Maybe the hour of Europe is at hand

…this time? The signs do appear to being pointing to a possible employment of European forces in Lebanon, not least with Israeli PM Ehud Olmert and others expressing a preference for “EU countries” or NATO – which is mostly the same thing, especially militarily – to supply troops to any peacekeeping/peace enforcement mission there.

The reason why particularly EU forces might be wanted is that the experience with UNIFIL, the existing UN force there, is not great. As what could be termed a “classic” UN force – blue helmets, white AFVs, no Chapter VII authority, and often drawn from neutral and third world armies – it never had a chance of keeping the PLO or Hezbollah out, and neither did it have a chance of standing up to the Israelis. For their part, the Israelis would obviously like any international force sent to the Litani to be effective. And if it is not effective, it won’t protect the Lebanese from the Israelis either!

Unfortunately, effective international forces for this job are in short supply. The US is out of the question, even if it could spare the troops. British armed forces are frantically overstretched. It seems unlikely to say the least that India would get involved, Pakistan would not be welcome, neither would Turkey for different reasons. Vladimir Putin has said that Russia would support a peace force, but its deployable forces are small, and a dose of the Grozny approach to peacekeeping would do everyone a power of bad. That doesn’t really leave anyone else.

Update below the fold.
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Migration And Reform

Well today is obviously immigration day, as thousands of Latinos take to the streets in the United States to demand some kind of ‘regularisation’. I have been posting on Demography Matters about the changing pattern of Latino migration in the US, and on the not entirely unrelated topic of whether it is the arrival of the Latinos or the presence of religious belief which is primarily responsible for the fact that US fertility is still hovering round the replacement mark (especially the comments, and here, and here and here).

But this post is not about migration in the United States. Rather it is about migration inside the frontiers of the EU itself. As populations age, and our economies come under increasing strain, some societies will prove more able to reform than others. Now one conjecture I have been making is that in this process some societies will attract population (and get that famous win-win dynamic going) while others will lose even that which they have (sounds a bit like the biblical parable now doesn’t it). Actually economists have terms for all this. You might say that the ones who attract are experiencing an increasing returns process, while those who lose are suffering from negative feedback.

Claus has already touched on how Denmark is suffering from a lack of immigration (and me here), in the sense that more people are now leaving than are arriving, but perhaps more importantly for the future of the entire EU, Germany is very near to becoming a net exporter of people (and here).

Pperhaps a bit more spice was added to this already simmering cooking-pot last week by a sudden, and rather unexpected, bout of finger pointing from Peer Steinbrück, Germany’s finance minister, in the general direction of Vienna. Now according to Steinbrück, Vienna’s recent decision to cut corporate tax rates from 34 per cent to 25 per cent has led to an increasing number of German companies investing across the border in Austria. In other words, not only are people leaving, companies are now also leaving, and to less than anticipated destinations, and of course, on the backs of the companies will go even more people. Are we really so sure that that recently heralded sustainable recovery is as sustainable as some are suggesting? Morgan Stanley’s Eric Chaney understandably still has his doubts.

The real issue is this: as the FT says “Mr Steinbrück has limited room for manoeuvre in the tax field because of Germany’s high budget deficit”. All these issues interlock. So, on a day when Jaques Chirac seems to have taken a step backwards in the French reform process, it might be just worth asking ourselves whether, at the end of the day, there won’t be a price to pay for all this ‘no rush now is there’ style delay.

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
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The Colour of Steel

First of all many thanks to the kind folk of Afoe offering me the possibility of expressing my views on some European reactions to the Mittal Steel bid for the European steel giant Arcelor. By now most of you must have heard about this sitation. Mittal Steel is the world’s largest steelmaker and was founded (and is still currently run) by the Indian-born steel maker Lakshmi Nivas Mittal, the third richest man in the world.
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Investment Dearth?

The idea that there was a global savings glut now having gone out of fashion, some are presently arguing that what we have is an investment dearth (my own view is that these two effectively mean the same thing, since the issue is a relational one). More evidence for this investment dearth hypothesis comes today from the UK.

