Brexit and Airlines

About a week before the UK government triggers Article 50, and the stories are just rolling out about taking control how difficult untangling the UK from the EU is going to be, how much business is going to head across the Narrow Sea (and to a much lesser extent, across the Irish Sea), and how very little influence the UK government is going to have on the process.

EU chiefs have warned airlines including easyJet, Ryanair and British Airways that they will need to relocate their headquarters and sell off shares to European nationals if they want to continue flying routes within continental Europe after Brexit.

The Guardian adds a little British understatement, “The ability of companies such as easyJet to operate on routes across the EU has been a major part of their business models.” Indeed.

Some airlines have started to seek headquarters within the EU and to restructure their ownerships. EU holding requirements could include “the forced disinvesting of British shareholders.” At least some business leaders were hoping the problem would go away. Because reasons, I suppose. “EU officials in the meetings were clear, however, about the rigidity of the rules, amid concerns at a senior EU level that too many in the aviation industry are in denial about the consequences of the UK’s decision to leave the bloc.”

Getting a new agreement won’t be easy, either. At present, the European Court of Justice is the final arbiter of disputes that arise under the agreements that cover air travel within Europe. The current UK government has signaled that it wants to leave the ECJ’s jurisdiction entirely. And of course undoing a multilateral agreement opens the door for some states to assert their individual interests in negotiating a new one: Spanish diplomats have said that they will not sign on to any international accord that recognizes the airport in Gibraltar. Somebody might be taking back control.

This is shaping up to be a very good couple of years for corporate relocation businesses, and possibly for people looking to sign on at the new headquarters locations replacing folks who were unwilling or unable to leave the UK when their jobs picked up and went.

We still owe it to them, and blaming private companies will not do.

Back in 2007, the Danish army withdrew from Iraq. The government originally tried to avoid accepting Iraqis who had worked for the Danes as refugees, despite the fact that they were in grave danger of reprisals. Eventually, after a protest campaign and a protest by senior army officers, the Danish government gave in. In the UK, this example was followed – the government tried to wriggle out of it, this blog among many other people protested as part of Dan Hardie‘s campaign, and eventually some action was taken.

History is repeating itself, as Le Monde reports. The story is paywalled, but the essential point is that the NATO deployment to Afghanistan will only shrink from here to 2015, the Danes will be off very soon, and again the government is trying to wriggle out of its obligations to Afghans who they relied on in a variety of roles and who are now faced with Taliban vengeance.

This time, though, the cowardice and moral abasement has reached a new low. The official argument is apparently that the interpreters (and others) were employed by a private company, and therefore it is nothing to do with Denmark! This is repellent. It is not just that a moral obligation exists, or that a norm of common decency is involved. This attempt to hide behind privatisation is undignified, dishonest, dishonourable. Everyone involved ought to be deeply ashamed.

Now I strongly suspect that history will repeat itself in the UK as well, and no doubt in the other European contributors to ISAF. So it is important to get angry early, in order to make an example to the others. To lead off, I will ask a question.

The story above refers to a supposed private company, says that it is a British company, and then names it as LSU or Labour Support Unit. But there is no such company registered in Britain. “Labour Support Unit”, in general, is a British military organisation, a staff attached to a large formation or garrison that is responsible for employing civilians.

So either Le Monde is confused, perhaps because “company” can be a business, a social group, or a military unit in English, or else the Danish government is bullshitting to its own public that it’s all the problem of the private sector, while hoping that the British government sorts out the problem and spends the money. This is a sorry, sordid business.

The Rain In Spain Falls Mainly On The Journalists, It Seems

Things in Spain are never exactly what they seem to be. This is a painful lesson that even Angela Merkel must have learnt in recent days, especially since she put her credibility so much on the line in backing the country’s deficit reduction efforts. “Spain has really done its homework and I think it is on the right track,” is the message she has been trying to sell to the world.

