Tag Archive: EU referendum

The Big Brexit Risk? It’s the trade, stupid!

When I have discussions with my fellow Britons about the Britain, the European Union (EU) and Brexit, sooner or later, I hear a complaint that runs along the following lines:

“We thought we were joining for trade reasons, but it has evolved into something completely different. We did not agree to that.”

The implication of course is that in making the decision to join in the mid-1970s, the British public had somehow misled about the true nature of what was then the European Economic Community (EEC) and is now the European Union (EU). There is also a strong sense that the main reason for joining, trade and commerce, has become less important over time.

The simple answer is that all institutions, the EU included, must evolve or become irrelevant. This applies to NATO, the UN and this certainly applies to the EU. Still, there is a sense of Britons having being “sold a pig in a poke”. That somehow they got into something without knowing its true nature. This sense of Britons having got in bed with an EEC trading relationship in 1973 and waking up in 2016 with the EU, with all its imperfections, is important to the outcome of the EU referendum to be held in Britain on the 23 June 2016.

Therefore, this post delves into history to examine the debates that were held in Britain in the mid-1970s and to unpack whether joining the EU was just about trade. It also addresses the extent to which trade remains important to any decision about whether to remain in the EU or not.

Brexit Referendums I and II

To put it bluntly, the UK joined the European Economic Community (EEC) in 1973 without the British voter being asked. The Labour Party’s general election manifesto of October 1974 committed Labour to allow Britons the opportunity to decide whether Britain should remain in the Common Market on renegotiated terms or leave it entirely. In 1975, the first referendum covering the whole of Britain was held. One could say that 2 years after joining the EEC, the first Brexit referendum took place. The result was clear-cut: 67% of voters supported the campaign to stay in the EEC.

If the clear result was meant to put an end the debate about Britain in the EU, it failed. On 23 June 2016, we shall have the second Brexit debate, 43 years after joining the EEC. You can be sure that it will still not end the debate either, regardless of which way the vote goes.

A reading of what took place then shows that commerce/trade was a focus of the debate on the pros and cons of remaining in the EEC or, put another way, an evident desire to ensure that Britain´s relative economic decline compared with its EEC neighbours was put to an end. It is not unusual for a particular topic to predominate in elections and referendums. But it would not be correct to suggest that commerce/trade was the only topic of discussion at the time or indeed that the political nature of the EU project was not clear to Britons at the time. Labour figures of the day, such as Simon Jenkins, Michael Foot and Barbara Castle, as well as Enoch Powell on the Conservative side engaged in a debate about the possible effects on British sovereignty, among other issues. The deep fissures that were created in the Conservative Party (and to some degree the Labour Party) were not the result of a simply a debate on the commercial/trade pros and cons of Brexit. At the core of the heated difference of opinion was a possible loss of sovereignty and Britain´s place in the world, be it at the side of our European neighbours or facing towards the Anglophone / Commonwealth world. Today, there is an equally fractious debate where immigration is the leitmotif, connected with a discourse about health tourism, benefit tourism, access to housing, trade prospects and loss of sovereignty to Brussels.

The polling in the mid-1970s illustrated voters’ wider concerns, including defence, Britain’s voice, avoiding future wars, etc., though trade/commerce/economy was undoubtedly a major issue. By then, Britain had lost the empire and replaced it with the Commonwealth. The “special relationship” with the USA was stronger, not least because the Cold War was still raging. The Anglosphere relations in general (USA, Australia, New Zealand, Canada, etc.) was in much better shape than today.

And yet, in 1973 the British Government under the Conservative Party still decided that it was in UK’s best interests to join the EEC after a decade of persistently trying to join the club and being vetoed by the French under Charles de Gaulle on two separate occasions. This was no spur of the moment decision on the part of the British government, but a clear recognition that it was in the country’s long term interest to do so. On 5 June 1975, a clear majority (over 67% of voters) reinforced the situation by voting to remain in the EEC, rather than going it alone again.

Those decisions were made at a time when Britain was much more dominant in global trade, prior to the rise of China and India, and before the dawn of full on globalisation. If it was the right decision then, there is no obvious reason for presuming that Britain would be better off on its own today, when the world is so much more interconnected. This is especially so because regional trade aggregations are increasingly common so as to maximise negotiation power, rather than bilateral arrangements. Examples of such regional trade blocs, apart from the EU itself, include the North American Free Trade Agreement (NAFTA), the Association of Southeast Asian Nations (ASEAN), perhaps soon the Free Trade Area of the Americas (FTAA), etc.

I do not subscribe to the view that a future outside the EU will be bleak for Britain. This argument is overdone by the Remain campaign and backfires because Britons do not believe it and resent those seeing to make use of the fear factor to “bounce” them into voting accordingly. Britain has an amazing economy, with dense infrastructure and packed with exceptional human capital. This is a fantastic foundation for future competitiveness. Britain is and will remain a key international economy and will continue to be a wealthy nation with quality of life and standards of living for the foreseeable future, regardless of the Brexit outcome.

So the real issue is: will Brexit help or hinder Britain´s future prosperity, since trade will play a key role in its future development.

EU and UK after Brexit: lose — lose

The EU area is the largest trade block by a considerable margin. Although trade patterns do shift over time, the simple fact is that the EU is by far the UK´s largest market: around 44% of exports went to the EU in 2014. British firms sold around £500 billion worth of goods and services to foreign buyers, according to the Office for National Statistics, and almost half (£230 billion) of those earnings came from the EU. The EU´s dominant role in the UK trade position is hardly surprising: our 27 EU trading partners are geographically close, there are no tariffs, close proximity means low transportation cost, etc. To reinforce the point, exports to the faster growing BRICS countries (Brazil, Russia, India, China, and South Africa) accounted for only 10% of exports in 2014 according to Full Fact.

Furthermore, Britain´s trade balance is directly connected with the 50 trade agreements which the EU has signed with approximately 120 countries around the world. It is hard to foresee exactly what will happen immediately upon Brexit. What is clear for starters though is that Britain will have to negotiate a new trade deal with the 27 countries of the EU. It is wishful thinking to imagine that the EU will be willing to agree a trade agreement with the UK on a comparable basis to what pertains now. Furthermore, a trade agreement similar to the one that applies to the European Economic Area (EEA) is also extremely unlikely, since this would require Britain to accept the EU’s freedom of movement of people, paying into the EU budget and other concessions which would be impossible to justify. Such concessions would cause the British public (and everyone else) to question why they were asked to vote for Brexit in the first place.

Whatever trade agreement is reached with the EU, you can be certain that it will not be as advantageous to Britain as the above two scenarios (EU or EEA). It is also certain that the trade negotiations will take years to reach a conclusion — they always do. Moreover, it is unavoidable that the costs of export will increase for British firms. Several years to negotiation means uncertainty which in turn increases risk and thus raises the costs for British firms. This third scenario cannot possibly be an advantage to the British economy and the same applies to the remainder of the EU: Brexit will be a “lose — lose” scenario. Both the EU and Britain itself will lose in the short-term. The medium to long-term effect could go either way, including a continuation of the “lose — lose” scenario. This cannot possibly be good for the UK’s economy. After all, the Britain´s trade balance has been in deficit more or less permanently since 1990. This will only make things worse since the EU accounts for 44% of the current exports.

The Anglophone Zone: hopes dashed

The Brexiteers are well aware that in the short-term both Britain and the EU will lose out. This is precisely the reason why they have emphasised that it is in the EU´s own interest to negotiate a good deal with Britain. Perhaps, but I would not hold my breath on that account. What sounds too good to be true, usually is. There will be a price to pay for Britain undermining the “European project”. There is such a thing as vindictiveness in human nature and the leaders of the EU nation states are only too human.

Whatever they may say in public, the Brexiteers are also aware of this, which is why their pin their main hopes and expectations on other countries, not least the key Anglophone ones, to step into the breech and sign-up bilateral trade agreements with Britain.

So it came as a bitter blow to them when Barack Obama came to the UK and highlighted a few points, including:

  • The priority for the USA is the EU as it covers 28 countries and 500+ million people;
  • Britain will need to go to the “back of the queue” for a trade agreement;
  • It will take years for a trade agreement to be negotiated with Britain;
  • Being part of the EU does not moderate British influence in the world, it magnifies it.

With this, the Brexiteer Emperors (Boris Johnston, Michael Gove, Iain Duncan Smith, Nigel Farage, etc.) were left without any trade clothes. They went ballistic in their attempts to discredit the President´s statement of fact, for that is exactly what it is. Any country would prioritize trade negotiation with the largest trade block in the world over a nation of 65 million people. The Brexiteers´ fragile trade hopes were dashed and predictably there was an unprecedented outpouring of vitriol, verging on racism, against the outgoing President of the USA, the country that Britain stresses it has a long-standing “special relationship” with. But obviously this does not extend to trade matters.

Should Brexit occur in June 2016, Britain would need to negotiate some or all of the EU´s 50 trade agreements with 120 countries, not counting the EU and EEA countries, if it expects to continue trading with them on a similar basis to today. Since it is impossible to negotiate all of those trade agreements in parallel, it will take decades to go through the trade negotiations just to end-up with the same situation as is currently the case within the EU. The UK does not have a Department of Trade but you rest assured that not only will one be created immediately upon Brexit, since the current trade competences lie with the EU. The institutional needs would arise in other areas where the EU currently has competences. The future Department of Trade will be large, it will be costly and it will be under tremendous pressure to get bilateral trade agreements done, and sharpish. When pressure exists to get things done quickly, bad deals are struck. Ask any salesman.

There is no evidence that either the Anglosphere (USA, India, Australia, Canada, New Zealand, South Africa, etc.) or other major countries such as China, Japan, Brazil, etc. will be willing to negotiate trade deals with Britain as quickly or as favourably as with the EU: the size and potential EU market is so much larger. Britain only constitutes 13% of the EU´s population but will be under pressure from enterprises to negotiate the new trade deals, pronto. Consequently, there is absolutely no reason for the future bilateral trade agreements to be as generous to the UK as to the regional block of EU countries.

If we accept the assumption that delays, uncertainty and risk add to the costs to doing business, then British exporting firms will experience higher costs for the years and/or decades that the negotiation process will last in replacing the existing EU trade agreements. The firms´ higher cost base will affect the level of British exports, probably negatively, though the magnitude and duration are not possible to predict without economic modelling.

The likely post-Brexit trade scenario does not look rosy for Britain… but the bad news is that it is probably the best case scenario.

A worse scenario is that the EU will not rush and/or wish to punish the UK for Brexit. The worst case scenario though is that, in addition, some of the 120+ countries covered by the EU agreements that Britain is currently part of, may close their markets to British enterprises until bilateral trade agreements are negotiated and signed. If this were to happen to any extent, British firms will automatically lose market share. In this scenario, British exporting enterprises would almost certainly suffer a major contraction until they are able to replace the (hopefully) temporarily lost markets.