UK Business investment grew sluggishly in the third quarter, official figures showed, confirming survey evidence that British-based companies are cautious about capital spending even though profit levels are high.

As the FT also notes:

Just as in other European countries, companies have decided to save most of the money they have been making rather than risk investment in new opportunities to generate profit in the future. The reluctance of companies to invest when interest rates are low and the return on the existing capital stock is high has puzzled economists for some time.

Dave Altig had a piece earlier in the week about the BoE rate decision wher he tries to put a brave face on the UK data. This investment news is another little bucket of cold water for the upside optimists. I’m more or less neutral here. The monetary policy committee intimate that the weakening of investment intentions “may also reflect uncertainty about the near-term outlook for the economy in the face of sluggish consumer spending and higher energy prices”. Dave concludes that “Perhaps the uncertainty will lift sooner than later”, and I agree, I’m sure it will: I’m just not sure which way the resolution of the quandry will lead us.

Something Is Moving

The FT reports this morning that France may be about to ease restrictions on certain highly regulated service industries and on business start-ups as part of a package to create jobs in poor suburbs. It is possible that these initiatives might be a test bed for broader economic reform throughout France. French finance minister, Thierry Breton, told the Financial Times:

France had failed its immigrant communities, largely housed in bleak areas of high unemployment where rioters have left one pensioner dead and burned 7,000 cars. “We have put a lot of money into the suburbs over the past 20 years,” Mr Breton said. “But obviously it wasn’t enough. We need to work on how to create more jobs and growth in those areas.”

Among the initiatives being considered is an easing of regulations in the specially designated “zones franches”. Currently companies are encouraged to locate in these areas of high unemployment through a limited range of tax breaks. However, the Finance Ministry is considering a form of “positive economic discrimination” that would exempt companies from certain rules in place elsewhere. These include relaxing professional qualifications on businesses such as hair salons and taxi companies, and increasing the level of state guarantees for business loans.

Petrol, Petrom, and the President

So, President Basescu is unhappy.

This is not unusual. President Basescu is often unhappy. You’d think that, having won the election last December against Prime Minister Nastase, he’d be at least content. But Basescu is a scrapper, and he’s always looking for a fight, and in recent weeks he’s found one. It’s about petrol, and Petrom.

Perhaps I should explain.
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This Just Looks Bad

Is the new double-decker Airbus vulnerable to sudden drops in cabin pressure? That’s the kind of problem suspected in this summer’s crash of a Helios Airways plane that killed all 121 people on board.

The former chief engineer for the company that designed the microchips controlling the motors that runs the pressure valves thinks so. The company, TTTech Computertechnik AG, of Vienna, fired him for going public with his concerns. For good measure, it has sued him in both civil and criminal court. Austria has no laws to protect whistleblowers.
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On Un-Common Ground

Now just remember, you read about it first on Afoe. Bertrand Benoit and David Pilling have an excellent article in the FT today:

Question: Which of the world’s biggest economies is holding an early election this month dominated by debate over radical economic reforms?

Two clues: The economy, long in the doldrums, is showing signs of life, thanks to improving exports and a restructured private sector. An ageing population is making structural reform an urgent priority.

The answer: Not one, but two countries – Japan and Germany.

Just my point in my earlier post, and the more this connection is recognised the sooner we’ll enter the zone of framing meaningful solutions. As the FT writers suggest, there are many intriguing parallels between next Sunday’s Japanese election and the German ballot one week later.
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Cracking the Code

In a recent post I noted that, despite some improvements, good corporate governance isn’t something Germans have an easy time getting their heads round. The Financial Times Deutschland reports that there might be a good reason for this: in Germany, it doesn’t seem to matter much how well a corporation is governed.

As the FTD reports, a new study from the consultancy Ergo Kommunikation maintains that ‘investors do not reward German firms that abide by the Corporate Government Code…. Their share prices profit just as little from a high level of transparency or disclosure of managing directors’ compensation.’ [My translation.]

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