Naturally then she will not have been amused to learn last Friday that rather than the 6% promised under the Spanish stability programme, the country’s deficit in 2011 is going to be something like 8%. Some sort of overshoot was long being anticipated, but such an overshoot? Naturally it isn’t (quite) Greek proportions, but it is still hardly evidence for a credible and praiseworthy effort. This is the thing about Spain, it obviously isn’t Greece, but still all isn’t quite what it should be. Add to this deficit result the fact that the Bank of Spain is reported to be frantically pressuring banks into revising the valuation of their property asssets following the publication by ratings agency Fitch of a report which claims they are currently on average 43% overvalued. And, of course, any major downward revaluation of the repossesed assets will give an entirely new reading for the balance sheets of many of the institutions involved (the Caja de Ahorros del Mediterraneo went from having a 50 million euro profit at the end of 2010 to 1.7 billion euros in losses in June 2011 following the application of just such a mark-to-market procedure – and the savings bank was finally sold to Banc Sabadell for the princely sum of one euro). Put two and two together here, and it is clear that the country’s bond spread may once more be in for a bumpy ride when investors finally recover from their yuletide hangovers. Continue reading

Let Our Fame Be Great by Oliver Bullough

Review in brief: Encounters between Russia and the peoples of the Northern Caucasus have not been happy ones, and have generally ended badly for the smaller nations involved. From the Nogai driven into the Black Sea in the 1700s to the Circassians mostly slaughtered or removed to the Ottoman Empire in the 1860s to the Chechens, who fought for 30 years in the 1800s, were deported en masse to Central Asia in 1944 and subjected to two wars since 1994, the overall picture is bleak. The individual stories are full of spirit and life, and Bullough goes to great lengths to find people and paints deft portraits. He’s a better reporter than analyst, but overall Let Our Fame Be Great: Journeys Among the Defiant People of the Caucasus is a splendid book.

…In Fact, It Has Never Been Tried

Everyone’s het up about Angela Merkel’s speech in which she said that multiculturalism had failed in Germany. Here’s the King’s College London War Studies blog, for example, being overheated. Here’s respected correspondent Tom Ricks being even more overheated.

There is one problem with this whole festival of Terribly Serious People stroking their beards about The Problems Of Integration. It is this: Multiculturalism is not German policy and never has been. It is true that Germany doesn’t have a policy of deliberate official racism. But the word “multiculturalism” doesn’t mean very much if you define it as the absence of apartheid, in much the same way that “peace” isn’t just the absence of war.

In fact, official Germany pretended for years that there were no immigrants in Germany, which is about as far from multiculturalism as you can get while remaining a liberal democracy. And it’s not as if it was hard for journalists and others to find this out:

“We kidded ourselves for a while that they wouldn’t stay, but that’s not the reality,” she told members of the youth group of her Christian Democratic Union party, referring to the influx of workers, known as guest workers, who helped fuel the country’s postwar economic boom. “Of course the tendency had been to say, ‘let’s adopt the multicultural concept and live happily side by side, and be happy to be living with each other’. But this concept has failed, and failed utterly,” she said.

Yes, she referred to it two sentences before the bit everyone freaked out about.

Of course, you could go on to ask in what way this concept has failed utterly – Germany had not, when I last checked, descended into race war – but that would be to lend the whole affair a dignity it does not deserve. Banging on about “christliche Leitkultur” is an utterly routine and tedious habit of right-wing German politicians. It’s depressing that Angela Merkel of all people should descend to this, but it’s of a piece with the generally crappy performance of the CDU-FDP government – her version of the special tax break for hoteliers.

Veteran journalist Michael Spreng‘s excellent blog has reasons why this has come up just now – basically, the coalition has lost its way and there is trouble in the ranks. Important people in the CDU (and even more so in the CSU) have become keen on the idea of Karl Theodor zu Guttenberg, the aristocratic defence minister, as an alternative chancellor. You have to remember that large chunks of the party, and especially the Bavarians, have never been reconciled with Merkel to begin with – she has usually been significantly more liberal, more northern, more Protestant, and more female than the party.

