Tag Archive: General Election

Brexit and the Politics of Wishful Thinking

It has been a little while since I last posted something on the AngloDeutsch Blog.

The reason is simple: the UK´s referendum decision in favour of Brexit was not entirely a surprise but it still came as a shock that the majority of my fellow Britons voted to leave the European Union (EU), a club that they had been part and parcel of for over four decades (Britain joined in 1973), even if it has always been a less than wholehearted member.

Since 23 June 2016 I have observed the unfolding UK-EU divorce while trying to come to terms with that it means for Britons, for Europeans and of course for me personally, a Briton who has lived in various parts of the EU and is a resident of Germany.

I remain as shocked as ever but unlike many Remainers who retain dim hopes that Brexit might somehow be averted, that Parliament could override the outcome of the referendum or that a second referendum could be held when the actual terms and conditions of Brexit have been negotiated, I am expecting Brexit to occur. Not only that, but I do strongly believe that having voted for Brexit, it must happen. The referendum was a democratic process, the decision was clear and democracy would be undermined, perhaps fatally, by anything other than Brexit.

Slow-burning Brexit fuse

This is not to say that I think Brexit is a good thing for either the UK or the EU, as I have made clear in my blog. I remain as convinced as ever of the opposite, even if a growing number of people are jumping on the bandwagon to claim that there has been no crisis post-Brexit. This is hardly surprising since Article 50 triggering the process of withdrawal from the EU has not yet been invoked, Brexit has not yet happened and the Bank of England has been very active in pre-empting a possible crisis by launching an aggressive “sledgehammer” stimulus package. The real Brexit impact will be medium- to long-erm in nature; it will have a slow burning fuse but it will eventually be more keenly felt in terms of investment, jobs, real wages and wealth.

The most notable thing about the three months since the referendum is how little progress has actually been made in terms of defining what Brexit actually means. Since there have been no notable decisions made, investors have not had anything substantive, positive or negative, to react to and are keeping a watching brief on what happens. This in itself is a negative, albeit not one that the Brexiteers would acknowledge.

The extent of the current policy position of the new British Prime Minister, Theresa May, boils down to a political soundbite: “… Brexit means Brexit, and we’re going to make a success of it.”

Beyond this, very little is clear about the British Government´s Brexit position in respect to fundamental issues such as:

  • When Article 50 will be triggered to officially start the Brexit negotiations (sometime in 2017);
  • Whether Parliament will have a vote on Brexit;
  • If the aim is to stay in the common market or not (hard vs soft Brexit);
  • When Britain will actually leave the EU;
  • How long it will take to sign new trade agreements with the EU and other countries;
  • What the rights and responsibilities of the EU citizens living and working in the UK;
  • What does Brexit mean for Scotland and Northern Ireland;
  • The same for the Britons living in EU countries, etc.

The only firm policy position is that the UK will not accept one of the EU´s fundamental requirements, namely the freedom of movement of people, and insists upon taking full control of the borders in terms of who is let into the country. These are non-negotiable for the government.

Wishful thinking

Theresa May said in advance of her first cabinet meeting as Prime Minister: “So we will not allow the country to be defined by Brexit; but instead build the education, skills, and social mobility to allow everyone to prosper from the opportunities of leaving the EU.”

However, Brexit will undoubtedly define her government´s work for the current political term. Not only that, it will involve nigh on Herculean efforts to unpick over 4 decades of close legislative, economic, trade, cultural, financial, environmental and other ties. Without a doubt, Brexit will define the next 2-3 UK governments´ policy agenda and thus the country´s destiny. Whatever the Prime Minister may suggest, Britain has already been defined by Brexit, certainly for the other 27 countries, and this will only intensify in period until 2019 when the divorce proceedings are likely to conclude.

The wishful thinking does not stop there.

The Eurosceptic knives are out and being sharpened; the Government already stands accused of not doing enough to bring about Brexit, as if it such a complex and critical issue in terms of Britain´s future economic wellbeing is something that could be decided upon at the drop of a hat. The Brexiteers may have gone into the referendum in a blithe manner in terms of their complete lack of post-referendum plan but at least they are being consistent.

