Oh We Are The Champions

Yes we are really, aren’t we. Especially if we are called Arcelor, or Danone, or Endesa, or Eni, or Enel, or Banca Antonveneta or Pekao. And what these champions have in common, and it is this which sets them so much apart from their footballing equivalents, is not the ability to win anything, but rather their capacity to lose, especially in a take-over battle from a foreign pretender. And just for this very reason it is, it seems, ok for you to include the referee in your line-up. Indeed such is the sporting prowess of these ‘champions’ that it is deemed that what they are most in need of is not the cold harsh wind of competition, but rather protection, and indeed protectionism, anything rather than face outright competition from would-be global rivals. A rare breed of champions these.

I think before I go further, I would like to draw attention to one idea which holds us all together here at Afoe:

Purity of race does not exist. Europe is a continent of energetic mongrels. – H.A.L. Fisher

So to rejoin the main them, what do we say to India or to China, or relatively poor Latin American countries like Colombia and Bolivia – open your markets to us we say, the competition will do you good (read Suhit’s last post). As well as being inefficient, we also seem to be hypocrites. But hold on a minute, isn’t there are bit more here? Just who exactly are these foreign competitors that we all seem so worried about? Well these days the foreigners who bother us most normally seem to be other Europeans. In fact, at the end of the day the Mittal/Arcelor affair is all about two European based global companies. Now come a bit nearer home, to the cases of the banking and electricity sectors like Poland’s Pekao, or Italy’s Eni and Enel, or Spain’s Endesa
or France’s Danone (or just about anything else for that matter according to the proposed new law). The rivals from which we are so in need of protection are in fact our main Eupoean competitors.

Two questions are raised here: what exactly does ‘foreign’ mean in an EU context, and what kind of benefits can consumers expect to see from all the protection that is being lavished?

Let’s start by looking at one or two specific cases begining, perhaps with Spain, and Jose Luis Rodriguez Zapatero. According to reports Zapatero (who regular readers will know I have defended more or less uncritically of late) is trying to reassure the EU that he has no intention of using his golden share:

Prime Minister Jose Luis Rodriguez Zapatero told reporters at the Senate that the government will respect market rules, but will also seek to protect Spain’s national interest.

“Markets are very important but for this government the citizens are more important,” said Zapatero, who told the head of E.On AG in a meeting Tuesday that he is strongly opposed to its 29.1 billion euro ($34.72 billion) offer for Endesa.

Possibly precisely because it is not clear what he can have meant by citizens being more important than markets in the context in question, Brussels have more or less given him a formal warning:

The European Commission warned Madrid on Wednesday not to use illegal protectionist means to try to block Eon’s takeover bid for Endesa, the Spanish utility.

The warnings came as the German power group prepared to take its case for the €29.1bn ($34.6bn) offer on the road to shareholders, and as other utilities considered joining in the race. Brussels’ intervention was sparked by remarks from the Spanish government’s chief spokesman that Madrid would “do everything in our power to ensure Spain’s energy companies remain Spanish”.

Also since we are all in the EU, and in this sense are all Europeans, I simply cannot understand what this means anymore:

“I understand that Germany wants to have a strong global energy company, but so does Spain,” Zapatero said..

But what is the problem with saying: we want to have strong European energy companies? Full stop. I’ll tell you what is wrong with not saying it: 12 EU countries share a common currency. In theory they are no longer countries for all significant economic purposes, although in reality, of course, they continue to be so.

The Italian case doesn’t seem to be very different:

The threat of creeping protectionism across Europe deepened on Wednesday when Italy raised the prospect of toughening Italian takeover laws in retaliation against France’s efforts to deter foreign bidders from acquiring French companies.

Giulio Tremonti, finance minister, said Italy was among the most “market-oriented” countries in the European Union and disliked protectionism, but it could not ignore France’s firm line on hostile takeover bids.

Poland is in hot water too:

The European Commission on Tuesday threatened to bring proceedings against Poland’s attempt to block Pekao SA and BPH merger, the two banks in which Italian bank UniCredito has stakes.

Internal market commissioner Charlie McCreevy said he was not satisfied with Polish government’s response to charges that blocking the merger violates one of the fundamental principles of the European Union, that is of free capital law.

“I asked the legal services to examine the possibility of launching proceedings on the issue,” he said, adding that EC decision can be expected soon. .

The Bitter Pill To Swallow

Obviously the decision which has really set this train in motion was taken in France earlier this week:

France is preparing to push European Union takeover rules to their limits again by giving companies the right to use so-called poison pill defences to rebuff hostile takeover bids – even if they come from companies unable to use similar strategies.

The new rules allow companies subjected to a hostile bid, or expecting a possible raid, to issue warrants convertible into shares at a discounted price to existing shareholders, making any offer more expensive and encouraging friendly talks.

Well, I mentioned consumers before, since consumers might, if anything, benefit from increasing competition, but there seems to be little of this here. Rather it is a question of protecting vested corporate interests and national state ones. The consumer only exists here as an afterthought.

Now all of this would be either good or bad, according to your point of view, except for one small detail, we have the eurosystem, and already it could hardly be said to be working optimally. When the French referendum was held last summer I made the point that what was really being voted on was in fact the future of the euro, since the continuity of the euro is predicated on a continuing process of political union (at least in the case the 12 participating states).

I think the French ‘no’ was the first major red alert signal that strong centripetal forces had stated to go to work, this week’s revival of petty nation state nationalism is the second. The attitude towards the freedom of movement of our fellow European citizens in the new accession states might be a third:

Service Workers: Stay Home

National interests can still trump good sense, as the demise of an EU initiative to liberalize trade in services shows

Many European Parliament members were mortified last year when voters in France and the Netherlands deep-sixed a European Union Constitution long sought by the region’s political leadership. But now the Parliament has done something that could hurt Europe even more…….