So this should really be considered a bit of cynical fan service, intended to queer the rivals’ pitch. Now can you all calm down?

Woerth/Bettencourt: efforts to cap the well fail, storm approaches

This week’s Canard Enchainé has a cartoon likening the Woerth/Bettencourt scandal to the Deepwater Horizon oil spill. This annoys me, as I’ve been making the same joke to anyone who will listen for weeks. So what happened? Well, just to run up to speed…

So there’s the heiress to L’Oreal, Liliane Bettencourt, the richest woman in France. (Among other things, she is the second biggest taxpayer and receives a reputed €34m in dividends a month.) She’s in her eighties, and she has a daughter. She also has a faintly boho circle of friends and a crack team of accountants. Now, she fell out with her daughter about the amounts of money she spends on her mates. The daughter sued, trying to get rid of her mother’s accountant and have mamma placed under a power of attorney. Mamma doesn’t agree, and the fact that she manages to pay the same marginal tax rate as someone on a salary of €3,000 monthly would tend to support the notion that she can well look after herself.

Then it turned out that her servants had been secretly taping conversations between her, her accountants, and various others. Sensation; one of the people involved is Eric Woerth, the former Budget Minister and now Minister of Labour. Eric Woerth’s wife, Florence, is an accountant employed by the Bettencourt family office. Further sensation.

But what were they talking about? One of the plaintiffs in the original lawsuit now gets her own back, by telling the newspapers, specifically the former Le Monde editor Edwy Plenel’s subscription-only website Mediapart. She says that Mme Bettencourt was in the habit of inviting key right-wing politicians for dinner and distributing yer actual brown envelopes stuffed with raw cash. Names include Woerth, Prime Minister Francois Fillon, and…Nicolas Sarkozy. El presidente himself.

Suddenly, no-one was talking about the family dispute any more, and a certain Macondo quality took hold. A string of efforts to cap the leaking well began.

Activating the giant shears

First of all, the UMP’s underwater robots tried to cut off the information source, encouraging legal efforts to suppress the documents of the case. That didn’t work; they were clearly “d’intéret génerale” and anyway, bits were washing up everywhere. Including in Switzerland, where it was alleged that €100,000 of the campaign money had come from. This would be highly illegal.

Top Hat

Then they tried to place a steel cap over the leak. The ex-accountant was quizzed by the police, and suddenly decided that Sarkozy hadn’t received the money and that the dates were wrong. What was wrong about them wasn’t clear, but it was certain who was at fault. Le Figaro somehow got what purported to be an extract from the transcript of the police interview, which said that Mediapart had “romanced”, perhaps a careful choice of words. (Remember that bit – it’ll come up later.)

There was only one problem; the police had already seized the bank statements, and large sums of cash had been withdrawn on each of the dates in Mediapart’s original report. Bubbles of hot air were building up beneath the cap, rendering it dangerously unstable.

A string of new leaks began to appear; a rather well connected racing stable, which had turned up just in time for its owners to benefit from a special tax break, for example. The tax break allowed those subject to France’s wealth tax to shield some of their assets by investing in small businesses. It had probably not been foreseen that such a small business might include buying horseflesh. Who changed the rules? M. Woerth, while his wife was one of the shareholders.

Actually, the affair has a curious horsey scent. Woerth is also accused of having sold a publicly owned racecourse, at mates’ rates, in his capacity as mayor of Compiégne…

There was more serious stuff, too. Bettencourt’s tax file, as one of the biggest in France, should have been audited every 3 years at least. Somehow, this had not happened since 1995 (significantly, since the end of the Mitterand presidency). The internal inquiry denied that Woerth had anything to do with it, but not many people believed this.

In the light of all this, containment efforts broke down. The accountant changed her mind again. The new line of defence was that the large cash withdrawals represented the Bettencourts’ pocket money. Even Le Figaro noted the curious coincidence that this requirement spiked by a factor of eight immediately before elections.