The headlong rush towards Brexit is irresponsible. To be sure, Britain has the right to unilaterally withdraw from the EU at any point of its choosing but there is broad consensus that this would be disastrous for all concerned. The default position is thus the negotiated route to Brexit, despite the unrest among the hard core Brexiteers. However, choosing to enter complex Brexit negotiations without adequate analysis, preparation and forethought in respect to Britain´s long term interests would be the equivalent of tying both Britain´s metaphorical hands behind its back in the forthcoming marathon negotiations with the EU. Just as in the case of unilateral withdrawal, there would only be losers from such a process. The Brexiteers have won the debate, so whatever their ideological desire to head for the exit door host-haste, they will just have to rein their horses in the interests of their country.

There is a school of thought that Mrs May has made a strategic mistake by offering key ministerial positions to leading Brexiteers as Boris Johnson (Foreign Office), David Davis (Brexit Negotiations) and Liam Fox (International Trade). I think it has actually been a strategic masterstroke on her part. The political onus has been neatly shifted to the Three Brexiteers, who must now take responsibility for preparatory work, negotiations and whatever outcome Britain is able to negotiate with the EU. The Brexiteers cannot claim to have been undermined by the Remainers if the critical political posts are all held by the Three Brexiteers.

Row, row your boat…

The advantages of this approach are already becoming evident. Among the chaos and obfuscation (which might be characterised as Project Lies or Project Fear, depending on which side of the fence you sit on) evident during the referendum campaign, there were a few concrete promises made by the Leave Campaign, though the Brexiteers are busily rowing away from them:

  1. GBP 350 million per week will be invested in the NHS: Nigel Farage (UKIP) admitted that it was a mistake to make such a claim and that the NHS would not get the extra funds.
  2. Article 50 to leave EU will be immediately triggered: Liam Fox (Conservatives) has admitted that Britain is nowhere near being prepared to begin negotiating Brexit and that this will take time.
  3. Brexit is a relatively straightforward process that can proceed quickly: David Davis (Conservatives) admitted that the Brexit negotiations may be the most complicated negotiation ever and that they will start sometime in 2017, followed by two years of negotiations.
  4. Introduction of a points based immigration system to take back control of the borders: Boris Johnson (Conservatives) has abandoned the plan for a points based immigration system promised during the election campaign stating that what matters is taking control of the borders.
  5. A favourably UK-EU free trade agreement will be negotiated as the EU has more to lose than the UK: David Davis (Conservatives) admitted that it might not happen and that the UK might exit without a trade agreement, thus having to revert to less favourable WTO tariffs instead.

The above can be interpreted in one way: the loud and clear sound of retreat can be heard and the buglers are none other than the Three Brexiteers.

For her part, Theresa May is keeping her cards close to her chest, holding bilateral preparatory meetings with the French, Germans, EU, etc. and repeating her “Brexit means Brexit” mantra. The three leading Brexiteers are the ones having to do all the running, carry the weight of political expectation and toil under the pressure to come up with a coherent plan for Brexit.

They are not giving the impression having much of a clue about what they are doing, let alone being capable of coordinating the process among themselves in a manner which inspires confidence about an outcome that will be at least as much in Britain´s interest as is the case today. Their fellow Eurosceptics in the Conservative Party are increasingly restless and if the current state of affairs continues, Mrs May might just be tempted in the future to relieve the Three Brexiteers of their duties. If she were then to appoint more capable replacements, whether Brexiteers or not, that might not be such a bad outcome and the Brexiteers would only have themselves to blame.

Choppy waters ahead

It takes two to do the Brexit tango, so how is the EU preparing for it?

Firstly, the rest of the EU insists upon Article 50 being triggered as soon as possible for the simple reason that an indeterminate period of uncertainty can only be negative for Britain and for the other EU countries. Ironically, the EU is pushing much harder for a quick Brexit than the Three Brexiteers and the rest of the government. However, since it cannot do anything about it, the rest of the EU is resigned to the likelihood that the UK will not invoke Article 50 and enter the negotiation phase until sometime in 2017, possibly later 2017 once the French and German General Elections are safely out of the way. Furthermore, the EU is firm about the fact that it will not start Brexit negotiations, formal or informal, until Article 50 is triggered by the UK. The hard core Brexiteers must be as bitterly disappointed about this likely delay as the rest of the EU, but at least they have finally one thing in common.

