Tag Archives: europe

Back to the Roots.

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Today, the IHT reprinted post referendum reflections about Europe by former German Chancellor Helmut Schmidt that were first published last Thursday in the German weekly Die Zeit.

I’m sure some will call it elitism in light of the recent constitutional referanda, but Schmidt still believes that real political leadership is now more important than ever in Europe, for

[b]ecause Europeans can look back on more than a millennium of national development, the Union cannot be brought to completion in just a few decades by ministers and diplomats: The EU needs the consent and will of its citizens. The coming experience of increasing helplessness of smaller and medium-sized nations acting alone will increasingly convince their citizens of the need for the Union, but that will take time and perseverance.

Jean Monnet, Robert Schuman, Val?ry Giscard d’Estaing, Jacques Delors, many of the old guard knew: We can repress the historically created egocentric nationalism of Europeans only gradually. Today’s statesmen and the overzealous Brussels commissioners should follow this example.

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Time It Stopped Snowing

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John Snow is in Europe, globetrotting on the G8 round. He had some advice for us here in Europe: “I think the important thing is that Europe continue to focus on the things that need to be done to encourage domestic growth”.

I’m glad he raised the point, since otherwise it might have escaped us. These comments, and other similar ones, are widely interpreted as recommending that we focus on reform. Well I couldn’t agree more, but sometimes isn’t it better to start putting your advice in practice at home. Looking at the state of global trading imbalances I would say that the US has its own problems, and they seem to need attention. Looking at the trade figures, German and Japanese companies don’t seem to have any special problem of being competitive internationally. I don’t want to seem tendentious, but isn’t it the US manufacturing company which is having difficulty being competitive these days, at least if the ability to sell at competitive prices in international markets is anything to go by.

Of course Europe and Japan are light on internal demand growth, but there is precious little we can do about it since this is largely a product of demographic changes, not structural weakness. This is a part of the ‘new global reality’ and the sooner politicians like John Snow face up to this, the better for all of us.

US Trade Numbers Are In

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So are the China trade surplus ones. Dave at MacroBlog has the details on China. I’m waiting for Brad Setser to post, but he must be either doing his sums, or having a late breakfast :) . Before we get some blog analysis (even Brad Delong is quiet today) you can get the basics here. In fact the rise in the April CA deficit to $57bn, from $53.6bn in March, is supposed to be good news, since the increase wasn’t as big as expected.

Essentially I am outside the Atlantic blog consensus here, since I think the US dollar will hold, and that it is the euro which is in trouble. I have a little post on this here. Logically if the other major alternative as a reserve currency is in trouble under Bretton Woods Mark I, everyone goes home to Daddy. I think that is how it will be.

Update: Well Brad still isn’t there but Stephen Roach is. I think his view is the dominant one on the US blogging scene, and shared by non-blogging economists like Paul Krugman. I’m sorry, I think it’s wrong, and by a long way.

Update 2 I’m getting a little tired of waiting (incidentally General Glut has just passed by in comments, and he *does* have a post on the topic). Now the politically sensitive US trade gap with China widened $14.0 percent in April to $14.7 billion. This means it was $12 billion in March, or that it rose $2.7 billion. Now China’s surplus widened to $8.99 billion from $4.59 billion. Doing the arithmetic the surplus rose $4.4 billion. $4.4 billion minus $2.7 billion gives $1.7 billion, a hell of a big chunk of which was probably with Europe. I wish someone who really knew about this would write something, but my educated guess is that Chinese import penetration in Europe is now big and getting bigger by the month. Hence the row about globalisation in the French referendum. Basically what I am saying is that having this kind of issue in the Free Trade US of A is one thing, having it in the more anti-globalisation European core is going to be quite another. China the global imbalance to end all (im)balances.

Now if you want to understand something about China:
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EU Budget: The Plot Thickens

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Perhaps better said, the crisis deepens. Jaques Chirac started things off:

“The time has come for our British friends to understand that they must now make a gesture of solidarity”

and Tony Blair, of course, rose to the bait:

“Britain has been making a gesture, because over the past 10 years, even with the British rebate, we have been making a contribution into Europe two and half times that of France.”

“Without the rebate, it would have been 15 times as much as France. That is our gesture,”

It doesn’t look like there’s too much understanding going on here. Then there’s the nub of the matter.

According to Blair, the reason the rebate exists is because otherwise there would be a ‘quite unfair’ proportion of British contribution and:

“The reason for the unfairness is because the spending of Europe is so geared to the Common Agricultural Policy. My view is that if we want a debate on future financing, one part of that has got to be what Europe needs to spend its money on to prepare Europe for the 21st Century, which is not the same as Europe 30 or 40 years ago.”

I think at this stage it is really hard to say how this will work out at the summit. At this moment in time there seems to be little love lost between the French President and his ‘British friends’. Of course a lot of this could change when they get down to the negotiating table, but at this moment in time it isn’t easy to see how.