Productivity growth in Europe’s service sector has averaged well below 1% in recent years, vs. 3% in the U.S. Burdensome regulation is a big part of the problem, Mettler and other business advocates say. Sadly, the Lisbon agenda’s goal of making Europe “the most competitive and dynamic knowledge-based economy in the world” by 2010 seems more elusive than ever.

Business Week talks about national interests ‘trumping good sense’, I would go even further, national interests are in danger of wrecking the euro (even more than it is wrecked already that is). For the eurosystem to survive those member states who participate will have to denationalise themselves (not their state owned companies. please note, but the countries themselves) completely. This was always an implicit part of the euro deal. In the real world there are no free lunches remember. Did anyone seriously think that a small group of countries would simply enjoy very low interest rates – as a kind of ‘freebee’ – and that would be it?

The price to pay for the euro is to be paid in the heart, it means the end to the old petty forms of patriotism. Well we have to start somewhere, so instead of worrying about whether the Catalan statute imperills the unity of Spain, lets go down the other road: lets get rid of Belgium. Then lets get rid of France, Germany, Spain, Italy etc. Europeans aren’t ready for this many will say (in fact they just did in the referendum). Well then they aren’t ready for the euro I say. This is my whole point of view. The labour mobility issue is a side problem. We have a national champions mobility issue to address first. What we need isn’t just labour mobility it is mobility tout court (mental mobility, flexibilisation, not just of labour markets but of everything, especially of feelings which need to go up an abstraction notch). We are living in the past, not in the future. If we continue to stay there the future will come looking for us soon enough, of that we can be sure.

44 thoughts on “Oh We Are The Champions

  1. In which regard do takeovers benefit consumers? It seems to me that a corporate merger decreases competition.

  2. Sorry, I don’t understand. Why is it “protectionist” to say that if you’re doing business in a country, you have to obey the laws of that country? And why are labor unions condemned for narrow-mindedness for opposing a measure that would hurt workers in general, since it would provoke a “race to the bottom” between countries (since otherwise native businesses would be at a competitive disadvantage relative to migrants from countries with looser regulations)?

  3. “Why is it “protectionist” to say that if you’re doing business in a country, you have to obey the laws of that country?”

    As long as we understand by ‘country’ here the European Union I don’t see any problem. Its only if we don’t consider the EU our nation state of reference that all the problems start.

    “In which regard do takeovers benefit consumers?”

    They may or may not. I don’t think I’m saying anywhere that they necessarily do. The issue here is the future of the single market and the common currency.

  4. “since it would provoke a “race to the bottom” between countries”

    Why is it always a race to the bottom. Why do people never seem to consider the possibility we might have a race to the top.

  5. Oliver,
    Edward has provided links to more detailed reports of recent cases. If, once you’ve read through them, you still believe that the principle objection of the protectionists is a concern about insufficient competition, then post again below. If it seems worth it we can argue it through.

  6. As long as we understand by ‘country’ here the European Union I don’t see any problem. Its only if we don’t consider the EU our nation state of reference that all the problems start.

    The services directive in the original form did not propose that national legislation be replaced by union legislation. It was supposed to make member states’ laws valid in other member states. That’s a difference.

    The issue here is the future of the single market and the common currency.

    We’ve gone too far. There will be a backlash.

  7. Edward, I’m with you on the economics, but you lose me on the regional agenda.

    The first time I heard this line being pushed with any seriousness it was inside the European Commission, and the case was explicit and political: to secure broader support and reinforce their powers and legitimacy, the European institutions should reach out to dissatisfied regions with well-funded appeals to both their ambitions and their resentments. This would involve bypassing nation-states that were obstructively jealous of their own powers and claims to legitimacy.

    I can understand why a Belgian might not value the nation-state (I read recently that only 5% of all Belgian marriages were between a Flamand and a Walloon). I can understand why for different reasons a Catalan might resent Castillian rule. And surely everyone can understand the attractions of such feelings to EU-level policymakers frustrated with their inability to connect with the grassroots: simmering regional agendas are a tempting resource in the difficult work of moving policymaking beyond national rivalry.

    The argument has generally been made using an historical imperative (an end to war, etc, etc). Your take is an interesting variant: an economic imperative arising from the difficulties of running the euro.

    I’m making no economic case. Instead, I’d like to suggest that moving things into a different forum (integrated or regional) won’t necessarily improve on what we’re offered by our national leaders. It’s significant that those mobilising most noisily for integrated economic policymaking in the eurozone are those who wish to reassert at a European level the political interference you decry: bring monetary policy under political control by clipping the wings of the independent central bank; harmonise fiscal policy by clamping down on variation between tax regimes, thus making taxes easier to impose and maintain. What precedent does a federal model offer regarding the politicisation of national champions? CNOOC is out of Chinese hands, while America’s ports may shortly be rescued from the menace of foreign ownership. Of course the rhetoric of national champions may not be used when American politicians pander to state-level interests, but nonetheless the Farm Bill is stuffed with subsidies for the farming constituencies, while the midwest gets discriminatory steel tariffs, at least in election years. Picking up on your concerns about the lack of coordination in eurozone economic policy, how comfortably over the medium term will the Fed’s monetary policy fit with the Bush White House’s fiscal stance?

    The moral is that actors at the integrated level can be just as bloodyminded and foolish as national actors. The same goes for regional actors. You’re justifiably proud of your adopted Barcelona, but why should this pride be any more legitimate than the national pride of a Swede or a Pole? By corollary, why should regional government be better or more legitimate than national ones? Many of the disasters of Spanish planning and development stem from the corruption, incompetence and cynicism of Spain’s local and regional politicians.

