What’s left of France

Ezra Klein is having a bit of fun with Rudy Giuliani’s assertion that the U.S. “will be to the left of France” if the American electorate is “not careful” and doesn’t elect him:

We could elect Dennis Kucinich and 10 more Democratic senators and we wouldn’t get anywhere near France. France is a country where the rightwing reformer won’t touch the 35-hour workweek, where all sorts of powerful politicians call themselves socialists, where there’s over a month of legally mandated vacation and unlimited sick days.

Well, France is also a country where insulting the flag is a criminal offense, where the level of opposition to affirmative action would delight any card-carrying Republican, where about 20% of the student body attend religious schools (double the American percentage) and where capital income is much less heavily taxed than in the U.S. (see this pdf).

Not that I’m defending Giuliani’s idiotic statement, mind you. Especially one in which he equates caution with voting for his crazy self. But the idea that France is some sort of liberal wet dream doesn’t jibe well with the facts either. Continue reading

French Candidates: What is this EU thing anyway?

Why do the leading candidates in the French presidential election seem to have utterly strange European policies?

Take Nicolas Sarkozy. He supposedly believes in “rupture” with old ways and a dash for a new free-market, hard-nosed, toughness cult future. And Euroscepticism is at the heart of this. But at the same time, he has promised to restore le productivisme – that is to say, the maximisation of volume – as the guiding principle of the Common Agricultural Policy.

That’s not free-market, tough, eurosceptic, hard-nosed, liberal, or anything else, except for pure clientele politics. Better yet, it’s the kind of clientele politics that uses other people’s money. Yawn. Not that the peasants’ representatives believes in it – one of them recently said that “there are no cloned Chiracs available”.

Fascinatingly, he’s also now blaming the European Central Bank for its exchange rate policy – as is Ségoléne Royal. Sarko thinks the trouble at Airbus is all down to the bank’s “policy of over-valuation against the dollar.” Sego apparently asked for Angela Merkel to help change the ECB’s charter so that “its sole objective would not be the exchange rate.”

One problem – the exchange rate is not the objective of the ECB. The ECB does not target the exchange rate. This is, of course, all part of the game with the straining “Bretton Woods II” arrangement between the US and China pushing the adjustment burden our way. But – the ECB does not stock and does not sell exchange rate targets.

Five Easy Questions

Before the war in Iraq, Europe did not have a coherent policy for dealing with that country. Given that the current large-scale American presence there will not last forever, some questions arise for European governments:

Should Europe as a whole have a common policy for dealing with Iraq?
If so, what should it be?
Who will implement it?
Who will pay for it?
What needs to be done now to get a policy in place by the time the US Army starts winding things down?

Eurozone Economy: When Paradigms Collide

When scientific paradigms collide everyone should duck, at least that is the best advice I can offer at the present moment. The provisional German retail sales for January are now in, and they don’t make especially pleasant reading:

European retail sales dropped for the first time in 10 months in January as spending in Germany slumped, adding to signs economic growth is slowing, the Bloomberg purchasing managers index showed…..German retail sales had the biggest drop in two-and-a-half years, with its index declining to 43.9 from 55.2 in December

Now for those who have been following the German economy in recent months none of this should be particularly surprising, since as is reasonably well known Angela Merkel’s government has just upped VAT from 16% to 19% in an attempt to address the ongoing federal deficit problems. And of course, one months data never offer a complete picture. But this decline in retail consumption in Germany forms part of a much longer ongoing weakness in domestic consumption (and here), one which many were arguing had finally come to an end in 2006. Some of us, however, seriously doubted that this was the case, and hence the initial significance of today’s reading. In particular what we may be faced with are changing structural characteristics of economies as median population ages rise. In particular – and following the well-known life cycle pattern of saving and consumption – more elderly economies may have a higher rate of saving and a lower rate of consumption increase than their younger counterparts.

Some more evidence to back this point of view comes from Japan, where today we learn that household spending in December declined for a 12th straight month, dropping 1.9 percent from a year ago. Yet the Japanese economy is not in recession, and output is actually rising. As Bloomberg say:

Japan’s factory production rose to a record and household spending fell, underscoring the central bank’s concern that growth has bypassed consumers and left the economy dependent on exports.

So please note: growth appears to have by-passed consumers, and the economy is ever more dependent on exports. The same goes for Germany, and this is why I talk about paradigm collision, since the neo-classical theory of economic growth – with its core conception of ‘steady state’ growth – was never built to handle median age related changes in economic performance and structural characteristics. Something new is clearly needed.