Top Kill

Clearly something more powerful than the underwater robot was required, and it was decided that a shot of Presidential authority might do it. Nicolas Sarkozy appeared on national television, in an awkward cross between an interview and a formal address, during which he talked a great deal about pensions. Afterwards, the semi-interviewer was accused by the France 2 journalists’ union of having done the government a favour.

Then came a new shocker – the discovery of the “microparties”. In France, it is illegal for a party to accept more than €7,500 a year from any one person or organisation. There is, however, no restriction on how many parties one candidate may be a member of. Also, someone who is a member of a party may give it as much as they like, and an association (as opposed to a party) can do as it likes and can also turn into a party at any moment. As a result, France has over 300 active political parties, many of which have no members. Inevitably, Woerth turns out to have such a personal party. The President himself has two. Valérie Pecresse has three. Laurent Wauquiez took the opportunity of an official trip to London to solicit money for his pocket party from French businessmen here.

Thick, sticky cash kept spilling from the damaged well. It turned out that Bettencourt had received €100 million in refunds over four years under a Sarkozy-initiated tax cut. Woerth was discovered to have pulled strings with the Bettencourts for his wife. The ex-accountant had been paid by both Bettencourt and her daughter. And there was that thing with the island in the Seychelles of unknown ownership.

This week’s Canard has an informative article on the Bettencourts’ tax affairs; thanks to a neat structure, the dividends from L’Oreal (a sort of feudal tribute imposed on every artificial blonde) flow into a shell company and sit there. Having been taxed as income at source, they are not then subject to further taxation. The lady draws on this company’s funds as required, and therefore manages to pay income tax only on what she spends.

Junk Shot

The situation, therefore, is grim. Sarkozy has been quoted as complaining that Woerth is “un poids, pas un atout” (a burden, not an asset) that it was “impossible de se délester” (impossible to jettison). Which begs the question, why is it impossible to get rid of him? It probably has something to do with the time he spent as the UMP’s treasurer. The president has some experience of these things – as Edouard Balladur’s campaign director in 1995, he was responsible for banking 10 million francs of campaign contributions. Ostensibly collected at campaign rallies, the only unusual feature of this transaction was that it consisted entirely of 500 franc notes. As Arthur Goldhammer says, one way of looking at Sarkozy is in terms of a swap of elites – the electorate turning to the private-sector rich rather than the civil service/industrial technocracy. “I call you…my base!”, indeed, but surely that took it a little too far.

So, what to do? Fortunately, there’s always the option of abasing yourself in a binge on racist demagoguery. So the police shot a gypsy, which started a riot.

Ce matin, au cours du Conseil des ministres, Sarkozy a donc annoncé qu’il organiserait une réunion, le 28 juillet, à l’Elysée sur « les problèmes que posent les comportements de certains parmi les Gens du voyage et les Roms » et qu’on y déciderait « l’expulsion de tous les campements en situation irrégulière ».

One of his own senators wouldn’t agree, but we’re in “don’t confuse me with the facts!” territory. After all, they also want to pass a flag-burning law, despite the fact there already is one. But sometimes, the best solution is a million gallons of old rope, balls, and toxic mud.

I mentioned that the Figaro story would come up again. Look at it closely; you’ll notice that there is no byline attached. This week’s Canard has a news-in-brief item mentioning a protest by the paper’s journalists about a story that was dubious and “part of the presidency’s communications strategy”, in connection with an unsigned article.

Hungarian passports; or, dumbest Stratfor article ever

This sort of thing is why I have trouble taking Stratfor seriously.

Short version: the new, center-right Hungarian government is reviving the plan to offer Hungarian citizenship and passports to ethnic Hungarians living outside Hungary. (There are a couple of million of them. Most live in Hungary’s neighbors Romania, Slovakia and Serbia, with smaller numbers in Croatia and Ukraine.) Stratfor sees this as “an insurance policy — a way of broadening [Hungary’s] power and securing itself should its protectors, the European Union and NATO, weaken.”