Secondly, it is not feasible for Britain to remain in the Common Market or join the European Economic Area (assuming the existing EEA members do not veto the UK from joining this club – the early indications are that these relatively small countries might not appreciate the prospect of being joined by what would become the dominant country, resulting in very different political dynamics) unless freedom of movement of people is guaranteed. Since this is a Rubicon that will not be crossed by the Brexiteers and/or the British Government, this option appears to be out of the question. The EU is inflexible on this fundamental issue, as illustrated by its handling of the Swiss referendum and the failed attempt to restrict freedom of movement while remaining in the EEA / common market. The omens are not good and the implication would be “hard” Brexit – leaving the EU and single market altogether without a free trade agreement with the EU.

The EU members are also unusually strong and consistent on other important issues.

Firstly, to make the UK divorce too easy would be to encourage other EU countries to consider leaving the EU club. Put simply, this is the very last thing that the other leading EU countries want. The negotiations will not be a stroll in the park, whatever the Brexiteers may claim. This is wishful thinking on their part and is misleading to it.

Secondly, it is entirely out of the question for the UK to expect to have its Brexit cake and eat it too. In other words, whatever is negotiated with the UK cannot possibly be as good as the current situation as a full and (formerly) leading member of the EU, something that the three Brexiteers continue to imply. Forget that sort of wishful thinking; it simply does not add up. If you join a club, you pay your membership fees, live by the rules and reap the benefits. If you choose to leave the club, you do not pay the fees, do not abide by the rules but do not get the benefits either. Period.

Thirdly, Angela Merkel has made Germany´s view unusually clear by stressing that Brexit is irrevocable (a one way ticket and Britons cannot expect otherwise) and that it is not feasible for the UK to be part of the common market without the EU´s four freedoms, one of which is freedom of movement. She has also stressed that Brexit negotiations cannot be a “cherry picking exercise” of keeping the good economic, trade and finance bits and ditching the rest. For someone renowned for mincing her words, this is as clear a statement as the Three Brexiteers will ever hear; not that they are paying any attention in their delusion.

The British government will also wish to factor in other important considerations in securing a Brexit deal. Whatever it turns out to be good, bad or indifferent, it can be vetoed by any of the remaining 27 countries. Any marginal hopes that Britain might harbour to somehow remain in the Common Market while avoiding the freedom of movement of people can and most probably will be vetoed by Visigrad nations such as Poland.

Loaded dice

There is thus a whole series of pitfalls to be avoided and the reality is that it will be very hard for a deal to be agreed within the maximum prescribed period. The negotiations are loaded in favour of the EU due to the time limit to finalise negotiations once Article 50 is triggered. Two years (unless there is a unanimous agreement by 27 nations to extend the negotiating period) does not sound like ample time to complete “…the most complicated negotiation ever” (David Davis) and do so in Britain´s favour while also securing a qualified majority of the EU leaders and the 27 Parliaments across the EU (as well as the European Parliament – see below).

As if that little lot was not enough to give the Three Brexiteers and their ilk food for thought, the EU has just appointed its team of Brexit negotiators and no one can claim that the intention is to give the UK and easy ride. The European Commission (EC) has put a Frenchman and former EU commissioner, Michel Barnier, in charge. The UK media was pretty clear about the possible implications. The Sun branded him “anti-British” and the Evening Standard called him the “scourge of the City”, with important implications given the significance of the financial sector and the sensitive issue of the UK retaining financial “passporting rights” without which a chunk of the financial sector concentrated in London could shift to Frankfurt, Paris and other EU cities.

Furthermore, the European Parliament has selected the MEP and former Belgian PM Guy Verhofstadt as the lead Brexit negotiator, since any deal agreed by EU Leaders will have to be ratified by the European Parliament, an institution which has often been in the crosshairs of the leading Brexiteers. The media immediately branded Verhofstadt a “diehard European federalist,” the worst possible insult that could ever be levelled by a Brexiteer. Without approval by the majority of the European Parliament, there will not be a Brexit deal. Perhaps Nigel Farage was a little unwise to gloat about Brexit at the European Parliament while still holding on to his seat and salary as a MEP (17 years and counting). Some might have concluded that Brexit was mission accomplished, but obviously not our Nigel.

Dream on

So the Brexit battle lines are being drawn.