It does not take genius to work out the possible consequences for British firms and thus for the British economy, in terms of the loss in competitiveness, export, employment, wages, tax revenue, public expenditure, etc. There are other interpretations though, such as by those bankrolling the Brexit campaign. Peter Hargreaves has acknowledged the insecurity that would result from Brexit and stressed that “It would be the biggest stimulus to get our butts in gear that we have ever had”“We will get out there and we will be become incredibly successful because we will be insecure again. And insecurity is fantastic.” Maybe so for a billionaire stockbroker but I am doubtful that the average Briton will see perceive insecurity in quite the same manner.

Is the Brexit trade risk worth it?

The above analysis is not based on economic modelling or other statistical analysis: it is based on the application of logic to the likely consequences of British exit from the EU and thus no longer being part of the Single Market. Voters must make a decision about whether the risk of Brexit is worth it. The facts relating to trade are not complex, even if the exact process, duration and impacts are:

  • Brexit means Britain turning its back on (in the sense of no longer being part of) the largest single trading block in the world in terms of population (500 million) and/or purchasing power;
  • British withdrawal from the EU means no longer being part of the 50+ trade agreements with 120+ countries;
  • EU countries are extremely unlikely to react immediately and offer Britain the same trade terms as the current one, which means uncertainly, risk and greater cost for British enterprises, rendering them, all other things being equal, less competitive in terms of export;
  • Britain will also have to negotiate new trade deals with non-EU countries, all of which will take years or probably decades to achieve;
  • Britain already has advantageous trade relations with the Commonwealth countries dating back to 1949, so cannot expect to greatly expand in its traditional markets;
  • The Anglosphere will not necessarily offer the UK preferential treatment. The USA has stated that Britain will “go to the back of the queue” in trade negotiations. None of the other Anglophone or any other countries has offered Britain accelerated trade agreements for the simple reason that they are complex and take a long time to negotiate to mutual satisfaction;
  • Even if the UK goes through a process of negotiating the current 50+ trade agreements with 120+ countries on its own (it lacks people and skills since it has relied on the EU to perform this role for decades), it will take years or decades to achieve and a nation of 65 million cannot negotiate trade agreements on a comparable let alone more advantageous basis than the EU;
  • Whether the Brexiteers care to admit it or not, Brexit will not be good for Britain´s trade in the short term. It will be bad for the EU too but it is not as reliant on the UK market as the UK is dependent on its market (44%of exports in 2014). On the other hand, Brexit could have catastrophic economic consequences if key countries refuse to make their markets accessible during the period until bilateral trade agreements are signed, which could last quite a while.

Is Brexit a risk worth taking in terms of the possible consequences for trade, export and potentially unemployment and wages? To paraphrase the well/known USA electoral saying, “It´s still the trade, stupid!”

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Is British Sovereignty undermined by the EU?

The single most important criticism made by the Vote Leave campaign in the current European Union (EU) referendum is that Britons should vote for their politicians who in turn should decide their own laws, rather than politicians from other nations. This boils down to a matter of British sovereignty and whether the UK is being drawn into accepting legislation that is emanating from the European Commission (EC) and European Parliament (EP), rather than from the British Parliament. If Britain has become a “captive” state and EU-imposed competences are out of kilter with those of the nation state, in this case the House of Commons and House of Lords, then democracy is undermined. 

If this simple but powerful argument is correct, then I too would be fearful of the overweening power of “Europe” as opposed to those who are elected by us to represent us. So it is worthwhile examining the potential loss of sovereignty in more detail.

In, Out…

The UK to keep out of what has now become the EU from the point when it was established in 1952 (European Coal and Steel Community). Its membership was then vetoed by the French (1963 and 1967) until 1973 when Britain joined the European Economic Community (EEC). It took over a decade of determination on the part of the UK to join the EU. Britain did not join on a whim but on the basis of a hard-nosed calculation of the balance of benefits that the UK would gain from joining. In 1975, a majority (67%) of British voters chose to remain in the EU, following a hard-fought first EU Brexit referendum. Britain joined and chose the remain in the EU fully cognisant that as a result it would be voluntarily and willingly pooling some aspects of UK national sovereignty with what was then the EEC. This was nothing new or unusual: all nations do this to some degree where they see the benefits of doing something which is cannot be achieved on their own. Classic examples, apart from joining the EU, are the United Nations (UN), the World Trade Organisation (WTO), North Atlantic Treaty Organisation (NATO), etc. These agreements amplify the UK’s power and influence at the global level.

UK vs EU sovereignty

There is a pervasive viewpoint in Britain that it thought it was joining a trade agreement, rather than a political one. All commentators agree that the EU has always been first and foremost about avoiding future wars in Europe, something which the EU has done very successfully.  So much so that it, rightly, received the Nobel Peace Prize in 2012 for six decades of advancement of peace, reconciliation, democracy and human rights in Europe. There is no diagreement about the fact that it was always a political project which went beyond trade, indeed trade was not even a reason for the EU receiving the prize. If the politicians in the mid-1970s chose to highlight the trade angle to the nation during the lead-up to the EU Referendum, it was their choice (just as immigration is the topic of choice this time around). But this underestimates the broad and intense nature of the debate that took place in the mid-1970s. It was never just about trade so Britons were not sold a pig in a poke by their own politicians.

Also, it is frequently claimed that too much of the legislation comes from the EU. No one has been able to pin this down precisely but estimates vary from 7-70%. The  House of Commons Library has undertaken a comprehensive analysis how the extent of ‘EU influence’ in UK laws and concluded that: “it is possible to justify any measure between 15% and 50% or thereabouts”, depending on the approach. It noted that 15-17% of UK law is derived from EU membership, but about 50% of UK legislation with “significant economic impact” originates from the EU. It is up to each one to decide what is too much. But perhaps it is more enlightening not just to ask how much originates from the EU but to assess the degree to which such law is useful or not (see the Balance of Competences review below).

Another point to note is that all the EU directives, regulations, treaties, etc, take years to develop, which allow all nation states, Members of European Parliament and stakeholders to engage with the process of developing new laws and regulations within the competence of the EU. Each national parliament decides whether to accept or not and in recent times, national referendums have scuppered draft EU Treaties. The days of a “single speed” EU are long gone and nation states can opt out if they so desire and Britain regularly chooses this option. 

In joining the 8 other countries, now 28 following further enlargement, the UK is closely involved in the process of making the EU legislation. It is not simply a matter of fighting for the national interest, something which Britain as one of the big beasts of the EU is able to do. Compromise was and remains the name of the EU game. However, whenever push comes to shove and Britain bangs on the EU desk, it has got what it wants. This includes Margaret Thatcher’s rebate, the various opt outs such as from Schengen and now the EU special accommodation of Britain’s needs in advance of the EU referendum on the 23 June 2016 (see below).

It may have chosen to pool its sovereignty in the mid-1970s but the fact is that Britain can opt out of the EU at any point of its own choosing. The British government does not even need to hold a national referendum to leave. If the British government decided upon Brexit tomorrow, it could exit the EU simply by dissolving the European Communities Act of 1972. Permission would not be required from either voters or the EU.

On the basis of the preceding points, it is evident that the UK is a sovereign country that chooses to engage with the EU, that it can opt out of EU treaties and other legal instruments that it does not agreed with and that it can regain control of all the elements of its sovereignty that it currently chooses to pool authority with the EU in order to achieve goals that it would otherwise not be able to do on its own. This is the very essence of sovereignty.

… Shake it all about (or the Balance of Competences Review)

If Britain remains a sovereign country and is able to abolish the European Communities Act whenever it likes, which is after all the whole point of the forthcoming EU Referendum, what are the competences that it has chosen to pool with the EU and do these make sense?

At the end of the day, what really matters is not whether laws and regulations originate from the House of Commons or the EU but whether such laws contribute to our economic, social and environmental well-being or not. The public concern about a potential or actual loss of national sovereignty compared with a gain of “unelected” and “Eurocratic” powers is what led directly to the Review of the Balance of Competences between the UK and the EU which was initiated by the UK government in 2012 and completed in 2014.

The Treaty of Lisbon (2009) sets out the exact competences or the areas where Treaties give the EU competence to act, including giving EU institutions the power to legislate, to adopt non-legislative acts or to take any other action. The type of competences vary:

  • EU has exclusive competence: only the EU can act such as customs, competition, international agreements, etc.
  • Competences are shared between the EU and the member states: the member states can act only if the EU has chosen not to such as consumer protection, environment, transport, etc.
  • EU has competence to support, coordinate or supplement the actions of the member states: EU may not adopt legally binding acts that require the member states to harmonise their laws and regulations such as health, economy, employment, social policy, etc.

The UK government undertook an official review of a whole raft of EU competences, including the following 32 documents:

Report title Lead department / ministry
1 Single Market: Free Movement of Goods HM Revenue and Customs
2 Taxation HM Treasury
3 Animal Health and Welfare and Food Safety Department for Environment, Food and Rural Affairs
4 Health Department of Health
5 Development Cooperation and Humanitarian Aid Department for International Development
6 Foreign Policy Foreign and Commonwealth Office
7 Single Market: Free Movement of Goods HM Revenue and Customs
8 Asylum and Non-EU Migration Home Office
9 Trade and Investment Department for Business Innovation and Skills
10 Environment and Climate Change Department for Environment, Food and Rural Affairs
11 Transport Department for Transport
12 Research and Development Department for Business Innovation and Skills
13 Culture, Tourism and Sport Department for Culture, Media and Sport
14 Civil Judicial Cooperation Ministry of Justice
15 Single Market: Free Movement of Persons Home Office
16 Single Market: Free Movement of Services Department for Business, Innovation and Skills
17 Single Market: Financial Services and the Free Movement of Capital HM Treasury
18 EU Budget HM Treasury
19 Cohesion Department for Business, Innovation and Skills
20 Social And Employment Department for Business, Innovation and Skills
21 Agriculture Department for Environment, Food and Rural Affairs
22 Fisheries Department for Environment, Food and Rural Affairs
23 Competition and Consumer Policy Department for Business, Innovation and Skills
24 Energy Department of Energy and Climate Change
25 Fundamental Rights Ministry of Justice
26 Economic and Monetary Policy HM Treasury
27 Police and Criminal Justice Home Office, Ministry of Justice
28 Information Rights Ministry of Justice
29 Education, vocational training and youth Department for Education
30 Enlargement Foreign and Commonwealth Office
31 Voting, Consular and Statistics Cabinet Office, FCO, National Statistician’s Office
32 Subsidiarity and Proportionality Foreign and Commonwealth Office

The House of Lords, in its assessment of the review of competences, stated that: “The Review was an ambitious, indeed unprecedented, exercise. The production of the reports, broadly within the projected timetable, was a considerable achievement. We believe that, for the most part, the individual reports within the Review give a fair and neutral assessment of the balance of competences between the EU and the UK.” The House of Lords did express disappointment that: “… no consideration was given to the Justice and Home Affairs measures subject to the block opt-out decision” and the “… lack of balance in the Single Market: Free Movement of Persons, Animal Health and Welfare and Food Safety and Fisheries reports” as well as the lack of “… a final report that could reflect upon cross-cutting areas, such as inter-institutional agreements and flexible integration.