    You persuasively diagnose a serious problem. But your solution (“… lets get rid of Belgium. Then lets get rid of France, Germany, Spain, Italy etc.”) ignores a recent widely-learned lesson. No matter how indefensible the existing state of affairs, regime change is a mistake unless you have a careful and realistic plan about what you intend replace it with.

  8. I have no doubt their main motivation is economic nationalism. But I protest the notion that by doing so they are working against consumers’ interests. No industrial policy is an industrial policy, too. A loss of a national champion curtails a country’s chance of implementing an industrial policy. The EU itself is probably finacially too limited to implement a common industrial policy, even if it could agree on one. Could you imagine the quarrels about a common energy policy?

  9. You’d have to explain what you mean by an industrial policy. I imagine though that what you have in mind would involve more than the prevention of monopolies, your initial comment notwithstanding. I’m sure such a thing could be said to protect producer interests – including those of employees – in a variety of ways. How it might be said to protect consumer interests would need a little more clarification.

  10. Bert, interesting thoughts.

    “The first time I heard this line being pushed with any seriousness it was inside the European Commission”

    Good. Well I’m glad someone up there thinks about something :). Actually this approach has a name inside Spain, it is known as Pujolism, after the former president of Catalonia.

    “And surely everyone can understand the attractions of such feelings to EU-level policymakers frustrated with their inability to connect with the grassroots”

    I think we could think about this on two levels. On the first level there are the stupid and bureaucratic attempts by the Commissioners to introduce silly standardistaion rules (like Kilometres and the universal sausage), for which they are understandably ridiculed.

    But there is another level, that of a nascent state apparatus with sufficient power and sufficient authority to make what it says stick.

    If the EU was simply a Common Market, then all of this latter effort would be unnecessary and thoroughly redundant.

    Mrs Thatcher simply wanted the EU as a common market, and the UK position insofar as it fits in that vision (and perhaps the Danish one) is pretty coherent and consistent.

    But others have wanted to see the EU as something else, as an enitity which was in some ways comparble to the United States. In part for this reason, since merely doing away with transactions costs couldn’t be seen as a justification for anything, a common currency was introduced by one group of countries. Fine.

    The name of the United States has been invoked time and time again by those who insist that the euro can work. So lets look at the US, and lets look at what it hasn’t got, rather than what it has got, for once. The US doesn’t have a large block of Nation States inside the union with populations which share a more or less strong nationalist sentiment about their state.

    But this is what we do have here in Europe, and it is precisely this national feeling which makes the Union hard to govern, and the euro hard to operate.

    The commission already has some states systematically ignoring agreed policy on budget deficits, and now another group of countries have started turning a deal ear to the mergers and takeover policy, to the idea of creating European champions to replace the old local ones. Obviously the administrative centre is far too weak for the role it has been handed.

    Now one of two things can happen: we can either go back to a general common market situation, and unwind a euro which has many negative consequences and is not absolutely necessary for a mere unified market, or we can go forward to a new set of arrangements where the old nation state entities get gradually stripped of their power and their importance. They have, after all, lost a good deal of this already, so the distance to go, in some senses, isn’t so great.

    What we now need is pragmatics, and a coalition of the willing. I can identify three groups of people who might be willing to do what those early pioneers in Leipzig did back in 1989, and bring down the ring-fence wall which divides us:

    (i) those like me (and possibly you) who feel themselves to be first and foremost Europeans rather than belonging (in the strong sense of the term) to any lower level national group, (ii) those who are members of the smaller EU countries (whose economies, surprise, surprise, are normally characterised by a far higher level of openness than is to be found in the larger states), (iii) and those disgruntled ‘national minorities’ who find their identity either not expressed or poorly reflected in the existing nation state structure.

    So this is what I am suggesting, that we come to recognise what an obstacle these old state structures actually are (Rajoy is just shouting his head off behind me on the telly as I write, about some aspect or other of Spain’s national constitutional interest).

    “I’d like to suggest that moving things into a different forum (integrated or regional) won’t necessarily improve on what we’re offered by our national leaders”

    No, you are right, it won’t necessarily do so. It would, however make what we are purportedly trying to do coherent. At present it isn’t even that.

    “It’s significant that those mobilising most noisily for integrated economic policymaking in the eurozone are those who wish to reassert at a European level the political interference you decry:”

    Well don’t include me in that group.

    “bring monetary policy under political control by clipping the wings of the independent central bank;”

    And certainly not in that one.

    “America’s ports may shortly be rescued from the menace of foreign ownership.”

    Yes, an the EU could do the same, vis-a-vis ex EU companies, but we are talking by and large about cross EU mergers, ‘foreign’ here means other Europeans, this is what I find ludicrous.

    “how comfortably over the medium term will the Fed’s monetary policy fit with the Bush White House’s fiscal stance?”

    Yep, but this is the type of pushing and shoving which goes with any separation of banking from government, we could also see Gordon Brown and Mervyn King at loggerheads at some stage (as the bank and the Dept of Finance are right now in Japan). This is normal, and to some extent healthy, what is ab-normal, and what is certainly ‘unhealthy’ is what is happening in the Eurozone right now, were you have a group of nation state actors as major players bang in the middle.

    “the national pride of a Swede or a Pole?”

    I’m trying to draw a pragmatic distinction between large nation state nationalism (in this case Poland, which has certainly now arrived on the scene) and the position of the smaller states. I don’t think it is mere coincidence that ‘poor little’ Portugal is simply taking the medicine and swallowing on the debt front.

    “No matter how indefensible the existing state of affairs, regime change is a mistake unless you have a careful and realistic plan about what you intend replace it with.”