It is evident that the EU´s position is a lot clearer than that of the UK, where pretty much everything is still up in the air, other than the intention to control its borders (despite being an island and not being part of the Schengen area) and avoiding freedom of movement of people (despite having almost as many Britons living in other EU countries, benefiting economically from EU migration and receiving the majority of its immigration from non-EU countries such as the Commonwealth).

The UK has yet to come up with the semblance of a cogent Brexit plan (“soft” or “hard” for a start), let alone one which unites the leading Brexiteers (a substantial minority of the Conservative Party) while also satisfying the majority Remainers in the same party. This is going to be tricky in the extreme: the Conservative Party has a slim overall majority of 16 in Parliament and UKIP will continue to breathe down the Conservatives´ political neck (the Labour Party is even worth mentioning, given its ongoing chaos and disarray).

Britain will need uncommon diplomatic and negotiating skills (eh hem! – yes, I am thinking of our Foreign Secretary), as well as a hefty dose of luck in navigating through the choppy waters coming up in 2017 and still coming out of with a Brexit deal, let alone a favourable one, whatever the Three Brexiteers and the British government may claim.

The likelihood of actually securing a deal that is at least as favourable as the status quo is nigh on impossible (though the EU is first and foremost a political construct and since politics trumps everything else, the possibility cannot be completely excluded). The prospect of the UK having its Brexit cake and eating it at the same time appears to be a load of wishful thinking and delusion. Everyone but the Brexiteers can clearly see the writing on the EU wall… in capital letters, underlined and bold.

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


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.

 

 


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

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

The future is blue

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

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

The blame game starts

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

Hail the Scots

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

The British bulldog bites… itself

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

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

Reinventing the Brand

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

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

To leave or not to leave… that is the question

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

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

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

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

Death by a thousand cuts

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

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

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

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

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

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

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

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

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

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


Predicting the British General Election Result and the next few years

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

And the winner is…

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

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

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

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

EU Referendum: plus ça change…

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

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

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

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

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

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

Austerity ad nauseam

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

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

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

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

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

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

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


Britain has taken away my right to vote (and I want it back)

With the British General Election due on 07 May 2015, I tried to register to vote as a Brit living in Germany. Imagine my shock at discovering that not only has my right to vote been taken away from me, but I will never again be entitled to vote in any future British election. Britain has just withdrawn my fundamental democratic right without a warning or right to appeal against it.

Gobsmacked? Join the club, because so am I. In what is supposed to be one of the oldest parliamentary democracies, Parliament has withdrawn what I always believed to be one of my most fundamental rights for the rest of my life.

You are perhaps thinking that I must have done something to have lost my democratic rights. I have lost my right to vote because Parliament has determined that I have lived too long away from the UK. This is otherwise known as the “15 Year Rule” whereby British citizens automatically lose their democratic right to vote in British elections; they simply fall into the grey Zone that I now find myself in. By virtue of being in a European Union country, I am at least eligible to vote in German local, regional and European elections, but not their national elections, since I am not a German citizen. As of today, I know that I shall never again be able to vote in any election in Britain unless I return to the UK, when my rights would be restored.

So it is worth asking why is this the case? Is there something logical and reasonable about the 15 Year Rule or is it an arbitrary decision taken by Parliament which deprives people of their democratic right to vote?

The main rationale for the 15 Year Rule appears to be to limit the vote to only those who are affected by decisions made in Westminster or who have retained ties with the UK. If so, there are serious problems with this line of argument.

Is this a throwback to a long gone colonial era where people migrated to some distant land, lost complete touch with their country of origin and never returned to the UK? If so, Parliament is woefully out of touch with the world of today.

Who is to say that I am no longer affected by the decisions made by Parliament? For example, I have and continue to contribute to the UK State Pension and the decisions made by Parliament will certainly affect me until the day I die. Secondly who is to say that I have now lost my ties with the UK? My parents, my brother and my oldest and closest friends live in the UK. With globalisation, cheaper international travel and the ICT revolution, they are ever more accessible to me than ever before, even though I may not be physically in the UK. I believe I am at least as well informed and in touch with social, political and economic developments in the UK than the average voter, so why should I be penalised in this arbitrary manner? Does living across the Channel in “Europe” automatically mean that I have lost touch with Britain after a predetermined period of time? And who can decide whether the cut-off point should be 1, 5, 15, 25, 50 years or the day I die?

