the UK and vice versa. The speech by this politician has been prominently reported but alas has also been widely dismissed for the simple reason that it was said by none other than Mr Tony Blair (Europe – a very good reason to vote Labour, 07 April 2015).

This is a terrible pity. Tony Blair has gone from being the darling of the left and the person that brought about Cool Britannia to achieving political pariah status in the years since he resigned in favour of Gordon Brown. The main reason for this is that he was he was blown off course by 9/11 and committed British troops to Afghanistan in 2001 and Iraq in 2003. Of course, many seem to find his ability to amass a personal fortune since leaving public office galling, though it is entirely his right to do so and simply mirrors what other ex-Prime Ministers have done.

Personally, I believe that because of the so-called special relationship with the USA, almost any other British Prime Minister would have made the very same decisions that he did at the time and that, just like Margaret Thatcher before him, not only has he defined British politics since 1997 but his legacy continues to do so today.

I admire his capacity to communicate and I respect his political courage for making this speech on the UK and Europe.

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