    Well I take the point you are making, but I would not suggest introducing this by recourse to bayonetts. What I think is it is time for the Europeans themselves to decide: do they want to go back to a common market, or do they want an integrated Europe with a common currency. It is the half-way house that simply won’t work. The worst of both worlds.

  11. Oliver,

    I am basically trying hard to side step the consumer interest part of the argument, although I don’t think it unimportant.

    I am not a sufficient specialist in the energy sector to make any strong claims, but I do imagine there would be savings to be made by having an EU wide electricity system, and indeed a much more coherent EU energy policy.

    OTOH I have the nagging feeling (as with the Mittal/Arcelor) case, that global assets (such as those of Endesa in Latin America) may be just as important here as the European ones.

  12. “”Why is it “protectionist” to say that if you’re doing business in a country, you have to obey the laws of that country?”

    “As long as we understand by ‘country’ here the European Union I don’t see any problem. Its only if we don’t consider the EU our nation state of reference that all the problems start.”

    That doesn’t answer my question. “Protectionism” generally refers to policies which disadvantage imported goods or services relative to home-grown ones. Here it’s being used to stigmatize those who don’t want home-grown service providers to be at a disadvantage relative to foreign ones.

    (And shifting to a European frame of reference doesn’t make the issue go away. You’d still have different sets of rules for service providers in the same market, depending on their place of origin. And you’d still have a “race to the bottom.”)

    “Why is it always a race to the bottom. Why do people never seem to consider the possibility we might have a race to the top.”

    Is no regulation of business “the top,” then? If so, then you shouldn’t be surprised that people who don’t share this view oppose rules whose effect would be to bring it about — or that they’re suspicious of a “European project” whose goal often seems to be to impose neo-liberalism through the back door.

    If that’s not what you mean, then I honestly don’t know what you mean.

  13. “If that’s not what you mean, then I honestly don’t know what you mean.”

    I think this is to the point Adam, and this isn’t meant to be rude or insulting. I think you are looking at this with a mindset that isn’t geared to getting to grips with all of this.

    One example:

    “they’re suspicious of a “European project” whose goal often seems to be to impose neo-liberalism through the back door.”

    We here at Afoe generally have no idea what ‘neo-liberalism’ is. We know what old fashioned British liberalism was and is: belief in free trade to make consumption products for the domestic working classes cheap and to push out vested interests at home, coupled with what is usually termed ‘progressive’ social policy, widespread welfare, acceptance of people’s sexual orientation, gender equality etc.

    We also know, more or less what US ‘libertarian’ liberalism is: small government, my right to do in my own home what I please, strong interpretations of freedom of speech (ie without too much inherent responsibility) Jallend-Posten style, minimum social welfare provision.

    But neo-liberalism is an expression which only is used by those who want to attack something. That alone should lead you to smell a rat.

    “Is no regulation of business “the top,” then?”

    I don’t think we have been talking here about regulation or the lack of it, but at what level the regulations exist. I’m sure you have noticed, Brussels has rules. What it doesn’t have is teeth to enforce those rules.

    The race to the top in question would be a race to raise the educational level of our populations to move them as quickly as possible up the value chain. At the same time we would clear space lower down for poorer countries to move in and occupy economic space. This is what is termed win-win. I have no interest in any sort of race to the bottom.

    Basically I am an intenationalist and a European. I am concerned about petty European nationalism, and European xenophobism whether this is directed at our fellow muslim European citizens (or citizens to be in Turkey) or at our Indian and Chinese counterparts (see Suhit’s last post). If this is neo-liberalism, then I’m a neo-liberal.

    “If so, then you shouldn’t be surprised that people who don’t share this view oppose rules whose effect would be to bring it about.”

    What we too often have in the name of regulation is a body of legislation to protect insiders against outsiders, whether these outsiders are new entrants in any line of economic activity or newcomers to Europe and their offspring (ie, look what happened in France last autumn).

    “That doesn’t answer my question. “Protectionism” generally refers to policies which disadvantage imported goods or services relative to home-grown ones. Here it’s being used to stigmatize those who don’t want home-grown service providers to be at a disadvantage relative to foreign ones.”

    Well we just have to accept that we see this differently, since what you don’t think answers your question in my book is a complete answer. The rules in question here are EU rules, foreign means now ‘anyone who is not a citizen of the EU’, so home grown providers are anywhere within the frontiers of the EU, including in the 10 new member states.

    I guess if I said that what you were arguing for was Mrs Thatcher’s common market idea you would feel insulted, so I won’t say it. But you might take a long hard look at what you are actually arguing for, and how relevant all this is in today’s world.

  14. My reference to regime change was partly an underhand debating trick, sorry (place your argument next to a busted flush and invite a comparison). But it was mainly intended to get across how unrealistic I feel the dream of constructing a European state is in the current climate. If the choice is, as you suggest, between an EU with all the attributes of statehood and a reversion to squabbling nationalism then all the signs are that the euro is doomed and that the rest of the EU will follow, messily, in due course.

    Happily, I think there’s another option. The EU cannot be an association of nation states – too much sovereignty has been pooled, and the benefits from that pooling are too entrenched. It’s not however a nascent state – the resources that the member states bring to the table are too great, and their central role was confirmed very early in the piece (most clearly by de Gaulle, with his empty chair). It’s something else, and the jargoneers reach for latin here to cover the thinness of this insight: the EU, they say, is sui generis. Put unpretentiously, we’re making it up as we go along – a process we see unfolding in front of us with the euro. Institutional change has its place here, of course, and I don’t rule out even a big move to further integration on principle. But it has to be within the bounds of what’s possible.