I do not accept at all that a 15 Year Rule or indeed any other time or other restriction should apply, especially in today´s day and age where the internet and international travel have shrunk space while increasing accessibility to almost everything. It is not only the apparently arbitrary nature of the rule that I object to; it also appears to be punitive and anti-democratic to force people like me into a grey zone where I shall never again be eligible to vote in any future British election unless I return to the UK.

The supposition that my links, connections and interests to and in the UK are somehow automatically lost after 15 years spent abroad is neither logical nor defensible. It amounts to little more than a hypothesis which cannot be proven, except at the individual level. It is equally arbitrary to automatically return all my democratic rights if and when I choose to return to the UK. I could then immediately leave again and be eligible to vote for another 15 years and keep doing the same thing over and over again. But why should I resort to doing this?

On the other hand, Article 25 of the UN International Covenant on Civil and Political Rights states that: “Every citizen shall have the right and the opportunity, … without unreasonable restrictions: (a) to take part in the conduct of public affairs, directly or through freely chosen representatives; (b) to vote and to be elected at genuine periodic elections which shall be by universal and equal suffrage and shall be held by secret ballot, guaranteeing the free expression of the will of the electors.” The 15 Year rule would appear to be amount to an “unreasonable restriction” and thus to contravene this Covenant, which Britain has signed and ratified.

The situation becomes even more interesting when one examines the data on overseas voters. Firstly, the problem is very well-known to government (see “Voter engagement in the UK, Fourth Report of Session 2014–15“, 2014). Secondly, a mere 15,818 such overseas voters are actually registered to vote, which is remarkably few. Thirdly and most interestingly, there are actually a staggering 4.7 – 5.5 million potential overseas voters, only 1% of whom are currently registered to vote in the UK. The total number of eligible electors in 2014 was 45 million, so about 5 million amounts to potentially over 10% of the electorate. It is not known how many of the 99% are, like me, artificially debarred from voting by the 15 Year Rule, but it must be a significant number.

The current situation is an anti-democratic disgrace. The House of Commons report “Voter engagement in the UK, Fourth Report of Session 2014–15” stressed that something had to be done about overseas voters by the 2015 General Election:

“Although British citizens are only entitled to register to vote for UK elections if they were resident in the UK in the previous 15 years, it is clear that only a very small percentage of those who are likely to be eligible to register to vote are actually on the electoral register. It is not acceptable that such a small proportion of this franchise is registered to vote” (Paragraph 90)

However, it failed to make a recommendation about the 15 Year Rule itself. As far as I can see, the Government has simply ignored both issues. It is interesting to note that Germany used to have a 25 Year Rule, which was a much longer period of time than the current UK rule. However, the exclusion from the right to vote of German citizens residing outside the Member States of the Council of Europe who had departed from the Federal Republic of Germany more than 25 years previously was deleted in 2008, and with good reason.

With about 5 million votes at stake, many of which are affected by the 15 Year Rule, it is more than clear that it must be replaced by something logical, proportionate and democratic. At the very least, British citizens living in EU countries should be excluded from the 15 Year Rule. This would be a very partial improvement. The whole thing must be scrapped for all overseas voters.

Perhaps starting an ePetition after the General Election is over would be the way forward.

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


The Housing Crisis and the Main Political Parties´ Solutions

Britain has had a housing issue over a period of decades which has morphed into a full blown housing crisis. So it is worth asking the question: just how do the leading political parties aim to solve the housing crisis, an issue which has been extensively discussed in the media and which directly affects people´s quality of live? This question focuses mainly on Britain, though the German situation is also touched upon.

Is there a housing crisis?

In Britain, no one seriously questions the fact that there is not only a real housing crisis in Britain, but that it is the worst it has been in a generation. In fact the worst situation in a generation does not really capture the issue since the current levels of house building in Britain are actually the lowest in peacetime since the 1920s. Unlike frequent hints and suggestions to the contrary, this is not first and foremost due to an increase in migration from the European Union (EU), which started in 2004, peaked in 2009 and been running at lower levels since. This is not to suggest that net positive annual migration does not impact on housing demand and thus ultimately on house prices. It is to argue that a full-blown housing crisis has taken decades to reach the current level, rather than being a consequence of 11 years of migration from the new accession and other EU countries. Rather, it is the direct consequence of neglect by the leading political parties over generations.