These are quibbles with what was a thorough, transparent and comprehensive process carried out by the British public authorities, experts and stakeholders. No one questions the overall conclusion of the balance of completeness review, which is that there is nothing fundamentally wrong with the balance of EU competences in the UK. Had this not been the case, you can be sure that the Leave Campaign would be using this treasure trove of information. 

What was prioritised by the UK for EU reform?

Now that the Government, the civil service and a multiplicity of stakeholders across all 32 reviews have had their say and overwhelmingly agreed that the balance of competences is broadly appropriate, what did the Government chosen to push for reform in the EU?

After a drawn-out period of public posturing, the British government set-out the government’s basis for renegotiating the terms of the UK’s membership ahead of the EU referendum in a letter to Donald Tusk in November 2015. The UK’s demands focused on four issues:

  • Eurozone: explicit recognition that the euro is not the only currency of the EU to ensure countries outside the Eurozone are not disadvantaged, including ensuring that deeper financial union cannot be imposed on non-Eurozone members and that they also UK do not have to contribute to future Eurozone bailouts;
  • Competitiveness: a target for reduction of excessive regulation and extension of the single market;
  • Immigration: restriction of access to in-work and out-of-work benefits to EU migrants until they have been resident for four years or an “emergency brake” to stop the payments for four years is being discussed as a compromise;
  • Sovereignty: allow the UK to opt out from the EU’s ambition to forge an “ever closer union” of the peoples of Europe so it will not be drawn into further political integration and giving national parliaments greater power to block EU legislation.

What has Britain got from the EU?

The EU has generally played ball with the UK’s requests – nothing would be worse to the EU than losing one of its key members, especially when the refugee and Eurozone crises continue to rumble on. The outcome is the following:

  • Emergency break: a four-year freeze on in-work benefits for EU citizens working in the UK but this will only apply for new EU migrants for a period of 7 years. Thereafter the emergency break cannot be extended;
  • Child benefit: instead of stopping all child benefit payments going to children living outside the UK, whose parents are working in the UK, child benefit will be indexed to the cost of living for children living outside the UK to new arrivals to the UK and to all workers from 2020;
  • Eurozone vs rest: the top item was safeguards to protect countries outside the eurozone against regulation made by those inside. The UK got its wish: any non-Euro country will be able to force a debate among EU leaders about ‘problem’ eurozone laws. No country has a veto but can discuss, amend or delay Eurozone laws.
  • Ever-closer union: the UK wanted a declaration that this would not apply and got this: “It is recognised that the United Kingdom … is not committed to further political integration in the European Union … References to ever-closer union do not apply to the United Kingdom.”

Given that the EU involves 28 countries with diverse needs and priorities, the UK did not receive as bad a deal as many Britons and segments of the media maintain. Many EU member states were not exactly ecstatic about what they perceive as yet another example of Britain threatening to throw its referendum dolls out of the EU pram if  its national interests are not accepted. When push comes to shove, each nation must do what it has to, while still rubbing along with the others around the negotiation table.

British sovereignty: our way or the Highway?

The UK remains a sovereign state. It can withdraw from the EU at any point that Parliament chooses to. It does not need a referendum or approval from the EU. This is the essence of sovereignty and Britain (and all other 27 EU nation states) retains it. Britain is involved in all treaties, directives and regulations. It can influence them and it can choose to accept them or opt out of them, a right that it regularly exercises, as do other nations. 

An estimated 15-17% of UK laws originate from the EU and an estimated 50% of its important economic laws originated from the EU. But the issue is not what percentage originates from the EU, a process that Britain is closely involved in. The real issue is whether such legislation is valuable or not: perhaps this is a point recognised by the Vote Leave campaign, which is why they have been strangely quiet on this issue. 

The UK has gone through the most comprehensive assessment of the competencies of the EU ever conducted involving 32 detailed reviews, extensive consultations with British stakeholders, including civil servants, professionals and other experts. The conclusion was that the balance of competences between the UK and the EU (arising from the EU legislation) is appropriate.

On the basis of the evidence, the British  government has sought a new EU deal for Britain, prior to the referendum, focusing on: Eurozone, competitiveness, immigration and sovereignty and the EU has agreed to various changes. These do not amount to a fundamental change in the relationship with the EU but are a considered response to Britain´s self-defined priorities for reform. Whatever the EU agrees to must be acceptable for all 28 nations and it was never feasible to find a compromise that could satisfy the Brexiteers.

  • Is the EU sovereign over the UK Parliament: EU legislation affects 15-17% of UK law and up to 50% of economic legislation according to the estimates that have been made.
  • Is British sovereignty compromised by EU competences: Britain is a key part of the process of making laws and regulations in the EU. Britain has secured-opt outs from EU treaties, directives, etc. The British government chooses to pool British sovereignty with 27 other countries in order to achieve what it cannot do on its own such as legislation affecting the environment, countering terrorims and the common market.
  • Should I vote to leave the EU because of lack of sovereignty / balance of EU/UK competences: Britain can choose to leave the EU whenever it chooses to. There is not need to hold a referendum. It has the ultimate decision-making power. The unprecedented EU review concluded that there is nothing fundamentally wrong with the balance of EU competences in the UK. The EU has responded to the British priorities for EU reform. As one of 28 countries, Britain cannot always get everything that it wants. Compromise is the essence of the EU game.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


EU health tourism and the breakdown of the National Health Service (NHS)

In addition to other issues connected with the EU referendum (e.g. EU immigration, EU benefits tourism and housing crisis and the EU), Britain is currently hotly debating the crisis in the health system or the National Health Service (NHS). It is not unusual for segments of the British media to lead with headlines such as “Migrants are pushing NHS to breaking point,” claiming that the NHS has been left “on its knees” by “uncontrolled migration” from the EU which has merged with the theme of “health tourism” or the practice of travelling abroad in order to receive medical treatment.

Prominent members of the Leave EU campaign, such as Michael Howard and others in the Vote Leave campaign have said: “We will be talking a lot about the NHS in this campaign because we believe that a leave vote is vital if we are to protect the NHS for future generations.” Priti Patel, the Employment Minister, claims that the health service is under threat because of EU membership: “Current levels of migration are causing unsustainable pressures on our public services and we can see that the NHS is creaking under the strain.”

The implication is that EU migration / benefit tourism is at the root of the problems of the NHS. So this post addresses the nature of the UK health crisis and the extent to which it is attributable to the EU migration and health tourism.

Challenges every which way you look

The National Health Service (NHS) is the largest and oldest single-payer healthcare system in the world. It is primarily funded through the general taxation system that is overseen by the Department of Health. The NHS is built upon the principle of comprehensive health service provision based on clinical need, not ability to pay. The NHS provides healthcare to every legal resident of the UK, with most services free at the point of use.

When created after WW-II, the NHS was the pride and joy of the pioneering British welfare state and served as a model for many other countries. But the fact is that the NHS has been in crisis for decades going back to at least the 1980s. As Britons are well aware, wave upon wave of health reforms have sought to cure its ills yet the NHS remains as sick as ever. The starting point in the health debate is to acknowledge that the problems with the health system predate the influx of EU migrants to the UK which started in earnest in earnest 2004 and continues to this day. The NHS’ problems did not begin with EU immigrant and will not end if migration were suddenly to end, regardless of whether migrants originate from the EU (less than half of UK immigration) or elsewhere (Britons returning home, Commonwealth, students, etc. – more than half of the immigration).

The second point is to recognise that the challenges facing the NHS are many and varied, not least connected with an ageing population and the impact of modern diseases such as diabetes, obesity, cancer, etc., combined with escalating costs of procedures, medication and so on.

The health professionals are in the best position to assess the issues and whether those issues are connected with migration or not. In a recent publication “Challenges facing the NHS in England: a guide for MPs and Peers”, the NHS Confederation (representing over 500 NHS organisations that commission and provide health services, including hospitals, community and mental health providers, ambulance trusts and independent sector organisations providing NHS care) set out the main health challenges facing the health system. These are illustrated in the diagram below.

Chart 1 NHS Challenges

Neither immigration in general nor EU immigration specifically figures as a health challenge. There is no reference to NHS creaking / breaking / lack of sustainability due to migratory pressures. This is hardly surprising since all the evidence is that EU immigrants tending to be younger, better educated and in better health than the average Briton in the labour force. We tend to consume disproportionate amounts of health services as babies/children and as pensioners, especially after the age of 75. Young adults – the typical EU migrants – put relatively few pressures on the health system.

Rather, the Call for Action focuses on areas about which there is little controversy among the 500 health professionals in the NHS Confederation. They stress the need for stability if the NHS is to tackle its challenges (endless reforms); the need to increase staff (too few); the necessity for social care funding for people with long-term illnesses; the need to make mental health services available and accessible, etc. The most critical issue by far is the finance challenge; this is the underlying reason for the continuing problems faced by the NHS. The point to note is that the UK is exclusively responsible for the resources that it devotes (or not) to the NHS. No amount of finger-pointing in the general direction of the EU will alter this particular fact.

Furthermore, the NHS funding challenge is nothing new: it predates and supersedes other factors such as EU migration. This is the fundamental reason why the NHS has been gradually overtaken by other countries, as illustrated in comparative research among OECD countries highlighted in the Table below.

Chart 2 OECD health indicators 2015

Health Care Resources in OECD Countries (OECD, 2015)

The UK’s performance compared with OECD countries highlights the NHS’ fall from grace. The UK ranks:

  • 19th in terms of health expenditure per capita;
  • 24th in terms of doctors per capita;
  • 19th in terms of nurses per capita;
  • 26th in terms of hospital beds per capita;
  • 29th in terms of Magnetic Resonance Imaging (MRI) units per capita;
  • 30th in terms of Computer Tomography (CT) scanners per capita.

Some countries, such as Germany, have even higher levels of EU immigration than the UK yet it comfortably outperform the UK in terms of the selected health indicators. Money, or rather the lack of it, is clearly an important reason for why the NHS is in the state that it is.