What the hell? Continue reading

what gordon should have said

You’re worried about immigrants? Jesus wept woman, I had this guy shot for you. What more do you want? 

Some of this goes back to the accession of the Poles, et al to the EU, when the government desperately tried to fudge the likely numbers coming in. What they could have said at the time was “ we know that large population transfers tend to make people nervous, but frankly we’re looking forward to getting hundreds of thousands of extra taxpayers in to help pay for all the stuff you get from the government. And it also means your kids can work anywhere they please on the continent too: and what’s more they won’t be stacking shelves. British win!” And just to underscore the point they could have timed a major public spending programme to the arrival of our Eastern European fellow toilers, being experts in the dark political arts and everything. They could have at least redirected some of the extra tax receipts that our new friends have contributed to the Treasury specifically to relieving what extra pressure there has been on schools, hospitals and other public services. 

All else aside, Mrs Duffy was owed an explanation of the likely consequences of the government’s actions at the time. If she’d have been given one, Brown might not have made such an arse of himself now. 

When our kid was young and he thought that there were monsters under the bed we tried to make it clear to him that not only were there no monsters under the bed but that there were no monsters full stop: because when you’re dealing with irrational fear what you need to make clear first of all is that there is nothing to be scared of. 

What the government has done over immigration was firstly to tell people that there were no monsters coming here, thus confirming the notion that immigration is in fact something monstrous; then saying that there are monsters coming here, but don’t worry, we only let them in if we give them licenses and if we find any under your bed we’ll deport them. Sure enough, the treatment certain categories of migrant are subjected to is truly monstrous, when it’s not just foul and mean spirited. This is positive encouragement for people to see monsters where none exist. Finally, an old lady comes along and tells Gordon about the monsters under her bed and he calls her a bigot. Now the Tories are dancing about shouting WOO, MONSTERS! and Gordon’s doom is apparently sealed*. Welcome, Prime Minister, to the world you made. 

 See also Justin, from whom I have snaffled many links in the above. 

*Maybe. On the other hand this seems to rest on a conviction that the “core Labour vote” is synonymous with the “confused Granny vote”, which strikes me as a version of the same metropolitan media condescension that metropolitan media types now like to accuse other metropolitan media and political types of. Hey, ho.

Are the Germans taking over Romania?

Not quite those Germans.

What’s happening in Romania, then? Handelsblatt reports. It’s time to pick a president, and the Social Democratic candidate looks in a strong position – although he finished second by a few points in the first round of the French-style presidential election, he’s got promises of support from several other parties, notably the Liberals and the Hungarian minority.

Fascinatingly, though, as part of the agreement with these groups, he’s promised to appoint the independent mayor of Sibiu – Hermannstadt in German – as prime minister. That’ll be one Klaus Johannis. Yes; he’s a Transylvanian German, the first time that a member of this minority will head the government. Of course, Romania has a hell of a lot of problems; the economy’s going to shrink between 7.5 and 8 per cent this year, there’s an IMF requirement to cut the public sector deficit to 7.3 per cent of GDP at the same time (ah, the IMF – never an institution to risk popularity by changing its ideas), and the country’s elite is full of old spooks from the Ceaucescu years.

But I can’t help but be amazed at the idea of a Romanian government that includes the Hungarians and is headed by a German, within 20 years of the revolution and 5 years of the CIA operating a secret jail in the suburbs of Bucharest. Well – non- or quasi-revolution might be more like it, which just adds force to the point. There are other reasons to be cheerful; HaBa also points out that there is some €32bn in EU funding heading that way in the next few years, which ought to help. If you want an inspiring European story, it’s right there.

However, they also note that the Renault Logan car factory accounts for 2 per cent of GDP and 15 per cent of net exports. I guess they can’t really be criticised for pinning their hopes on export-led growth when the UK and Germany are doing exactly that.