Over the coming weeks I will undoubtedly have more to say about all this, as we get to see more of the 2007 Eurozone data, but for now let me point you in the direction of Claus Vistesen, who has been patiently toiling away trying to work through a hypothesis which, in terms of the data we are now seeing, certainly seems more in keeping with current economic realities than the view we currently see emanating from the ECB. His arguments on Japan can be found in depth here, and his latest piece on the eurozone is reproduced below the fold.
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European Energy Efficiency Plan

Sargasso, Dutch weblog and co-nominee in the recent BOB’s has a very interesting post on European energy policy, which prompted me to address the issue here as well. The point of my own post here on AFOE is not to elaborate extensively on European energy policy, I simply do not have the time right now, but simply to draw your attention to the fact that there is a European policy, the Energy Efficiency Action Plan, not to be confused with its US namesake (pdf), and to start a discussion.

The ambitious aim of the European EEAP is to have a 20% reduction in wasteful energy consumption by 2020. From the official press release:

“Europeans need to save energy. Europe wastes at least 20% of the energy it uses. By saving energy, Europe will help address climate change, as well as its rising consumption, and its dependence on fossil fuels imported from outside the Union’s borders.” said Energy Commissioner Piebalgs. “Energy efficiency is crucial for Europe: If we take action now, the direct cost of our energy consumption could be reduced by more than €100 billion annually by 2020; around 780 millions tonnes of CO2 will also be avoided yearly” he pointed out.

In another press-release on the same subject we can read the following:

At the same time saving energy is the easiest, most rapid and most effective way to answer the challenge of our energy dependence and reduce damage to the environment.

So, the objectives are clear: save money, help the environment and reduce our dependence on fossil fuel imports. How? The EEAP outlines these focal points (I have added a few informational links here and there):

1) Promote energy-efficient household appliances through labelling and performance requirements
2) Promote low-energy housing (pdf)
3) Render power generation and distribution more efficient
4) Further reduce CO2 emissions from cars
5) Facilitate financing of energy efficiency investments for enterprises
6) Stimulate energy efficiency in the new member states
7) Use tax tools in a carrot-and-stick fashion
8) Raise awareness and share information, both within the EU and worldwide

The big problem, as always, is mentioned at the end of the proposed plan:

Nonetheless, before any of these objectives can be achieved, political will and engagement at national, regional and local level are necessary. The European Council, European Parliament, as well as national and regional policy makers will need to renew their full commitment and establish a clear and unambiguous mandate to facilitate the implementation of the Action Plan by endorsing it and agreeing on the proposals set forth.

Nevertheless, I’d like to take a positive approach and welcome the proposed policy set forth by the European Commission while awaiting new developments in the area of alternative energy as well.

For those who are interested, please go and read the details of the EEAP in full and share your thoughts and insights with us.

The new great game

Our next anniversary guest post is written by the the great Jonathan Edelstein.

It’s starting to look like the season of referenda in the near abroad.

On September 17, less than a week from today, voters in the unrecognized republic of Transnistria, located between Moldova and Ukraine, will be asked to vote on whether to “renounce [their] independent status and subsequently become part of the Republic of Moldova” or “support a policy of independence… and subsequent free association with the Russian Federation.” The option of “free association” with Russia, which is widely considered a prelude to outright annexation, is reportedly backed by a large number of Russian-financed business and political organizations, some with long-standing presence in Transnistrian politics and others apparently formed for the occasion. In the meantime, South Ossetia, which had earlier explored the possibility of petitioning Russia’s constitutional court for annexation, has just announced its own referendum for November 12, and although Abkhazia currently denies similar plans, there are rumors that a plebiscite may be in the works there as well.

The referenda, which are rather transparently supported by Moscow, represent something of a change in policy for the Russian Federation. It’s certainly nothing new for post-Soviet Russia to attempt to maintain its influence over the countries comprising the former Soviet Union, and it has at times used Russian citizenship to cement the “soft” annexation of neighboring territories; for instance, at least 90 percent of Abkhazians and South Ossetians now hold Russian passports. Nevertheless, up to now, it has soft-pedaled the issue of de jure territorial expansion. The forthcoming vote on whether Transnistria should become a second Kaliningrad suggests that policymakers in Moscow are at least starting to think seriously about taking formal responsibility for the territories that have broken away from other former Soviet republics.