The UK’s austerity measures, which have been in place since 2009, included severe budget constraints with zero growth in health spending per person in real terms. On a per capita basis and as a share of GDP, health spending in the UK is slightly below the OECD average. Lack of financial capacity is clearly not the issue. Rather the UK government chooses to prioritize other public expenditure, such as defence, over the heath system. Furthermore, the situation is set to deteriorate: the NHS Confederation estimates that the gap between increasing demand for care and the funding available will be at least £30 billion by 2020. The key point is that other economies choose to put more resources into their health systems than Britain. The state of the NHS, by and large, reflects this particular policy prioritisation. Transferring the entire net budget that Britain spent in 2015 on the EU into the NHS, namely £8.5 billion (2014) would not make that much of a difference in the projected NHS deficit of £30 billion in 2020 for England alone. The Vote Leave campaign misleads in suggesting that cancelling one (EU contribution) will solve the problem of the other (NHS crisis).

EU health tourism: where’s the beef?

Health provision is clearly a national issue – the EU has no direct powers in this area except to support the common market. The Government’s audit of EU powers (the so-called balance of competence review) also covered health area and its official report concluded that: “…the UK Government believes that the current balance of competence is broadly appropriate.” It also noted that: “Industry were generally very supportive of the current position regarding competence.” It concluded that: “Evidence suggested that free movement of persons brings benefits for the UK health sector and for patients, but not without risk.”

There are “risks” perceived in some quarters, such as the EU’s Working Time Directive (WTD), which limits work to a maximum 48-hour week and lays down minimum requirements for rest periods and annual leave. But can critics really sustain the argument that the health profession should work longer hours than other professions? Most people would not agree. When it comes to a critical matter of life and death, most people would want a doctor / nurse / surgeon who is neither exhausted nor overworked (we all recall UK health workers, especially junior doctors, having to work absurd and dangerous numbers of hours in the past) when attending to their health needs. The WTD applies to all 28 countries and all professions; I see no reason for making an exception for the UK or for the NHS, though this does not preclude the possibility of fine-tuning the WTD.

There is also freedom of movement of doctors and nurses from across the EU working in the health system in the UK. This is actually a very good thing for the NHS, as acknowledged by the government’s official report: “In terms of health professionals, there has been a very positive impact for the NHS as 10% of NHS staff are from European Economic Area (EEA) countries, without whom there could be staff shortages.” For example, the Royal College of Midwives, has stressed that Britain would be hard-pressed to find enough midwives and nurses trained in the UK to replace the 33,000 from other EU countries who currently work in the NHS.

It is not only an issue of the damage that staff shortages might cause in such a sensitive area as the heath sector. The issue which those interested in improving the health system should be focusing on is exactly why Britain continues to be completely incapable of training a sufficient number of its own health professionals. I recall nurses and midwives being sourced from Ireland before the EU and the rest of the world became the NHS’s recruitment pool for health workers. No open-minded individual can fail to see Britain’s gain in this form of EU migration. If anything, other nations might well criticise the NHS’s beggar-thy-neighbour recruitment strategy (i.e. a policy by which one country attempts to remedy its economic problems by means that tend to worsen the economic problems of other countries) which basically mops-up experienced doctors, nurses, midwives, surgeons, etc. which other countries have paid to educate and train.

There is also the Cross Border Healthcare Directive which allows individuals to purchase health care and treatment from a provider in another Member State. This is supported by the health industry in the UK since it offers them the prospect of widening the sources of income by attracting EU patients and using excess capacity in the health system, for example in specialist areas such as diagnosis and treatment of rare diseases. Furthermore, under the current NHS arrangements, patients in one location of the UK are not free to seek treatment in another part where waiting times/lists may be shorter. However, the Cross Border Healthcare Directive enables them to seek treatment in other EU countries if they wish. This is a good thing: it allows patients to control their own health needs. Something that puts power in people’s hands over vast bureaucracies, for that is exactly what the NHS is, must be a good thing.

EU-related health costs: Britain only recovers 23% of what it could claim back

There is limited reliable data on the use of health services by immigrants and visitors, making robust estimates difficult. That said, the available evidence suggests that use of health services by immigrants and visitors appears to be lower than that of native Britons, as previously discussed, not least because immigrants and visitors are, on average, younger.

In 2014 an official report (Quantitative Assessment of Visitor and Migrant Use of the NHS in England), showed that EU (27 countries) and EEA (3 other countries) visitors and non-permanent residents cost the NHS an estimated £305 million, of which £220m is recoverable by England under the European Health Insurance Card (EHIC) scheme. Every EEA country issues EHIC cards to their citizens, thus enabling them to receive healthcare whilst on a temporary visit to another EEA country on the same basis that is provided to its own residents. People go on holiday in the EU/EEA knowing that if they fall ill or have an accident they will be able to access health care without the need for separate insurance. This saves time, effort and money for all and is widely considered a good thing.

Department of Health data for 2012-13 show that only about £50m was recovered from the EEA countries compared with the £173m that the England pays for British visitors to EEA countries. This means that the NHS / Department of Health are not claiming as much of the money that they are eligible to receive from the EEA countries as they could.

Some forget that this is not a one way street; it is not only EU nationals that come to the UK and use health service here. Britons also make a good deal of use of the health services in other EEA countries and the costs more or less balance out: £220m worth of health services received by EEA people in England, compared with £173m worth of services received by people from England in EEA countries.

The low percentage of recovery (22.7%) is due to one reason and oner reason only: NHS inefficiency, which is an issue for the UK to rectify. Why should Britain need over a decade to set-up a working reciprocal health cost management system when the other 27 nations have long ago managed to do so? It has been argued that there is a lack of knowledge among NHS healthcare professionals as to who is eligible for free treatment. Can this really be so fiendishly complicated as to systematically defeat the British health care system with its new generation of sharp suited, MBA educated management? Surely it is not like expecting the NHS to crack the health equivalent of the Enigma Code.

Rather than voting to Leave the EU for a problem that can only be pinned on Britain itself, it might be more effective to set-up a system to check if an individual is from the EEA and train healthcare professionals to recoup the costs of EU patients, as Britain is fully entitled (but fails systematically) to do.

EU-related health costs: instead of 0.18% of the NHS budget in England, it costs 0.26%

Interestingly but not surprisingly the actual health costs of EEA migrants are very low, despite all the emotive talk of “EU migrants / freedom of movement pushing NHS to breaking point” and “NHS is creaking under the strain of immigrants” emanating from the Vote Leave EU group such as Priti Patel and others. The annual NHS budget in England was worth £116 billion in 2015/6, so EEA migrants used-up 0.26% of the annual NHS budget (£305 million). When the costs that could have been recovered from EEA countries are taken into consideration (on the assumption that the NHS ever gets its act together), the percentage would drop to 0.18% (£220 million). There would appear to be vastly bigger fish to fry when it comes to saving costs in the British health system.

When this analysis is extended from England to the UK, the same health competences report noted that in 2012/13 the UK paid a net £805 million to EEA countries to cover the healthcare costs of Britons, especially pensioners, living in other countries. This sum illustrates just how many UK citizens benefit from the EU health provisions.

The health competences report also stressed that: “… many more UK pensioners choose to live in other EEA countries than pensioners from those EEA countries who live here. Using Spain as an example, approximately 400,000 British pensioners reside there at any one time. For a great majority of these, the fact that the UK covers their healthcare is of great benefit. It should also be noted that, had those citizens remained in this country, the UK would be meeting the costs of their NHS care in the usual way and in some Member States the average cost of healthcare can be lower.”

In other words not only do more British pensioners benefit from the system than EU pensioners gain from using the NHS but it would cost the NHS more to provide health care to those 400,000 Britons currently living in Spain (and potentially many others, since there were about 1.4 million Britons living in the EU) if they came back. The Vote Leave EU campaign would find it hard to swallow the point that EU health provisions may actually be saving British taxpayers money (and/or that the savings are being recycled for the benefit of the health of the people in Britain).

It should be noted that the NHS (Charges to Overseas Visitors) Regulations Act of 2015 requires hospitals to charge overseas visitors (not ordinarily resident) for the NHS services that they provide in a hospital or provided outside by staff employed by a hospital. GP services and services provided outside hospitals are not chargeable. So it would appear that Britain is well on the way to meeting the public concerns about the costs of health for visitors, whether from the EU or elsewhere.

EU health tourism: much ado about very little

The UK’s competences review concluded that, on balance, the EU’s engagement in the health sphere is appropriate and noted the major advantages of EU health directives, including the IHIC card, the number of EU educated nurses and doctors working in the UK and the capacity to access European level health services. There are real benefits for health institutions and citizens across EU countries.

In terms of the major health challenges facing the UK in the future, the 500 NHS Consortium health institutions did not identify immigrants as an issue: money or rather the lack of it is the key issue in Britain. The evidence is that EU/EEA citizens use the NHS intensively less than native Britons. In any case, Britons make extensive of health services in EEA countries, especially those that retire in Spain, France and elsewhere.

The EU introduced health transfer arrangements to ensure that each EEA nation pays according to the health services absorbed by their nationals. This is fair but it is up to each country to introduce the necessary systems and procedures. After a decade, the NHS is still unable of charge its share, which means that instead of EU nationals costing the NHS 0.18% of its annual budget, it actually costs 0.26% in England.

Boris Johnson, Michael Gove and other Vote Leave campaigners may insist that the “billions spent on the UK’s EU budget contribution to be spent on the NHS.” That is fair enough but let us not pretend that this will solve the problems in the health system at a stroke. Even if the GBP 8.5 billion net EU contribution were poured in its entirety into the NHS tomorrow, nothing would change fundamentally because the financial need is much greater than this contribution. Can it realistically be argued that EU migration / health tourism is pushing the NHS to breaking point, especially when large numbers of Britons and British pensioners living in the EU are actually reducing the costs to the NHS since the costs of health provision in Spain and elsewhere are lower than they would have been in the UK?

I don’t think this is such a bad health deal for Britain and is not a sufficient reason for voting to leave the EU in the forthcoming referendum.

  • Is the EU responsible for the state of British health system: the EU ensures that all EU citizens have access to health services in all countries at no extra cost or hassle.
  • Is the British government responsible for the state of British heath system: the UK is 100% responsible for national health provision and the health budget. The UK chooses to invest a smaller amount on health than other countries and this is the root cause of the health problems. Pumping Britain’s entire EU annual contribution in the NHS will not change the fundamentals of the health system, though it would certainly be helpful.
  • Should I vote to leave the EU because of EU health tourism: EU nationals make less use of the NHS than do native Britons. Also, there are more retired Britons living in EU countries and making use of other EU health systems than there are EU nationals living in the UK. Both save the NHS money and/or allow resources to be focused on health services in Britain.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The British housing crisis: is EU migration also responsible?