    Regarding the deficit criteria, there are fewer and fewer defenders of the flawed arrangements negotiated for this. Enforcement of discipline on member states was put in the hands of member states. Duh. But I can’t believe that putting enforcement powers in the hands of a centralised body is the right course. As it is, some politicians indulge themselves by running against Brussels. Once social programmes start getting cut, they’d be indulging themselves if they didn’t. If you’re worried about the noxious effects of nationalism, this strikes me as a bad move. As an AngloSaxon I have some fairly standard-issue ideas for an alternative approach, which perhaps belong in another thread: not enough thinking has gone into the role of markets as a source of discipline (quote Bill Clinton: “When I die I want to come back as the bond market – you can intimidate everyone”); not enough progress has been made in compensating for a lack of monetary flexibility by improving flexibility elsewhere (yes, the Lisbon agenda).

    The protectionism problem strikes me as a different case. Laws and treaties are in place. The competition directorate is one of the strongest and most serious in Brussels. The current populism is worrying, particularly when elevated to high principle by the French, but I think we’re very far from having sold the pass on this.

    We’re not talking about regime change, of course. Even so, Joschka Fischer’s a good guide: you have to make the case. In response to Adam, you made it. Since it’s a good case, you’ll often win, but the reality is that you’ll have to keep making it. Again and again. (I hope you won’t mind if I occasionally chip in.)

  15. “Happily, I think there’s another option.”

    Normally I am an enthusiast myself for the Aristotelian ‘mean’, unfortunately – as we may be seeing in Iraq right now – it isn’t always available.

    “The EU cannot be an association of nation states – too much sovereignty has been pooled, and the benefits from that pooling are too entrenched. It’s not however a nascent state – the resources that the member states bring to the table are too great, and their central role was confirmed very early in the piece (most clearly by de Gaulle, with his empty chair).”

    What I’m worried about is that this mid-point may not be sustainable. The elastic may snap, and then either the centrepetal of the centrifugal forces may work abruptly. If they do, I will be there with my proposal for a European identity and a coalition of the willing.

    The motive force for the tipping-point situation will be the euro. This should never have been embarked on if the plan were a half-way-house, and of course, as you point out the UK itself never did embark on it. So from ‘outre mer’ the waters definitely do look a lot calmer, and the possibilities for pragmatic suck-it-and see approaches may seem greater.

    As I said, the middle-term isn’t always available, nor are smooth transition always possible. Sometimes in economics smooth transitions don’t happen and only corner (or limit) solutions are available. This is why people sometimes talk about ‘hard landings’. Sytems which lack the necessary flexibility to adjust, sometimes go with a bang. This is the big worry here.

    On most of the rest of what you say we are near as damn it to being in agreement.

    “Again and again. (I hope you won’t mind if I occasionally chip in.)”

    Mind. You would be sorely missed if you didn’t :).

  16. Incidentally Italian Industry Minister Claudio Scajola is also taking my line since he has just said that “neo-protectionism” threatens the
    European Union. By neo-protectionism I think we mean here treating other Europeans as foreigners. He may well be using rhetoric, I am not.

    “If neo-protectionism prevails, the political and economic destiny of the European Union will be compromised,” said the minister Sunday, who on Saturday cancelled a planned meeting Monday in Paris with his French counterpart Francois Loos.

    Italian energy giant Enel last week indicated its interest in taking over Suez, without making a formal bid.

    French Prime Minister Dominique de Villepin announced the merger Saturday after a dramatic week of takeover talk in Europe’s utilities sector.

    Enel, Europe’s third largest energy group in terms of stock market capitalization, had made its surprise declaration of interest in buying Suez on Wednesday.

    All of this follows this move:

    The French government declared his backing for a full merger of energy giants Suez and Gaz de France, bringing closer a deal that would create Europe’s second biggest energy group and the world’s largest supplier of liquified natural gas. Prime minister Dominique Mr de Villepin and Economics Minister Thierry Breton said on French television that a merger would “strengthen the global industrial vocation of our country”.

    Meanwhile in Spain ‘neo-protectionism’ trundles on:

    Spain’s government approved measures Friday designed to block German utility E.On AG’s takeover bid for Endesa, placing itself on a collision course with European Union regulators.The government, which backs an all-Spanish takeover for Endesa, passed a decree that will expand the scope of its energy regulator’s veto power to include deals in which a foreign buyer targets a Spanish energy concern, Industry Minister Jose Montilla said.

    Under the current law passed in 1998, the regulator — the National Energy Commission — could examine and veto a takeover deal in this sector only if the buyer was a Spanish energy concern. If the buyer was not energy-related, or foreign, the regulator’s hands were tied.

    EU spokesman Jonathan Todd said the E.On takeover bid for Endesa is a clear case with a cross-border European dimension and thus the EU — not Spain — has jurisdiction over approving or rejecting it.

  17. The ironic thing about this recent surge in protectionism is that it happens on the back of the (semi) energy crisis we had a while back when Gazprom (or in fact Russia) chose to flex its muscle .

    My point is that Europe would probably be better off by allowing a lot of these mergers to go through and the fact that governments are getting scared for all the wrong reasons.

    Concerning the more wide question of a European identity and the role of (nation) states I believe there are several interesting questions yet to be answered …

    The Euro;

    I am biased here! As an economist (in spe) I can see that this project is bound to collapse and fail at some point. The best example is the ECB who must conduct monetary policy serving the interest of 12 essentially different countries; effects of pro-cyclical policies are bound to show their nasty face at some point. And then we have the demands of convergence which by now I think are well eroded since France and Germany have been running deficits well above the 3 % gdp threshold for quite some time now.

    As a European I think a single currency is a genious idea to affirm and create a European identity if ever such an identity existed. However, the economic tradeoffs might be too big.

    Pooling of sovereignty;

    This will remain as an issue in European negotiations; the pivotal question is, as also articulated by Bert and Edward, whether the European project can endure with “integration in different tempos(tempi?)” and how much difference we will/can allow? Edward’s “coalition of the willing” might be the end-result but surely not the one we really want?

