Tag Archive: European Union

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Moral Hazard and the Future of the Eurozone

The blame game

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

Contradictions galore

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

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

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

Moral hazard and financial crises

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

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

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

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

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

There is no such thing as a free lunch

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

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

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

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

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

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

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

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


Transfer Union and the Biggest “Game of Chicken”

The Greek David vs. the EU Goliath?

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

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

Game of Chicken: who blinks first, loses

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

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

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

The Germans always pay…

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

… except if they simply cannot: transfer union

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

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

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

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

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

New Greece or eating the euro cake and having it too

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

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

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

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

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

The limits to the EU and the euro

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

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


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

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

Recent Immigration has been at a Historical High

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

 Asylum seekers

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

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

Net migration

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

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

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

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

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

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

Of  Natives and Foreigners

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

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

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

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

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

 EU and non-EU immigration

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

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

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

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

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

The EU Accession Countries

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

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

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

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

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

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

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

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

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

Conclusions

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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


Launch of the AngloDeutsch™ Blog

New AngloDeutsch™ Blog Launched

Today, the AngloDeutsch™ Blog was launched. The main reason is that Britain and Germany are countries that are absolutely critical to the future of Europe and the European Union. Yet, there is currently a gap in terms of comparing and contrasting the two countries in terms of various dimensions, such as economics, housing, health, etc. within the overarching context of the EU.

It was not always so. In the same year that Britain joined the European Economic Community in 1973, the Anglo German Foundation (AGF) was established in recognition of the fact that the Germany and Britain could learn a good deal from each other, not least to improve mutual knowledge between the two countries and deepen understanding of modern society and its problems. The AGF undertook policy-oriented comparative research on the Britain, Germany and what is now the European Union (EU). It was valuable to compare and contrast countries that were not only the two largest in the EU, which also exhibit rather different social, political and economic traditions. They are two of the largest EU trading and exporting nations, the people respect each other and, despite the differences, or perhaps because of them, they can learn from each other’s ways of doing things.

In 2009 the Trustees decided to abolish the AGF, the main argument being: “… other organisations at both national and European levels are now carrying this work forward, and the need for a specific institution for this purpose is no longer so compelling.” (Anglo-German Foundation for the Study of Industrial Society,p.3).

British and German Comparisons Growing in Importance

I disagree with this conclusion. Some 40 years on, the reality is that the need for comparative analysis and discussion in relation to Britain, Germany and EU is greater than ever before and it is far from obvious which other institutions are carrying this work forward. I believe that the last Trustees of the AGF would probably be astounded at how dramatically things have evolved since their decision to end the institution.

A number of momentous developments are affecting the socio-economic dynamic in Europe:

  • The recession that started in 2009 has morphed into full-blown global financial and economic crises. The sovereign debt and the commercial banking crisis drag on and the prospect of deflation still looms large in Europe and elsewhere.
  • The Euro and the significant political and financial reform efforts connected with ensuring that it is kept alive has resulted in enormous fissures arising between Britain, Germany and the EU countries. These tensions are, if anything, increasing over time.
  • The political strains of keeping the Euro (and thus the EU) together, not least through various forms of austerity, have taken a massive toll on the credibility of the EU as well as the level of cooperation and trust between nation states, not least the German-British-French axis. This applies doubly so to the so-called „PIIGS“ (Portugal, Italy, Ireland, Greece and Spain) and the north Europeans, especially Germany, Holland, Austria, Finland, etc.
  • The UK and DE play a critical role in the future of the EU. Germany has become the undisputed albeit reluctant European hegemon, though the jury is still out as to how long this status will last. The decisions and even ruminations of Europe’s preeminent politician, Angela Merkel, reverberate throughout the EU. The same cannot be said of David Cameron (and still less François Hollande) to the same extent. Still, the UK’s role in EU, influential though diminished, remains critical to the future of the EU (independent Sterling, monetary and fiscal policy, insistence on EU reform and devolving powers to the nation state, challenge to the freedom of movement principle, possible in/out referendum on whether to remain in the EU in 2017, etc.).

These stresses and strains are part and parcel of what has become a full-blown crisis of the legitimacy of the “European Project”, as understood since it was formed in 1951 by the Treaty of Rome. A process whose ambition was to “make war not only unthinkable but materially impossible”  (The Shuman Declaration, 9 May 1950) was not and could never have anything short of an economic, social and political project, even if the discourse was principally economic.

This ambition was not merely a Franco-German idea. Immediately after WWII Sir Winston Churchill was one of the first to call for a “United States of Europe” (“We must build a kind of United States of Europe. In this way only will hundreds of millions of toilers be able to regain the simple joys and hopes which make life worth living. ” 1946, p.1). The ambitions of the European Project have always been understood in its wider sense by its founder members, not least Germany, because of its particular historical specificities.  However, this ambition was and remains almost entirely an economic or trade issue in pragmatic Britain.

Longstanding concerns about the legitimacy of the EU, the steady erosion of the powers of the nation state (contrary to the principle of „subsidiarity“), the implications of principle of freedom of movement and indeed of the limits to the notion of „ever closer union“ in the EU have been forced to the foreground by the Euro crisis. These issues must be debated and tackled to maintain legitimacy with the people as well as the governments of all 28 EU nation states.

Britain and Germany at the leading edge of the EU

In this context, the British and German electorates have a critical role to play in the future of their respective countries, as well as that of the “European project”. They are at the nexus of the most important debates connected with the great issues confronting Europe, not least:

  • The future of the Euro and the EU (e.g. EU reform and in/out referendum in 2017).
  • The advent of anti-EU / Euro parties (e.g. the Ukip and AfD).
  • The solutions to the recession / depression, austerity and falling standards of living.
  • The debates on the future of housing, education, poverty, migration, health, ageing, etc.
  • But also the more fun things in life, such as sport and traditions such as Christmas.

Through the AngloDeutsch™ Blog, launched today, focuses mainly but not exclusively on Britain, Germany and the EU, it is hoped that a contribution can be made not only to better understanding in general but also to possible economic and social policy solutions and recommendations. This would be in keeping with the tradition of the now defunct AGF, even if the focus of a blog cannot be on rigorous academic research per se.

Focusing on the British and German perspectives has gained in salience. The target group of this blog is not the academic community, interest groups or indeed the politicians, though it is hoped that they too will get involved and/or be influenced by the AngloDeutsch™ Blog. The target group is anyone who has enough humility to be willing to learn about alternative ways of doing things, discuss different views and maybe implement some of the ideas, taking into consideration the uniqueness and specificity of every nation, region and locality. This aim is illustrated in the Box below.

The AngloDeutsch™ Blog aims to contribute to the policy process in Britain, Germany and the EU more generally by raising comparative economic, social and political issues and by stimulating an exchange of knowledge, views and experience between informed citizens in the two countries, as well as the EU.

 

To kick off the blog, the first few themes covered by the AngloDeutsch™ Blog will include the following:

  • The immigration debate.
  • Christmas traditions (since the blog is launched in December).
  • The housing crisis.
  • The future of the EU.

Other themes will follow as the blog evolves.

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