Let us get down to brass tacks: Britain has a serious housing crisis. When demand for housing (people wanting to rent or buy) exceeds supply (the stock of housing) the effects are not good for society. House prices and rents rise, making it difficult for people to pay for their accommodation. This reduces the net income available for other things, makes people anxious and directly affects their quality of life.

If people migrate to the UK or wealthy foreigners invest in the housing market, this reduces the housing supply for the domestic population unless construction goes up. This drives-up house prices and the levels of frustration, especially when people have to share their homes with their parents/children, are priced out of living in their communities or see empty houses that are investments, rather than homes. This is especially so in Britain, a nation of home owners and this state of affairs leads some to conclude that the housing crisis is caused by the EU and its freedom of movement principle. It leads to a perception that perhaps EU mobility results in a lack of housing for the native population. This is powerful argument during the period leading up to the EU referendum in June 2016; it connects with the EU immigration and EU benefit tourism, topics I have previously written about, and is presented as another reason for Britons to vote to Leave the EU (i.e. Brexit). So it is important to address the nature of the British housing crisis and the EU’s role in it.

The first thing to be said is that there is no shortage of analysis of either the housing problems or the possible solutions, but the latter basically boil down to balancing housing demand and supply, together with the political will to solve the crisis.

My home is my castle: demand for housing

Numerous factors influence housing demand. A critical factor is price: at higher prices, real incomes fall and people will reduce their demand while alternatives to owning a property, such as renting, become more attractive. There is a multitude of other factors that are important, such as population dynamics (population size, migration, birth and death rates, age structure, etc.), incomes of households (some may shift from renting to buying, move to a bigger property, buy a second property, a holiday home, etc.), social and lifestyle trends (e.g. late marriages, divorce rates, decisions to remain single, etc. all increase single households and thus demand), availability of credit and interest rates (higher rates make ownership less affordable while lower ones achieve the opposite and restriction in the supply of credit reduces demand for housing and can lead to a fall in house prices) and other influences such as government incentives (to buy, to rent or to buy to rent) and expectations in terms of house /land price developments (speculation).

Since all the above influence housing demand, estimating future demand is a complex process. What is simple though is that immigration, whether from the EU or elsewhere, is only one factor among many others, the majority of which are more influential in terms of stimulating demand for housing in the UK.

Nevertheless, as far as the EU’s freedom of movement of people is concerned, there are two further issues to consider:

  • EU migrants are a sub-set of the migrants to the UK. In a separate post, I showed that of the 498,040 people who migrated to Britain in 2012, 80,196 or 16.1% were Brits returning home, 157,554 (31.6%) were from the EU and 260,290 (52.2%) were from the Commonwealth and other countries that Britain is entirely responsible for, rather than the EU;
  • EU migration is not a one way street and not all roads lead to London and the South East. In the same year, 321,000 people left the UK, a proportion of which migrated to other countries in the EU.

Consequently, even if EU migration was the only issue affecting demand for housing, which is clearly far from being the case, EU migrants do not constitute the majority of immigrants to the UK. Furthermore, the same process is happening in other EU countries that receive Britons.

A number of housing demand studies demonstrate the same trend in the UK: housing demand is increasing significantly and the government and the rest of the housing system, not least the planning system and the construction industry, need to respond in order to ensure that the supply covers the future demand. After all, it is not unusual for populations to increase and housing policy and system must respond in order to deliver affordable, quality housing. The public has the right to expect this irrespective of the particular set of factors that may drive housing demand (i.e. whether immigration is an issue or indeed whether it is from the EU or elsewhere) at a particular point in time.

A comprehensive estimate of housing need and demand in England was published by the Town and Country Planning Association. It estimated that England alone required 240,000 – 245,000 additional homes each year until 2031 in order to meet rising demand. Many similar projections have been made long before EU migration to the UK became an issue of debate post-2007.

Housing supply: decades of neglect = housing crisis

The issue then is how much housing is being built and is it sufficient to meet the demand for 245,000 new units per annum? The UK housing construction data (supply) are presented in the Table below.

Table 1 UK Housing Construction

Source: Gov.uk, Live tables on house building, Table 209

A few points are worth noting based on the Table:

  • Housing construction (permanent dwellings completed) in England have fluctuated between a peak of 170,610 in 2007/8 and 108,870 in 2011/11;
  • The point during which it was perceived that there was an acute housing crisis was around 2005 but since then, the trend in terms of housing supply, albeit fluctuating slightly, has actually been downwards;
  • By definition if the target for England is 245,000 new units per annum, the equivalent for the UK will be much higher. The last year of housing construction data (2014-5) shows a gap of 93,000 even against the lower target for England;
  • In a well-functioning housing market where the citizens, planning authorities, construction industry and the government jointly perceive a housing crisis, the normal response would be for housing supply to increase to reach the target of 245,000 new housing units per annum for England. If this does not happen, it adds to the affordability pressures experienced;
  • If here is such a systematic lack of construction, then surely the respective people in charge of housing policy, finance, planning, construction, etc. are responsible.

To Scapegoat or not to scapegoat (or holding a mirror to British policy makers)

A considerate British voter in the forthcoming EU referendum might reflect on the following issues:

  • The EU has no control in the housing sphere: this is exclusively the remit of national governments, in this case successive UK governments;
  • There are many factors affecting demand for housing, of which EU migration is only a secondary factor;
  • The EU related migration accounted for 31.6% of the migrants to the UK in 2012, but the UK also sent its migrants to EU countries – the EU freedom of movement cuts both ways;
  • The UK has systematically produced fewer housing units than it needs for a period of decades despite projections of massive unmet demand for housing ;
  • The UK, including its politicians, its construction industry and its planning system (local authorities) are responsible for ensuring that supply keeps-up with demand and that housing is affordable. This requires responding to changes in housing circumstances, regardless of what is driving them (e.g. prices, birth rates, speculation, constrained land release, immigration, interest rates, tax incentives, etc.);
  • Despite mounting pressure, regular public outcries, evidence of shortage and affordability problems, etc., the UK only managed to build a paltry 150,000 housing units in 2014-5. This is a damning indictment of Britain, not least its politicians, policy-makers and industry.

It is up to each individual to form their own opinion of where the blame for Britain’s chronic housing crisis should rest. Scapegoating EU migration (which took off from 2004) for problems which have been systematically neglected in the UK amounts to a disgraceful attempt to blame others for issues which Britons have failed to tackle over and over again and are still doing a miserably bad job with.

In this context, it is worth addressing two issues which policy-makers, politicians and the Leave the EU campaign will almost certainly raise in defence of the indefensible: the lack of adequate and affordable housing in the UK, which is a basic human right.

Clutching at straws 1: the crowded island myth

Many, if not most, Britons appear to be convinced that the UK is a very crowded island and that there is simply no space left for housing construction, let alone to accommodate migrants from the EU or anyone else. Certain segments of the media that are biased against the EU, as well as the general Leave campaign, including populist political parties, are keen to emphasize this argument, so let us examine the claim.

The most comprehensive analysis of this issue (UK National Ecosystem Assessment) concluded that only 6.8% of the total land area of the UK is urban (10.6% of England, 1.9% of Scotland, 3.6% of Northern Ireland and 4.1% of Wales). But being urban does not necessarily mean that it is built upon since such areas also contain gardens, lakes, etc. The most detailed analysis ever conducted found that only 2.3% of England is built upon, the rest is natural. Elsewhere in the UK, the figure is less than 1%. Contrary to popular misconception, only a tiny fraction of Britain has been concreted over. Britain is not a crowded island. It can and must build more housing for the benefit of its citizens.

Clutching at straws 2: EU preferential treatment in accessing social housing myth

Another common perception is that EU citizens are benefit tourists, and that they strain the welfare state by having a higher demand for social housing. But the data show that about 17% of UK-born and 18% of foreign-born individuals live in social housing. That means that foreigners are on par with native Britons when it comes to access to social housing. However, when it comes specifically to EU migrants, the popular perception is even more incorrect. Studies demonstrate that citizens of EU-8 countries who arrived in the UK after accession are 57% less likely to live in social housing than native residents. More recent studies indicate that over 90% of immigrants in the UK are in households that are eligible to apply for social housing (p.3) and confirm that EU (and EEA) citizens are less likely to be in social housing than Britons.  The research also shows that, once factors like the demographic structure, location and economic circumstances are taken into consideration, immigrant households are significantly less likely to be in social housing than equivalent native households. Another popular myth bites the dust.

Build, Build, Build

The housing crisis is fundamentally a matter of demand and supply and the policy choices each country makes about how to prioritize public investment and other policy decisions. For decades Britain has emphasized home ownership as the one and only housing policy priority. It has constrained social housing construction for ideological and financial reasons, while at the same time forcing social housing to be sold at discount. Its recent policies have stimulated a boom in buy-to-rent, which has increased private renting but also boosted house prices and exacerbated the affordability problem.  At the same time, policy makers have not stimulated the planning system to release sufficient land for housing construction, mainly due to the NIMBY (Not In My Back Yard) syndrome. In the meant time, the construction industry has shown much more readiness to speculate in order to accumulate, rather than increase construction efficiency, productivity and quality. None of this has stimulated housing supply greatly while housing affordability has declined.

Housing is a matter for each of the 28 nation states of the EU. Some countries, like Germany, build enough housing to meet the needs of their citizens whose quality of life is significantly improved by having sufficient, high quality, affordable homes to rent and/or buy (the recent refugee crisis could not have been planned for in advance. By definition, a surge of 1.1 million asylum seekers in 2015 was not part of the housing forecast). Others, like Britain, do not build enough housing. This is not because of insufficient land, EU freedom of movement of people or other handy excuses for systemic failures on the part of British politicians and their policies, the British planning system and the British construction industry. Any such interpretation amounts to the politics of scapegoating others for one’s own glaring failures and I, for one, will have no truck with it.

  • Is the EU responsible for the British housing crisis: The British housing crisis has been decades in the making. Strong EU immigration is a relatively recent phenomenon.
  • Is the British government responsible for the state of British housing: Its policies have focused almost entirely on housing ownership (tenure), rather than housing construction.
  • Should I vote to leave the EU because of the state of British housing: Britain alone is responsible for regulating demand and supply to deliver sufficient and affordable housing.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


How extensive is EU benefit tourism in the UK anyway?

A cursory reading of Britain’s most popular newspapers might leave the distinct impression that immigrants, especially from the European Union (EU), are beating a path to the UK specifically in order to take-up welfare benefits, live in social housing, avail themselves of the health system and generally live the high life on the back of the hard-working citizens of the UK (i.e. benefit tourism) who actually pay taxes and thus subsidise the lives of such EU citizens.