  18. (i) those like me (and possibly you) who feel themselves to be first and foremost Europeans rather than belonging (in the strong sense of the term) to any lower level national group

    An interesting question (two questions, actually) is, who are these ‘ethnic Europeans,’ and how numerous are they. At the moment, I’m seeing this through the lens of an American ethnic quip, “There are no Asians is Asia,” which is to say, that in the U.S., those who identify as Asians are the children and grandchildren of immigrants who do not really identify with the particular ethnic culture of their ancestors, but do identify with the shared experience of Asian immigrants in the U.S. Are the ‘ethnic Europeans’ those who, like Edward, have relocated and identified to some degree with a local culture other than that of their childhood? The children of Europeans of two different ethnic backgrounds? The young people seeking to make a living in a European nation other than the one of their birth? And if this ‘European ethnicity’ is in some degree to be associated with a culture of migration, then why is France, more than any other of the large European countries a nation of immigrants, perhaps the most obvious example of a nation state that insists that its citizens shall have no allegiance to any identity other than that of La Republique.

    (ii) those who are members of the smaller EU countries (whose economies, surprise, surprise, are normally characterised by a far higher level of openness than is to be found in the larger states), (iii) and those disgruntled ‘national minorities’ who find their identity either not expressed or poorly reflected in the existing nation state structure.

    If these smaller national groups do have some common ground with the first class mentioned, and not merely a marriage of convenience because, as opposed to dominant national ethnic groups, the ‘ethnic Europeans’ are a group too vaguely defined to be capable of much ethnic oppression, then might I suggest that the Balkans present an ideal opportunity: as the fractal breakup of Yugoslavia progresses from the centrifugalization of territories that certainly form viable nation-states, to those that seem at least mildly absurd as sovereign states (Kosovo, Montenegro, Voivodina? an independent Republika Srpska?) there are several entities in the Balkans that might wish to join the Union, but whose small size will enhance the existing constitutional questions surrounding how large states and small states share power in the Union. Also, several areas of the Balkans might enjoy greater stability were an external power (namely, the Union) to guarantee that the local government would not be oppressive. For both these reasons, it may well be that the Balkans are ready for European federalism when “old Europe” is not. Yet, those whose dream is a federal Europe, might do well to create a category of autonomous but not really soverign entities within the EU before seeking to convert existing EU members into these sorts of entities.

  19. Granted, the benefits of industrial policy to workers are easier to observe, but the TGV and electricity prices in France should tell us that a successful industrial policy benefiting consumers is possible.

    Common EU policies might be good in some areas, but we should keep a few things in mind.
    Firstly, the EU has grown a lot. An energy policy that will fit Finland and Greece is hard. A common minimum wage is ridiculous.
    Secondly, a common policy will in most member states face dual opposition. Those who would also oppose it on its own merits and those who oppose EU common policies as such.

  20. Yet, those whose dream is a federal Europe, might do well to create a category of autonomous but not really soverign entities within the EU before seeking to convert existing EU members into these sorts of entities.

    Hm, this is a very fantaisiste and unworkable ideea, but it makes one think. How about a “Autonomous European Republic of Kosovo”?

  21. Do you really want to pour oil into the fire, giving plausibility to allegations that the EU is having colonial designs on member states?

  22. “who are these ‘ethnic Europeans,’ and how numerous are they.”

    Robert, you raise important questions. I don’t have most of the answers to them. But I think you are pushing the right button.

    Actually the very expression you use, ‘ethnic Europeans’, is in itself an interesting contradiction in terms.

    What those who feel themselves to be Europeans rather than first and foremost members of a national sub-group are precisely not ethnic. This is possibly what they are trying to get away from.

    How many are we you ask. Not too many I imagine. I think the transition here is as much a cerebral one as anything else. It’s a question of how you see yourself, a decision to prioritise a more abstract identity over a more primal one. Above all it is a decision (just like in its way swearing the oath of allegiance is a decision, this is where I see the parallel). At the moment this is a very minority thing, an intellectual choice, something for the ‘intellectual elite’, hence all the scorn which is lavished on the ‘elitism’ of Brussels, and those who think like they do ‘up there’.

    I mean you could even see a spell up at the Commission as a form of ‘going native’.

    So at the moment this is a minority thing. The point is, however, that the majority have just inadvertenly stuck themselves between a rock and a hard place. Not understanding too much economics, and even less understanding the difficulties inherent in mixing non-compatible identlty levels, the euro was created.

    The reasons why it was created are probably very interesting, and very revealing, and at some stage I intend to go into this very thoroughly. But it does certainly involve the attraction of (and power of) an idea.

    So one idea has got a lot of people into a big mess, maybe another one can help them get out of it. That is what I personally am hoping.

    At the moment those who feel themselves to be Europeans first and foremost are few and far between, but they could rapidly become many many more, when the implications of not taking that decision become all too obvious. This is my personal bet.

    “Are the ‘ethnic Europeans’ those who, like Edward, have relocated and identified to some degree with a local culture other than that of their childhood?”

    I think this is a good point, but raises the issue: which way does the causal arrow work here? Do people change their ids because they move, or do they move simply because they can no longer stand the old id structure? I know which one of those was my case.

    I think it is important here to distinguish between the case of relatively educated Europeans who move because, to some extent at least, they are footlose and fancy free, and the new economic migrants who are arriving on our shores.

    “There are no Asians is Asia,” which is to say, that in the U.S., those who identify as Asians are the children and grandchildren of immigrants who do not really identify with the particular ethnic culture of their ancestors, but do identify with the shared experience of Asian immigrants in the U.S.”