Demand for housing is not simply about migration, it is also about the overall population growth, as well as other factors such as regional migratory patterns, trend towards smaller households and various many other factors. To argue, as the media, the politicians and many ordinary people increasingly have, that the current housing crisis is due to migration in general and/or so-called „uncontrolled“ EU migration in particular is quite simply pie in the sky.

The other key factor, of course, is supply of housing and here, we see the real problem which has resulted in the current housing crisis. Unlike Germany, where demand and supply are responsive to one another (albeit it with a time lag that is caused by investors, the construction industry and the planning system taking time to react to the changing circumstances), the same does not apply to Britain and has not done so for decades. Quite simply not enough housing is constructed to meet demand. At its core, this is fundamentally the cause of the housing crisis in Britain, though there are numerous factors which deliver this unsatisfactory outcome.

Of course, one could discuss the effects of certain policies which have affected the housing policy dynamic, the most important one being the Right-to-Buy policy, which since 1980 has resulted in 1,5 million homes being sold at discount. However, this does not affect demand and supply situation. People still need to live somewhere, regardless of whether a former council owned property is now owned by the last former tenant or not.

What are the solutions to the British housing crisis?

It is safe to say that one of the two leading parties is likely to lead whichever government comes into power after 07 May 2015. So it is worth asking the question of what they are proposing in their election manifestos to solve this major social and economic ill which affects the younger generations in particular (but not only). These are, of course, also the ones which either do not vote or tend to vote proportionately less than their parents´ and grandparents´ generation.

The answer in terms of what they are proposing is, sadly but perhaps predictably, not that much.

  • Labour Party: promises that 200,000 houses will be built annually by 2020, meaning that the numbers will be a lot lower until then. Given that annual construction is currently running at half that number, this is a realistic target but there is little detail on how this will actually be achieved, let alone ensuring that such housing is affordable.
  • Conservative Party: the supply of housing is not uppermost in the manifesto, since the emphasis is on privatising whatever social housing is left, namely the stock that is used by 1.3 million families living in housing associations. There will also be a requirement for local authorities to sell the most valuable properties from what remains of their housing stock (210,000 or 5%). The sales will be reinvested in new housing supposedly resulting in a larger number of new houses built, compared with those sold. The plan is to create 200,000 Starter Homes over the course of the next five years, which will be sold at a 20% discount to for first time buyers under the age of 40.

Is the end of the housing crisis in sight?

Any way you view the election promises of the two leading parties, the numbers simply do not add up. Even if it were possible to achieve the targets set by 2020, which is in itself doubtful (for example, the Conservative manifesto more or less rules out construction of Green Belt land and the Labour manifesto does not even mention it, referring only to the Lyons Review), neither party is seriously promoting serious, long-term solutions to the housing crisis. Housing is first and foremost a numbers game; the supply has to exceed demand and it needs to be maintained over decades in order to deliver not only sufficient, affordable homes, but also an increase in standards and quality over time.

The proposed solutions are not going to do much for the large numbers of people, especially those under the age of 35, who are currently having to live with their parents or paying high rents for low quality private rented housing. The proposed solutions represent yet another missed opportunity to think long-term and prioritise investment in what is a basic human necessity, as well as something which greatly influences our quality of life. The contrast with other European countries, such as Germany, could not be greater as illustrated in a previous post comparing the German and British housing systems.

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


British Voters and EUroscepticsm: much ado about nothing?

A Historic Turning Point Coming Up?

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

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

Voter Priorities (2010-2015)

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

British voter priorities 2010-2015

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

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

Voter Priorities and UK vs. EU Responsibilities

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

UK EU competencies

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

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

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

Below I address the remaining voter priorities:

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

EUroscepticism: much ado about nothing?

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

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

 

 

 

 

 

 


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

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

Demonizing Germany

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

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

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

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

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

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

Unsustainable to the Nth Degree

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

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

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

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

That’s not all, folks

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

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

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

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

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

Endgame: pressing the reset button

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

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

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

Maybe, maybe not.

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

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

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

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