 Immigration generally is “the” issue of the forthcoming EU referendum and if the above characterisation of the situation remotely reflects the truth, I would be campaigning to leave the EU too. Not surprisingly this is one of the key arguments of Eurosceptics and Brexiteers in the debate over the future of the UK in the EU. So this post examines the extent to which the EU freedom of movement of people contributes to benefit tourism in the UK. 

EU migrants sponging off Britons?

There are four fundamental freedoms in the EU which are designed to create a common market in Europe, namely to: sell goods, sell services, invest and work anywhere in the EU. Britons have no issues with the first three freedoms but remain deeply concerned about the fourth. 

The first point to note, as discussed in the previous post on EU immigration, is that the freedom of movement of people is not possible for seven years upon joining the EU, unless a nation chooses to opt-out as the UK did (together with Ireland and Sweden) in 2004. So, for example, the Croats will not be able to work in the UK until 2020 unless a country, such as Germany, decides otherwise. This is to ensure that there is not a rush out of a country that joins the EU. The second point to note is that out of the 508 million people in the EU, only 2.2% of them chose to live in another country of the EU. There is clearly no mass exodus of people from one EU country to another. The third point is that though the UK is indeed a very attractive country to move to, it by no means the only one or even the main one in the EU.

In terms of net migration (those arriving minus those leaving), the countries with the largest net inflows of foreign nationals were Germany (452,000), UK (267,000), Italy (235,000) and France (71,000) in 2013. The reality is that the more economically dynamic a country is, the more it is likely to attract people looking for work or to improve their lives.

Turning specifically to the issue of benefit tourism, the evident suggests that EU citizens come to the UK to study, work or to join their families, rather than because of the allure of the UK’s social benefits. This is illustrated in the graphic below, which shows that family reunion used to be the dominant entry route. Student inflows became the main reason for entry, but this has fallen significantly in recent years, something which is connected with the Conservative government’s drive to cap net migration at 100,000 per annum. Most immigration from the EU is for work-related reasons, whereas most immigration from outside the EU is for study-related reasons.

Figure 1: Annual Inflows of Migrants by Reason

Figure 1 Annual Inflow of Migrants by Reason

 

 

 

 

 

 

 

 

 

 

Source: Immigration and the UK Labour Market, Jonathan Wadsworth, CEP, 2015

Furthermore, the same study shows that immigrants are better educated than their UK-born counterparts and that the educational gap is actually increasing over time over time. The “old” Europe or EU-15 migrants are twice as likely to be graduates and the “new” Europe or EU-8 migrants (the 8 Central and East European countries that joined the EU in 2004) are also more likely to be graduates than the UK-born, and most others have intermediate levels of education.

The conclusion of the research is unequivocal:

“There is still no evidence of an overall negative impact of immigration on jobs, wages, housing or the crowding out of public services. Any negative impacts on wages of less skilled groups are small. One of the largest impacts of immigration seems to be on public perception.” (2015, p.1).

But even if there is little or no evidence that EU immigrants to the UK reduce jobs and wages, housing or other public services (housing and health services are discussed in subsequent chapters), this cuts little ice with the Leave campaigners. They maintain the “benefit tourism” rhetoric in relation to EU migration, stressing that an unspecified proportion of EU migrants come to Britain specifically to take advantage of its generous welfare state.

To be fair, such belief is not unique to Britain. In Germany, similar pronouncements are regularly made by the CDU/CSU, the mainstream right of centre parties, as well as the Alternative für Deutschland (AfD), a fast growing populist party. The AfD is the equivalent of UKIP. It wants to leave the Euro, rather than the EU, while also stopping benefit tourism and the flow of refugees to Germany. Both parties are aided and abetted by segments of the media in driving a general notion that EU benefit tourism is pervasive, unfair and must be stopped forthwith.

What exactly is the scale of EU benefit tourism?

A detailed report (ICF GHK and Milieu Ltd, 2013) concluded that non-active EU migrants represent a very small share (0.7% – 1.0%) of the total population in EU Member States. The evidence is that non-contributory benefit payments to immigrants account for between 1% – 5% of all benefits paid in France, Sweden, the Netherlands, etc. and above 5% in Belgium and Ireland. However, the share of non-active EU migrants is very small, both in the UK (1.2%) and in Germany (1.1%).

Other research examining recent EU immigrants to the UK of working age who are not students, not in employment and not in receipt of state benefit, estimates that this group amounted to 39,000 people received any benefit, including child benefit. To put this in perspective, this is only 1% of all recent EU nationals in the UK who are of working age, not students, not in employment but in receipt of some kind of state benefit. Since non-EU immigrants typically cannot access benefits until they have been resident in the UK for five years, it is unlikely that they would migrate with the intention of accessing state benefits.

The latest official government information (February 2015) reinforces the previously mentioned studies:

  • 371,220 working-age claimants of UK benefits (7.2% of total claimants) were non-UK nationals. Of these 113,960 were EU nationals, representing 30.7% of non-UK claimants and only 2.2% of all claimants;
  • In terms of the people who are out of work and claiming benefits, 287,300 were non-UK nationals claiming out-of-work benefits or 7.4% of total claimants. Of these 91,700 or 2.4% of total claimants were EU nationals;
  • People born outside the UK comprised 16.2% of the working-age population but only 7.7% of working-age individuals receiving key out-of-work benefits were non-UK nationals;
  • 19,579 families had Child Benefit awarded for 32,408 children living in EEA states, around two-thirds of whom were in Poland. 7,026 families had Child Tax Credit granted in respect of 11,762 children in EEA member states.

The Government’s own authoritative Balances of Competences review on the Single Market Free Movement of Persons (2014, paragraph 2.55) observed that:

“… none of the evidence we received was able to point to specific research or analysis on the importance of access to social security benefits in the decision to migrate.”

Whatever the Leave EU faction and segments of the media may claim, EU benefit tourism, to the extent that it exists, is much lower than the native population’s own use of such benefits. This reinforces the point that EU nationals come to the UK to work, not to sponge off Britons. Benefit tourism is not worth getting worked-up about, unless it is for cynical political reasons.

A storm in an English tea-cup

People generally emigrate due to the prospect of employment and better wages, rather because of the lure of welfare benefits. The EU migrant population is younger and better educated than the average Briton; the unemployment rate among EU migrants is also lower than that of the average Briton. When the figures for both non-EU and EU migrants are analysed, it is hard to avoid the conclusion that the benefits tourism hysteria affects very people from the EU living in the UK. This is a storm in a tea-cup whipped-up by those that seek to pander to popular misconceptions rather than standing-up to them.

Benefit tourism, whether from the EU or elsewhere is largely a myth. It is not only that not many migrants are eligible to get benefits in the UK. It is that the great majority of EU migrants actually pay more than their share and take very little out in the form of benefits of any sort. EU migration is good for the tax man and for the welfare state in Britain.

  • Is the EU responsible for the level of benefit tourism in the UK: No. It only guarantees freedom of movement and equal treatment of all EU nationals.
  • Is the British government responsible for benefits eligibility in the UK: Yes. For UK and non-EU nationals; partly for EU nationals, but the recent renegotiation has resulted in a decision to tighten-up eligibility rules for EU nationals living in Britain.
  • Should I vote to leave the EU because of EU benefit tourism: No. The numbers of people involved are small and proportionately much lower than the native British population claiming benefits.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Is EU immigation so negative for the UK and is it out of control?

EU immigration has been possibly the single most topical issue in Britain since 2004, when Britain allowed various new members of the European Union (EU) such as Poland to come and live and work in the UK. When the economic and financial crises hit, the views on immigration hardened noticeably in Britain, with an accent on immigration from central European countries. The discourse evolved into “British Jobs for British Workers” under the Labour Party. Under the Conservative Party, the debate intensified further, partly due to the impact of the UK Independence Party (UKIP), resulting in a “cap” on annual net immigration at 100,000 and concern over Britain’s “uncontrolled borders” due to the EU’s freedom of movement of people. Attention then shifted to Bulgarian and Romanian migrants and EU “benefit tourism.” Lately, the surge of refugees and asylum seekers to the EU in 2015, on-going tensions in the “jungle camp” in Calais and the possibility of jihadist terrorist sneaking through EU borders have elevated anxiety to peak levels.

This is a very potent mix of issues to discuss. In the context of the British referendum on whether to remain in the EU or not, the key issue boils down to this question: to what extent is the EU and its freedom of movement of people the reason for the current level of immigration in the UK and it is good or not for Britain??

Is the level of foreign born population much higher than the EU average?

The first issue to address is whether Britain is somehow exceptional and has disproportionately higher levels of foreign born population living in the country. The answer is an unequivocal no. 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 in 2013. The latest figures would probably be around 14% for the UK but larger for Germany, following the entry of over 1 million refugees in 2015, an issue which I have written about.

The percentage of foreign-born populations in the UK is relatively modest compared with many EU countries such as Luxemburg (42.4%) and Cyprus (23.2%), well as others such as Belgium (15.7%), Ireland (16%), Austria (16.1%), Sweden (15.4%), etc. Indeed, given Britain’s not so distant colonial past, the level of foreign born population in the UK could have been a lot higher. At the same time, it is not only foreigners that have been beating a path to the UK. Historically speaking, a very large number of Britons emigrated to the rest of the world, especially the Commonwealth countries, though there is far less concern about British emigration as about immigration into the UK.

Focusing on the role of the EU migration and thus on the freedom of movement of people, the EU cannot be held responsible for any migration to Britain prior to joining the European Economic Community (EEC) in 1973. Until then, Britain was entirely in charge of its immigration policies and the pattern of immigration reflected its colonial past and the rules established by successive British administrations.

The freedom of movement of people is one of the four economic freedoms that form the basis of the EU: free movement of goods, services, labour and capital. By voting in a referendum in 1975 to join what is now the EU, the British people accepted these four economic freedoms. The freedom of movement and residence for persons in the EU as one of the cornerstones of the EU was established by the Treaty of Maastricht in 1992 but the data show that the flow of EU citizens to the UK was a trickle until 2004, when larger numbers started to come to the UK.

Are Britain’s Borders out of control because of the EU?

Over time, the EU has grown to 28 member countries, a process that successive British governments have supported enthusiastically until recently. There is always a possibility that people will flow from lower income/employment economies to higher income/employment ones. This is the very reason why EU transitional provisions exist to restrict the flow of people from new member countries to the rest of the EU for a period of up to 7 years. This applied to Spain, Portugal, Ireland, etc. when they joined to the EU then Poland, Slovakia, etc. then Bulgaria and Romania (until 01 January 2014) and it applies to Croatia, the latest country to join the EU, until 2020. Each member country has a choice of either sticking with the 7 year transition or not. Thereafter the EU freedom of movement of people and workers applies in full to the new EU member countries.