    Yes, well again, this is very important, and your whole experience in the US with immigration is important, we could, if we weren’t so goddam proud learn a lot from this. The UK experience is in many ways not too disimmilar. But then, that’s just it, they have evolved the Bristish halfway house id. Not English, or Scottish or Welsh, but British. The British id is the reference id for the children of immigrants.

    Actually, as far as I am concerned, the sooner all new immigants take EU citizenship diretly and swear an oath of allegiance to the Union the better. Come to think of it, the offspring of the migrants could be another group which might be recruited to the coalition of the willing.

    “If these smaller national groups do have some common ground with the first class mentioned”

    Well, yes and no. I am really suggesting a marriage of convenience (that is how you win wars isn’t it?). I think that members of many small nation states are pretty attached to their own national ids (the recent Danish example is clear I think, and the national minorities are not different, as the Catalan case shows me), but necessity forces them to open more, and be more pragmatic, and reach out for allies.

    These are very much thoughts in progress, but thank you for raising the points you did.

  23. “The ironic thing about this recent surge in protectionism is that it happens on the back of the (semi) energy crisis we had a while back when Gazprom (or in fact Russia) chose to flex its muscle .”

    Well quite Claus. We are moving into troubled water, and all we are doing is pouring oil on it, if you’ll pardon the pun. There is supposed to be a summit in March to thrash out the basis for an EU energy policy, but I sense we just had the policy imposed from below.

  24. So at the moment this is a minority thing. The point is, however, that the majority have just inadvertenly stuck themselves between a rock and a hard place.

    Have let the minority stick them would be more accurate a description.

    Are the ‘ethnic Europeans’ those who, like Edward, have relocated and identified to some degree with a local culture other than that of their childhood? The children of Europeans of two different ethnic backgrounds? The young people seeking to make a living in a European nation other than the one of their birth?

    If so, they’ll be a permanent minority. Unless you can convert the average European, the effort is doomed. At best it is ineffectual. At worst, you engineer a split between elites and the masses.

  25. Oliver, continuing our earlier conversation, I’m not going to poke obvious holes – the problem is bigger than that.
    There’s an attitude of mind at work here, which never had strong roots in my country and was thoroughly discredited by the crises of the 1970s.
    What prompts these thoughts: I was looking for background on Villepin’s Gdf/Suez announcement, and found this from le Monde Diplo. Representative sample: “no previous privatisations of public utilities anywhere have ever delivered the benefits that were promised to consumers”. The author waits with great restraint until the second paragraph before mentioning Railtrack, as if that were representative. If anyone fancies a steaming serving of crap, follow the link.
    Perhaps the convential wisdom under the Sixth Republic will be a bit less fearful.

  26. “At worst, you engineer a split between elites and the masses.”

    Is this not already reality? The fact that the integrationist project in Europe essentially is a top-down procedure has caused serious legitimacy problems; in fact every time we have a referendum in member states we see that masses turn on the elites even though the reasons for doing so might be blatantly wrong (a bit arrogant, I know).

    What I argue is that if we want to have any chance of people to accept EU as vessel of some kind of identity be it co-existing with their national identity or not we need to realize that some might be lost in the process; i.e. Edward’s coalition of the willing scenario. The question then is; how far should we (one) go to grow a European identity and crucially would not the affirmation of European identity strenghten the top-down process of integration?

  27. … which continues with this reassurance: Oliver, I’m not having a go at you. I’m genuinely interested in your views: given your belief that mergers harm consumers (I hope I understood you right), are you upset by the Suez/Gaz de France deal? Or are there other factors to take into consideration? A year or so ago, when EdF was the focus, power was cut to Prime Minister Raffarin’s home. I gather the unions are angry about the current deal. Does an industrial policy lose its effectiveness when the politicians in charge of it are vulnerable to external pressure. Or do you believe this pressure keeps them honest?

  28. Monopolies are bad as such.
    But I think that specifically transnational mergers in utilities are bad. The decisions on energy supply are very long term, affect foreign policy and even require military actions. Therefore decisions on energy policy are primarily political and not economic. A country without national (not necessarily public) companies has a problem implementing a coherent energy policy.
    You might argue that the EU should have a common energy policy. Chances of that are very low. Therefore the means of energy policy have to remain in the hands of the member states to secure the consumers a reliable energy supply.

  29. “You might argue that the EU should have a common energy policy. Chances of that are very low.”

    You may well be right here Oliver. The problem in assessing all this is that there are so many counterfactuals to consider. Lets look at it in a game-theoretic way. What you are saying is that most of the EU players are covering the option that in the longer time the EU might not exist. There is no other coherent explanation otherwise. But keeping open the option is p`recisely what stops the EU developing. It thus increases the risk that the EU could break up (something which I severely doubt, it is important to be clear, the EU is not the euro).

    What I really think is that when push comes to shove we will have to have a have a common energy policy. The other players (like Russia and Iran, or the US and China) are just too big and have too much clout for any individual EU state to realistically go it alone. That at the end of the day is part of what the EU is all about. So we will have a common energy policy, and all these people will be dragged ‘kicking and screaming’ into the 21st century, it’s just that while they are doing the kicking and screaming them may in fact ‘see off’ the euro.

  30. “‘If that’s not what you mean, then I honestly don’t know what you mean.’
    “I think this is to the point Adam, and this isn’t meant to be rude or insulting. I think you are looking at this with a mindset that isn’t geared to getting to grips with all of this.”

    Well, one of us is evidently missing something, but I’m not sure who. If the original services directive had proposed to replace national regulations with uniform EC-wide regulations, then your reply would be on target. But (as I understand it) it didn’t.