At first glance, it’s hard to see why Russia would push such a policy at the present time. All three of the breakaway republics have substantial minorities who oppose union with Russia; Transnistria is almost evenly divided between ethnic Russians, Ukrainians and Romanians, and despite post-Soviet ethnic cleansing, South Ossetia and Abkhazia retain Georgian minority enclaves. The recent wave of terrorist bombings in the Transnistrian capital of Tiraspol may well be linked to the referendum, and Russian annexation of the Georgian breakaway republics would only intensify border conflicts such as the Kodori Gorge. Nor would successful plebiscites lend a veneer of legitimacy to a Russian annexation; indeed, given the current international attitude toward non-consensual secessions from recognized states, this would only make Russia’s legal position worse by transforming it into an occupying power.

In other words, the referenda seem like a recipe for stirring up ethnic conflict within the breakaway republics, making Moldova and Georgia even more alarmed over Russian political ambitions than they already are, and creating new diplomatic and legal problems for Moscow. Which leads naturally to three questions: why now, what does Russia stand to gain in compensation for these risks, and how much should the rest of the world (and particularly Europe) care?
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1..2..3..And They’re Off – The Left

On the other side of French politics, as I promised, the internal conflicts are if anything stronger. To start with the most important ones, the Socialist Party is about to do something quite rare in its history – have a contested primary election. The only other was that of 1995, when Lionel Jospin beat Henri Emmanuelli to succeed Francois Mitterand. Before that, the candidacy normally went to the party’s first secretary, who was usually Mitterand anyway. (Before 1971, when Mitterand set up the modern PS, the various splinter-groups from the old SFIO that made it up of course had their own arrangements.)

Since the disaster of 2002, though, this looks like it’s going to change, chiefly because there’s a strong external candidate. Ségoléne Royal, the head of the Poitou-Charentes regional government, has been campaigning vigorously all year with some success. The success can be measured, in fact, by the frequency with which she is being accused of “Blairism” by the rest of the possible candidates. This looks like being the content-free insult of the campaign, in fact, as could be seen with the PS official quoted by Libération who remarked that he didn’t want Royal to “come back from London and abolish the social security” – after all, everyone knows that the UK provides no social security whatsoever, right?

It would be more accurate to place Royal on the soft-left. (If anyone’s Blairite in this game, it’s Nicolas Sarkozy – this speech is a classic of early Blairite rhetoric circa 1997.) She is no more “neoliberal” than Lionel Jospin was in government, for example, or for that matter Dominique Strauss-Kahn, and is closer to the Greens than some. She is given to vaguely conservative speaking, but it’s harder to discern where a concern for civisme, secularity and Republican values (in the French sense) stops and where a rather stern law-and-order politics begins in a French context.

However, it looks more and more as if the rest of the party is gearing up for an “anti-Blairism”, stop-Sego campaign. And policy doesn’t matter very much in this sense.
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Steinmeier on Belarus

Well, following up the last post on Belarus, it seems that German foreign minister Frank-Walter Steinmeier has mirrored what went on in that Patterson School command post exercise to an eerie degree. In the simulation, apparently, Gerhard Schröder made a fool of himself by lining up with the Russians…and, strange to tell, Steinmeier has done so too, at least in the eyes of Transitions Online’s Belarusoblogger.

Seems he’s arguing for a “measured” approach and more “dialogue” with the Belarus government – or to put it another way, doing nothing. Is it “the natural gas, stupid”? Perhaps. One of the delivery pipelines from Russia to Germany (the Yuma pipeline) passes through Belarus, but German policy seems to be more about bypassing the Central Europeans, and surely (as I blogged regarding the Ukrainian gas crisis) it would be in the EU’s interest to limit the degree to which Russia can disaggregate the customer states.

Deeper than that, I think it’s fair to say that Germany – or to be more accurate, the German foreign policy establishment – has an enduring preference for Moscow. As far back as Willy Brandt, in fact. The Treaty of Moscow in 1970 preceded the Treaty of Warsaw and the Grundlagenvertrag with East Germany, and extensive partnership agreements were signed with Gorbachev as a preliminary (indeed a quid pro quo) to the reunification. Timothy Garton Ash, I think, remarked that “this Germany and all previous Germanies have a special interest in good relations with Moscow”.

This was obviously true regarding Deutschlandpolitik and reunification–the Ostpolitik was a prerequisite of the Deutschlandpolitik. But is it still true now? Clearly the degree of hostility between Germany and Russia is much less, which is all good, but the degree of interdependence is much greater. And the conflicts of interest are hardly less.

One thing the German policy establishment did well in the 1970s, 1980s and 1990s was to synchronise their own policy with that of the EU. It would seem that a tension is emerging.