The evidence shows that there was not a significant flow of people from the EU to the UK until 2004. Until that point the overwhelming majority of immigration to the UK reflected the policy of the British government, which in turn reflected Britain’s colonial heritage and its agreements with Commonwealth countries, as well as a strong flow of students to the country. These are not something which the EU interferes with. They are national decisions that Britain makes.

Furthermore, two issues reinforced the UK’s ability to influence migratory flows to the UK:

  • Schengen Agreement: this created the EU’s borderless space, enabling passport-free movement across most of the EU bloc. However, the UK opted out of the Schengen Agreement and unlike most EU countries, its borders remain intact and passports are essential to gain entry;
  • Britain is an island: unlike most other EU countries which have no internal borders and thus people can cross former borders unimpeded (this is changing following the 2015 refugee crisis), this is not the case in the UK. As an island, it has defensible natural and other borders. There are few entry points and every person seeking entry is checked by the UK authorities.

Therefore, the notion often repeated by the media and “Leave” politicians that Britain has “uncontrolled borders” because of the EU and its freedom of movement of people is little more than a fib. It has opted out of Schengen, it has natural borders and migrants can only come in via three routes: the Channel tunnel, the harbours and the airports, all of which under the exclusive control of the UK Border Force. It is only the people that are allowed in (or manage to sneak in) that get through.  This is the exclusive preserve of the British government. What it cannot hinder is the freedom of movement of EU citizens (once the transition period is over). However, this cuts both ways: Britons can and do leave the EU to other EU countries in large numbers.

If Britain is an island and is able to check every single passport of every single person coming into the country, you might well pause to ask what is so uncontrollable about the UK’s borders, other than EU related migration? Whose fault is that and is the EU element a reason to leave the EU?

Why did EU migration increase and is it detrimental to Britons?

The UK government (and Ireland and Sweden) chose to forego the EU transition arrangements and opted to remove the restrictions on labour market access from the onset of the EU enlargement in 2004. Other nations gradually followed suit, but like the UK, did not have to for 7 years. Germany and Austria restricted labour market access to the maximum period allowed.

EU-8 is the term used to denote the 10 countries that joined the EU in 2004 (Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, Poland, Slovenia, Slovakia), excluding Cyprus and Malta. The UK decided of its own volition and with its national interests in mind, to allow the citizens of the EU-8 countries to live and work in Britain immediately. The rationale at the time was clear: Britain’s economy was booming and both the government and the private sector were concerned about a possible overheating labour market. The problem was solved by suspending the EU’s 7 year rule. Citizens from the EU-8 responded to the invitation to come to the UK, exactly as hoped by British authorities and industry. The key issue, however, was that neither foresaw just how many would choose to take-up the offer to come and work in the UK and Ireland.

But this was not an issue as the economy kept growing and all boats kept rising with the tide of employment and wealth being generated. British companies, British tax payers and British citizens benefited from the contribution of a young, healthy, educated, willing and industrious new source of labour.  When the double-whammy of deep recession and financial crisis hit, leading to unemployment and reductions in wages, the gear was thrown into reverse. History has a habit of repeating itself. The call for “British Jobs for British Workers!” was soon be heard, as well as increasing levels of criticism of Central European migrants, which then transmuted into criticism of the EU, the freedom of movement of people, Britain’s uncontrolled borders, etc. This was followed swiftly by the rise of UKIP as a political force, leading to a decision by the Conservative Party to cap net immigration at 100,000 per annum and culminating in the decision to hold a referendum on whether to remain in the EU or not on 23 June 2016.

The hardening of public attitudes in respect to EU immigration specifically since 2008/9 only makes sense if the EU migrants, and more especially the recent arrivals from the EU-8 countries, have been taking-up jobs which the British population would have otherwise have had, thus leading to higher levels of unemployment among the native population, as well as depressing their wages.

The evidence is that there are two types of EU migrant: those from “old” Europe (EU-15 such as France, Germany and Italy) who are slightly younger and more highly educated than the average Brit and those from “new” Europe (EU-8) who are much younger and also better educated than the average Briton. The old Europe migrants tend to find more highly skilled work than the average Briton. However, the new Europe migrants, partly because of the lack of language skills, found work mainly in low-skill, low-paid jobs such as skilled trades, construction and services jobs.

The evidence is that neither the “old” nor the “new” EU migrants put pressure on the wage and job prospects of the native British population. A review of various UK studies shows that there has been no, a small negative or a small positive labour market effect (wages, unemployment, etc.) in destination countries such as UK, while the long run impact is thought to be very small or none. By contrast, “old” EU migration has resulted in an increase in human capital, leading to higher productivity while also having a positive effect on British GDP.

The consistent conclusion from research into the labour market effects is that migration from the EU has been beneficial to the UK economy.

Is the EU freedom of movement a one way street?

It might be quite hard for some to comprehend this, but not all roads lead to London and the south east. The EU’s freedom of movement of people (as well as goods, services, capital) is a remarkable gift: it allows all EU citizens to travel across 28 countries (31 when Switzerland, Luxemburg and Lichtenstein are counted) to study, work, retire, au pair or just enjoy the richness of Europe whenever and as often as they like without “let or hindrance”, something which Britons should appreciate since these very words are engraved in our passports.

Many, if not most Britons, enjoy some or all of these freedoms in one way or another, not least in terms of their holidays. Indeed, 2.2 million Britons, such as me, have chosen to work, study, invest (e.g. holiday and retirement homes and pension funds) or retire in EU countries not least Spain (just over 1 million), France (330,000), Ireland (329,000), Germany (107,000), Cyprus (65,000), the Netherlands (48,000), Greece (45,000), Portugal (39,000) and Italy (37,000). It is not possible to claim anything other than that the UK and its citizens have taken full advantage of the freedom of movement of people in the EU: the numbers of Britons living in the EU almost balances the EU citizens living in the UK (2.3 million). Despite the somewhat hypocritical stance of many Britons towards the EU freedom of movement of people, this right is something which is taken for granted by a very large number of them, especially the elites that control the British media and the political parties (it would be good to know just how many of them own a holiday home and/or how frequently they holiday in the rest of the EU). Leaving the EU would be a double-edged sword for Britain.

Is the level of EU migration to the UK unstoppable?

Chart 1 Migration 1991 - 2014

 

 

 

 

 

 

 

 

 

 

Source: Migration Statistics, House of Commons Library, Briefing Paper, 2015

Chart 1 shows immigration, emigration and net migration in the UK. During 1991 – 2014 immigration increased rapidly from 329,000 to 632,000. Emigration also increased from 285,000 to 319,000. Net migration (those arriving minus those leaving), increased from an annual average of 37,000 during 1991 – 1995 to an annual average of 232,000 during 2010 – 2014; this represented a significant and sustained increase in the level of migration.

However, the majority of immigration is not from EU countries, as the Table illustrates for 2014.

Table 1 Immigration 2014

Source: Migration Statistics, House of Commons Library, Briefing Paper, 2015

Historically, EU migration to the UK has been relatively low: during the period before the British government chose to allow EU-8 countries to enter Britain in advance of the 7 year transition period, EU migration accounted for 12.9% of all migration.

By 2014, 41.8% of annual immigration was attributable to the EU’s freedom of movement of people. However, the majority of migrants to the UK remain Brits returning home (12.8%) or non-EU nationals (45.4%). The decision by the UK to allow close to 60% of migrants to enter is not to do with the EU in any way, shape or form.

Of the 41.8% of the EU nationals entering the UK in 2014, almost half (20.4%) were from the EU-15 or “old” Europe such as Germany, Italy and France. As previously discussed, these are typically extremely well-educated, professional individuals who the British economy relies on to succeed and thrive. 12.7% of EU migrants were from the EU-8 such as Poland and Slovakia. The rest, 8.7% are from the rest of the EU, which is mostly Romania and Bulgaria. These are less well educated but still outperform the British average.

On this basis, although EU migration to the UK is undoubtedly significant, it is beneficial to the economy and only 21.4% of overall migration is from countries that Britons have become sensitive to in recent years. The UK could reduce the levels of migration from non-EU countries (45.4%) overnight, if it chose to do so, without reference to the EU or anyone else. Presumably it prefers not to hinder Britons from returning home, students paying pretty good money into the British higher education system or close-off access by Commonwealth countries (or presumably cut-off the supply of highly skilled employees from “old” Europe).

The rest (from the EU-8 and EU-2) amounts to 21.4% of the immigration experienced in 2014 or about 1 in five of the migrants entering the country. Is this worth leaving the EU in order to stop this group from the EU entering the country? And is it worth doing so despite the evidence that such migration does not depress wages and does not reduce the employment prospects of native Britons? I don’t think so, despite the media negativity and the claims of UKIP and Leave faction.

However, it might possibly be worth it if the EU citizens, whether from old or new Europe, were in the UK specifically to take-up the social benefits, rather than coming to work and thus contribute to the British economy. I shall address the issue of EU “benefit tourism” in the next post.

The EU immigration debate – much heat, little light

Migration from the EU was relatively low until 2004 when the UK decided, in its own interest, to allow immigration from the EU-8 accession countries such as Poland a full 7 years before the EU transition period officially required it. The UK benefited greatly from this decision, as did the many migrants that responded to the UK’s invitation: they did not come illegally to Britain. When the economic and financial crises struck, the mood turn ugly in the UK towards migrants generally, and those from the EU specifically. The freedom of movement of people is routinely criticised but the facts are that Britain has opted out of the Schengen Agreement, is an island and is in full charge of policing its own borders and deciding who comes into the country, not the EU. The latest information shows that immigration is running high but 12.8% are either Britons returning home or non-EU nationals (45.4%), mostly from the Commonwealth countries, over which the UK has full control of but rightly, chooses not to stop.

This means that less than half (41.8%) of the UK immigration originates from the EU. But even here, the situation is not as simple as UKIP and the Leave campaign pretend. Almost half (20.4%) are from the “old” Europe comprising top professionals which the British economy depends upon. Only 12.7% are from the EU-8 such as Poland and Slovakia and 8.7% are from EU-2, namely Romania and Bulgaria. However, in both cases, the evidence is that they are neither reducing the wages nor the employment prospects of native Britons.

Furthermore 2.2 million Britons benefit from the EU freedom of movement of people compared with 2.3 million EU citizens living in the UK. A decision to leave the EU would be a double edged sword for Britain, since it not only benefits economically from EU immigration, but also exports pensioners, student and workers to other parts of the EU.

Is this a case of the British media and populists politicians eating the EU cake and having it too? Form your own opinion.