    Incidentally, I come from the U.S., which I think you’ll admit is more than just a “Common Market,” but where there is in general nothing like a country-of-origin rule: if you’re a builder in Houston, say, and you want to build houses in San Francisco, you have to obey San Francisco’s building code. Of course, sometimes federal regulations pre-empt state regulations, but that’s a quite different thing.

  31. What I really think is that when push comes to shove we will have to have a have a common energy policy. The other players (like Russia and Iran, or the US and China) are just too big and have too much clout for any individual EU state to realistically go it alone.

    If push comes to shove, it will be too late. Before that can you see a way to reconcile the energy policies of eg. Denmark and France?

    Secondly is the EU an institution that has the necessary ruthlessness in securing good relations with suppliers? I cannot imagine the EU obviously looking away in places like Darfur for the sake of energy supplies.

  32. European building codes are AFAIK also local. But the rules about payment of your workers is from the home nation. I don’t know how that is in the US but i assume that it is the same

  33. Energy Commissioner Andris Piebalgs, recently:
    An approach based solely on 25 individual energy policies is not sufficient to deliver the common objectives of the EU (secure, sustainable and competitive energy) … I will propose to the Commission, by the end of March, the launching of a package of infringement procedures against those Member States not having ensured full compliance with the provisions of these gas and electricity directives.

    Lots of good links here (some of them pdf).

  34. Energy policy should be divided in 3 different areas. Oil, gas and electricity are three distinct markets.

    Oil is really more pan-European and in short is “make sure you can afford to pay more than America”. Getting it is not a problem.
    Electricities problem is its very peak dependency which is mostly solved at the moment by gas, hydro and locally by exporting electricity during the base hours(France’s methode and the reason why they would be in trouble without Russia gas exports).
    Gas, the problem child. Be nice to Russia and Iran or have your own supply

  35. Oil is really more pan-European and in short is “make sure you can afford to pay more than America”. Getting it is not a problem.

    For now. It will not remain so.

    Gas, the problem child. Be nice to Russia and Iran or have your own supply

    If we don’t have an energy policy and maintain stringent emission targets, which we are bound to, and even add taxation of carbon dioxide, our electricity will soon be made mostly from natural gas, like in Italy and partially the UK.
    Adding competition, as Comissioner Piebalgs plans to, won’t help. It might even hurt.

  36. “if you’re a builder in Houston, say, and you want to build houses in San Francisco, you have to obey San Francisco’s building code.”

    Of course, and I absolutely agree that housing rules should be written locally under the kind of subsidiartity structure that the EU so badly needs. Brussles is a need of both a drastic pruning and a substantial strengthening. It should have the clout to do what it needs to do, simply that.

    If you have the euro it needs to be able to enforce a universal capital and labour market.

  37. This, which I found in the FT, is a fairly balanced comment I think:

    Karel van Miert, who served as a European commissioner for transport and competition between 1989 and 1999, told the Financial Times on Tuesday : “The vehemence we have seen recently in the Mittal case, in Spain and in Poland is indeed something new and rather worrying.”

    He added: “Some countries have always been rather protectionist in the sense that they did not like at all to see their companies being taken over by others from abroad. What has not been around all the time is that you are now getting it [protectionism] all over the place and even in the new member states such as Poland.

    “What we are seeing is on the one hand very worrying, because it shows there is a reluctance to accept the logic of the single market. But it also shows that liberalisation is making some headway. Especially in the energy sector, we are seeing the beginning of a consolidation game – and this does trigger great resistance.”

  38. I don’t see a problem obtaining oil for Europe for the next 20 years. After that is to far in the future to say anything usefull.

    Producing base electricity with gas is foolish. At the moment producing base load with wind or even nuclear is cheaper than gas so i don’t see gas taking over base load production. Also Kyoto is an intention without any real penalties and we could buy all the emission rights from a certain faultering economy who at the moment hasn’t yet signed kyoto but who will so it can sell all those emision rights.

  39. The van Miert quote sounds like an example of the Aristotelian mean you were talking about.
    On the one hand, it’s happening; on the other hand, the fact that it’s happening is a sign that it’s on its way out.

    I’m less sanguine. In fact I’m far more worried now than I was when France unveiled its list of protected sectors. That was entirely to be expected: the first rule of French politics is that across the entire spectrum, everyone’s a Gaullist. But, like bird flu, this strain of economic nationalism seems to be contagious. So we get things like this, which may be election-fuelled, but still smells bad:
    According to Welfare Minister, Roberto Maroni, Italy should apply legitimate defence to the economic field: “We must do what France did in the energy sector and defend Italy’s strategic materials … Europe is in a deep coma. Political Europe no longer exists.”
    An eye for an eye and the world goes blind.

  40. Follow-up thought:
    van Miert’s view is that these deals show national players consolidating in response to the wider context of a liberalised European market. There’s a lot to be said for that view, and it might cheer those worrying that the deals are in fact a defensive obstruction of that liberalisation.

    But it’s a bad outcome if we end up with a Europe where each national market is dominated by a domestic champion, and national regulation is subordinated to an industrial policy* that serves to entrench the champions’ dominant position. Anyone who read the recent obituaries of airline adventurer Freddie Laker will know exactly how much fun it was to be a customer in a sector dominated by complacent flag-carriers.

    For this reason we must put quite a large amount of trust in European regulation, and not kid ourselves that there won’t be a very serious fight on this issue.
    _____

    * ‘industrial policy’ never got a proper definition earlier in the thread. As far as one can tell from the examples given, the following seems fair: using state powers to intervene in a broad range of economic decisions, in the national interest and/or in the interests of a particular government or group.

  41. “But it’s a bad outcome if we end up with a Europe where each national market is dominated by a domestic champion, and national regulation is subordinated to an industrial policy*”

    Yep, and I think this thread now moves over to Tobias’ latest post :).

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