Les Jeux Sont Faits

Yes gentle readers, les jeux sont faits. Italy has entered the election season, and this time the game is for real. The outcome of this election, and the decisions which are subsequently taken will be important not just for Italy, but for the whole EU, and the stakes are not small ones: the whole European process is in play. (This post needs to be read in conjunction with the last one from Alex, and contsitutes the start of our campaign: Italian elections 2006. Incidentally, since none of us are in Italy, and since I for one tend to see everything Italian through a Spanish filter, if there is anyone out there in Italy reading this, and who fancies their hand at some guest blogging during the Italian campaign, then please consider yourself invited to contact us directly to talk about this.)

The starting point for getting a handle on Italian Elections 2006 is undoubtedly a blog post from the US economist Nouriel Roubini following an amazing outburst at the recent Davos forum by Italian economy minister Guilio Tremont (also see here).

Wolfgang Munchau takes up the issue in an FT article today.

There was a revealing incident at the World Economic Forum in Davos this year. Nouriel Roubini, the New York-based international economist, took part in a panel discussion during which he raised questions about Italy’s future in the eurozone. A fellow panellist was Giulio Tremonti, the Italian finance minister. Professor Roubini wrote in his web log* that his presentation “caused a stir with Minister Tremonti who interrupted me in the middle of my remarks, went into a temper tantrum and shouted: ‘Go back to Turkey!’ I happen to have been born in Istanbul.”

Perhaps one should not conclude too much from this incident, but it does show one thing: European officials are getting nervous about the future of the euro. A few years ago, no one would have raised an eyebrow.

Now Munchau’s focus is Spain, but Spain and Italy here are but two sides of the same coin, the existence of low, and thoroughly inappropriate, interest rates. In the one case it is the private individual who is hopelessly in debt, in the other it is the state. Now as Munchau states:

Italy is often mentioned as the country most likely to leave the euro. I disagree. Leaving the euro would not solve any of Italy’s problems. Since Italy’s debt is mostly euro-denominated, Italy would be facing an Argentinian-style debt crisis.”

This is undoubtedly true. Leaving the euro would clearly leave Italy facing a horrible mess, of gigantic proportions, but it ducks one key question: will Italy be able to stay inside? It may well be that Italy would never ‘choose’ to leave, but can Italy find a sustainable path to maintain its membership? That is the real question, and I, for one, have serious doubts on this, doubts which I have never really tried to hide. In the face of Italy’s inability or unwillingness to correct its course, the issue is, as Roubini himself asked in an earlier post, in the game of chicken which is now being played between the Italian state and the EU institutions who will be the first to blink? Certainly no-one here has a very viable exit strategy to hand. The latest news on the current attempts to reign in the debt is certainly far from reassuring.

So, to start the ball rolling, here are a number of the key issues as I see them:

1/. The existence of a huge and unsustainable public debt, no clear evidence that anything is going to be done about this, and the accompanying serious policy headache both for the EU Commission and the ECB.

2/. The presence of a high level of private saving, coupled with a far from dynamic internal economy.

3/. The fact that Italy has one of the lowest fertility rates in Europe which make the population pyramid unsustainable in the long term together with a lack of the real resources needed to introduce a programme of public policy to address this problem.

4/ The presence of strong xenophobic attitudes among leading members of the Berlusconi government (and here) which makes recourse to serious immigration as a paliative to the demographic problems extraordinarily complicated while at the same time making the conduct of EU foreign policy even more of a headache.

5/ A long and complicated history of corruption at many levels of private (and here) and public life (and here), and a complete lack of infomational transparency in dealings with the EU.

6/. The presence of a heavily ‘familiaristic’ approach to public policy which prevents realism and objective debate in looking for solutions to Italy’s long term structural difficulties.

7/. The existence of a strong sense of denial inside Italy itself about the scale of the problems and a real and present willingness to blame the euro itself for all the problems.

This list of headaches is undoubtedly long enough already, and undoubtedly more topics could quickly be added, they do howvere form a starting point for a full and frank dicussion of the problem. Let the games commence!

Menarché and Low Fertility

Earlier this morning I read this intriguing paper by US researchers Robert Drago & Amy Varner. The title of the paper is “Fertility and Work in the United States: A Policy Perspective” and it addresses the important issues of gender equality and the historical trend towards declining fertility in the United States. Now while I was thinking of how to write a post on this general topic I wandered over to Brad Delong’s blog and found he had this highly relevant post entitled Menarché vs Monarchy.

OK, what’s this all about.
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