  • Is the EU responsible for the overall level of foreign born population in the UK: No
  • Is the British government responsible for its own borders and the majority of migration in the UK: Yes
  • Should I vote to leave the EU because of the EU freedom of movement: No

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


To Brexit or not to Brexit: key issues for the EU Referendum

EU Referendum ahead

The British voter will soon be asked to decide on whether Britain will continue to have a future as part of the European Union (EU) or to exit it (i.e. Brexit or British Exist). The EU referendum’s date has not yet been fixed and must happen by 2017, but is widely speculated that it is going to be to be scheduled for mid-2016.

That question that will be put to the British voter is simple but fundamentally important, namely:

  • Should the United Kingdom remain a member of the European Union or leave the EU?

The options are either to:

  • Remain a member of the European Union or
  • Leave the European Union

This is a simple question with simple options, but it nevertheless is a historic referendum that will influence the future of the UK (and that of the EU itself) for generations to come.

Brexit the obvious solution?

I am a British citizen who lived, studied and worked in Britain. My parents, sibling and my closest friends remain in Britain. Nevertheless, during the last 20 years, I have lived and worked in numerous countries of the EU and elsewhere. I am married to a German and my business takes me regularly to different parts of the EU, potential future EU countries and beyond. I understand what the feeling is about the EU and that there is frustration with the way the EU is perceived to be interfering with British sovereignty and especially about the freedom of movement of people, which is widely seen to be adding to the social pressures in the country.

If I were about to cast a vote at the forthcoming EU referendum, I would feel apprehensive about it. If I were to believe what a hostile media and populist politicians stress, my gut reaction might be to vote for Brexit and leave the EU. I might not be greatly enamoured by the current state of the UK economy, the ongoing austerity, the decreasing wages and the job insecurity. I might well be hearing about the number of laws and regulations emanating from “Brussels”, which the shorthand for the EU, with the implication that Britain no longer controls its own borders and sovereignty. I might well be tempted to conclude that the EU is indeed to blame.

Furthermore, I might also be frustrated by my inability to get on to the first rang of the housing ladder while others point to migrants from the EU are taking up the supply of housing that I or my children want to make use of in our own country. This might lead me to concur with those that point to the “uncontrolled” borders and the EU migration caused by the freedom of movement of people. A similar argument is applied to the pressures in the health and education systems, and I might also be concerned about the “swarms” of EU migrants taking-up scarce resources that we are entitled to, since we are the ones who are actually paying the taxes while the others jump the queue and coin the market for social benefits.

In short, if I were to believe all of the above, I might be well disposed to giving “Europe” a bloody nose, just as populist politicians and the media are urging me to. I might vote to leave the EU: Britain was great on its own and can be once again.

The real issues

But the British voters are fair and reasonable. Rather than follow their gut reaction, they will want to balance both sides of the equation and be fair and dispassionate in making this historic decision. They will want answers to the following questions:

  • Is the negative portrayal of the EU and all the criticism connected with it correct?
  • Is it too simplistic to say that the EU is to blame for all the challenges in Britain?
  • Is Britain indeed so tied-up by the EU that it is no longer in charge of its own destiny?
  • Are there only costs to being one of 28 member of the EU?

If something sounds too simple to be true (it’s the EU, stupid!), then perhaps it is really is too good to be true. Simple solutions to complex problems are appealing but can the EU really be the fount of all of Britain’s ills and will the country really be better off immediately upon Brexit?

Looking at it through another lens, the fair-minded British voter might ask whether it is reasonable or not to only see “Europe”, “Brussels” and the “European Union” only in a negative light? Can it really be that Britain is only paying in but getting nought out of the EU? And, if things are not quite so black and white, what exactly are those positives that are so rare to hear about? Are the benefits so abstract that the ordinary voter simply cannot grasp them or related to them?

We all instinctively know that there are two sides to every story but the media and the loudest politicians do not excel at presenting the pros and cons. As a Brit with a foot on both camps, I hear a series of populist myths being peddled again and again. I often smell a red herring when I turn a newspaper pager. I often see the EU being used and abused by those who would attack a straw man.

So in making-up my mind about how to vote at the historic EU referendum, as a Brit, I would want to understand the costs as well as the benefits connected with the most important EU issues, namely:

EU costs
  • Is EU migration a good reason for Brexit?
  • Is EU benefit tourism a good reason for Brexit?
  • Is the housing crisis a good reason for Brexit?
  • Is EU health tourism a good reason for Brexit?
  • Are EU directives and regulations a good reason for Brexit?
  • Is the state of the education system a good reason for Brexit?
  • Is the EU the cause of austerity, low productivity and stagnating wages in the UK?
  • Is the UK paying more than its fair share and getting little out of the EU?
EU benefits
  • Is having the Euro (one currency in 19 countries out of 28) so bad?
  • Is being able to visit, study and work in 28 countries so bad?
  • Is being able to own a second home and retire in 28 countries so bad?
  • Is having common trade arrangements in 28 countries so bad?
  • Is having common environmental standards in 28 countries so bad?
  • Is having common consumer protection in 28 countries so bad?
  • Is reducing the time, stress, cost, etc. across 28 countries so bad?
  • Is the EU undemocratic, out of touch and beyond reform?
Key issues

 

  • Is Britain better or worse off within the EU?
  • Is the EU better or worse off with Britain in the EU?
  • Are you better off with Britain in the EU or not?

Questions and Answers

If I were the average voter, I would want an answer to these questions before casting my vote.

I would also want the answers to be simple, short and to the point but backed-up by evidence.

This is exactly what the AngloDeutsch Blog will seek to do from until the referendum.

This will be a challenge, given my professional and other commitments, but I shall do my best to cover as many of these topics as I can over the next few months, starting with the EU’s freedom of movement of people.

Dr Ricardo Pinto, AngloDeutsch™ Blog, www.AngloDeutsch.EU, 13 February 2016


If #ThisIsACoup then #MoneyGrowsOnTrees

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

It seems as if a great number of people, and not just in the Eurozone and the European Union (EU); have taken to Twitter to express their view that Greece has been bullied and coerced into an unjust and undemocratic agreement by the other Eurozone members and by Germany in particular.

Prominent bloggers and commentators such as Paul Krugman, the Nobel-winning economist, have helped to legitimate and propel the hashtag #ThisIsACoup to the global audience. He wrote in his New York Times blog that:

“The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief.”

Partly as a result, the hashtag #ThisIsACoup, was trending in Greece, France, Germany, Britain and indeed globally as Twitters claimed that Greece was being stripped of its sovereignty as illustrated below.

#ThisIsACoupGLobalTrend

 

 

 

 

 

 

 

 

 

 

 

So it is worth examining what the hashtag #ThisIsACoup really means.

There are two meanings of the word “coup” according to Dictionary.com, with a third connected with the word:

  1. a highly successful, unexpected stroke, act, or move; a clever action or accomplishment.
  2. (among the Plains Indians of North America) a brave or reckless deed performed in battle by a single warrior, as touching or striking an enemy warrior without sustaining injury oneself.
  3. coup d’état.

Strictly speaking, it would appear as if the hashtag #ThisIsACoup is actually praising the bailout agreement that Greece and the Eurozone have come up with as “a highly successful, unexpected stroke, act, or move; a clever action or accomplishment.” However, if you read the thread, it is clear that the vast majority of people on have actually understood the Twitter hashtag #ThisIsACoup as the exact opposite. And took the opportunity to engage in a bit of Germany bashing while they were about it.

As an aside, what is not being reported is that there is also a hashtag #ThisIsNOTaCoup where quite a few people are arguing the opposite. Although I do agree with this particular hashtag, they are also missing the point.

This takes us to the third meaning, namely of a “coup d’état” which is, of course, what the hashtag #ThisIsACoup does not say but presumably actually meant to say.

So let us examine this option. The same source (Dictionary.com) defines a coup d’état as: “a sudden and decisive action in politics, especially one resulting in a change of government illegally or by force.” Furthermore, it identifies various synonyms for coup d’état, including “overthrow, rebellion, revolution, uprising.”

It seems as if the vast majority of people actually were talking about the hashtag #ThisIsACoupD’état rather than #ThisIsACoup. But let us examine if this makes any sense, despite its obvious popularity:

  1. A sudden and decisive action in politics: really? I could have sworn that what has happened is the very opposite of this. The Greek crisis has been at least five long years in the making, there have been two bail outs already and an excruciatingly drawn out process of six months since Syriza came to power. Sorry, but the Twitters seem to be backing the wrong horse again, Nobel Laureate included.
  2. Resulting in a change of government illegally or by force: Really? Again, I could have sworn that the process has been the opposite of this. It seems to me as if the people of Greece have not only elected the political party (Syriza) which the “Eurocrats” did not want but also reinforced the point by offering up the referendum result that the Eurozone was hoping to avoid. Has there been a change in Government in Greece since the January general election? Has anything been done illegally or by force? I don´t think so. In fact, if anything is being done illegally it is that many of the other 18 members of the Eurozone, Germany included, are actually doing somersaults to keep Greece in the Euro despite the sentiment of their own electorates. There are 19 countries and democracies to take into consideration in the Eurozone, not just Greece. And this is before even mentioning the fact that transfer union is illegal, as are debt write offs and permanent bailouts in the Eurozone. Yet effectively all three are being done in one way or another in order to assist Greece.
  3. As for the synonyms “overthrow, rebellion, revolution, uprising,” do these really apply? I am not convinced. There has not been an overthrow or revolution of any kind and the Greek parliament will have its chance to reject the whole potential bailout package if they so wish. If there has been a rebellion/uprising, it is on the part of Syriza in relation to its approach to austerity, its debts and the conditionality which previous Greek governments have signed up to  and unorthodox manner by which it has carried out the negotiations with the rest of the Eurozone countries. This is not something that has been done to the Greeks, except for the Eurozone´s insistence that they deliver on their reform commitments (this time around) before getting their hands on the bailout cash. After all, money does not grow on trees. As I have previously argued, the Greeks have had two general elections and one referendum to leave the Euro and/or the EU. They have resolutely stuck to the current path of remaining in the Euro and the EU. If anyone is advocating a coup d’état, it is the commentators that are shrilly insisting that the Greek government rejects its electorate´s views in two general elections and leave the Euro as soon as possible. If the same wish to argue that the Greek Referendum was a vote to leave the Euro, let them try to make that case but they will get nowhere since the question was so convoluted as to be meaningless. It could not possibly be construed as a desire to leave the Euro and no one is claiming that.

So please, you Twitters out there, do get your facts right instead of blindly following the herd instinct.

If you meant that “this is a coup”, then you have actually been lavishing praise on the Eurozone members and the agreement that was reached at the eleventh hour.

I think it is a flawed agreement but better than none.

And it you actually meant that “this is a coup d’état” (which is clearly not what the hashtag actually says), you have also  got it completely wrong.

Either way the hashtag #ThisIsACoup that has been globally trending is misleading to put it mildly.


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.