Prodi Strikes Back

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I think one of the topics for next years election in Italy is just being decided. Romano Prodi (former President of the EU Commission) has just spoken out against Sinascalco. He is in favour of making cuts. Prodi is quoted as saying that:

“Credit downgrades will follow if there is not quick action in fixing the situation, and I do hope Finance Minister Siniscalco makes some decision……The government lost control of current expenditure. The situation is very serious.”

Prodi is about to become the whipping boy, having to go into an election with the ‘popular’ policy of making widespread spending cuts.

Incidentally,
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Let Battle Be Joined

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Well, things are shaping up nicely for a ‘healthy debate of the underlying issues’ on 16/17 June. Chirac and Schr?der have pronounced: the ratification process must continue, Jean-Claude Juncker is warning that failure to reach a budget deal at the summit would “turn the big European difficulties into a big European crisis“, and Peter Mandelson forsees a historic opportunity for Tony Blair. Mandelson is quoted as saying:

“Tony Blair could carry on for another three years now that he has been given a “fresh calling” to resolve Europe’s crisis, his old ally Peter Mandelson claimed last night.

Mr Mandelson said the French and Dutch rejection of the European Union constitution handed Mr Blair another chance to secure his legacy as Prime Minister“.

What does all this mean? Well, according to France’s Le Figaro:

“Si Londres gagne, c’est la victoire de l’Europe lib?rale, ? l’anglo-saxonne, aussi ?largie que possible, un grand march? contr?l? au strict minimum par Bruxelles. Si Berlin l’emporte, c’est la victoire de l’Europe politique, libre-?changiste, mais surtout f?d?rale, avec une d?fense, une diplomatie, et une monnaie commune. Dans l’Europe b?tarde du trait? de Nice, tous les Etats membres n’ont pas encore choisi leur camp. La crise va les obliger ? tomber les masques.”

“”If London wins [the ratification dispute] it is a victory for liberal, Anglo-Saxon Europe, enlarged as much as possible, a giant market, with regulation from Brussels kept to a strict minimum. If It is Berlin that carries the day, it’s victory for the Political vision of Europe, free-trade, but especially federal, with a common defence, diplomacy, and a common money. In the ‘bastard’ Europe born of Nice treaty, all members states have not yet chosen their camp. The crisis will force everyone to take off their masks.”

Of course there is a third party here: the Commission. What Barroso will undoubtedly be working for is a pragmatic, workable compromise.

“Mr Barroso urged the French leader and his colleagues to “turn a crisis into an opportunity” and argued: “It is vital that we use the present moment to forge a new consensus.”

He warned Europe not to indulge in a “blame game” or an “ideological rift” between supporters of free markets and those who believe in government intervention. What was needed, Mr Barroso said, was “an intelligent synthesis between the market and the state, which can help Europe win and not lose in the face of globalisation”.”

People Get Ready

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Laura Rozen thinks that the broadcast of a graphic video from the massacre at Srebrenica may mark a tipping point in Serbian public opinion and pave the way for the arrest of Ratko Mladic and his extradition to The Hague.

She quotes an international justice listserv:

B92′s Danijel Bukomirovic, speaking in Dutch on NOS Journaal at 20:00 CET, suggested between the lines the Serbian government had had a hand in the surfacing of the ‘executions tape.’ The dire economic needs of the country make EU accession talks the only option for a better future, but oppositon amongst a majority of the poulation against the ICTY’s demands for the extradition of indicted war criminals stands in the way. A mood swing amongst a public in denial of the Srebrenica massacres would pave the way towards the extradition of Ratko Mladic…

This is part of what’s at stake with EU enlargement, and indirectly with the constitutional treaty.
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Heeding Henry.

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Joschka Fischer, the German foreign minister, may be coming out of the dog house – if only conceptually.

After even the left leaning German daily taz recently began publishing political obituaries for the man who more than anyone represents the political maturing (or not) of the generation of ’68 (following the affair about problematic political guidelines leading to criminal exploitation of German visa policies in Eastern Europe and in light of the looming federal election that will likely lead to a government without a Green party participation), Mr Fischer may have decided that it might be worthwhile to spend his remaining time in office not just by campaigning for a permanent German seat in the UN security council but by heeding Henry Farrell’s advice about the opportunities of a dieing European constitution and going back to his own foreign policy ‘roots’: In May 2000, he used a speech at Berlin’s Humboldt University to sketch out his ideas for ever closer union, “From Confederacy to Federation” (pdf available).
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Another ‘euro’ sceptic

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Bloomberg’s Mathew Lynn has been pretty consistently skeptical about the workability of the common currency. Personally I find it difficult to disagree with the following:

“The euro, the common currency shared by 12 EU nations, will weaken considerably as Europe enters a long period of political instability. Recriminations from the collapse of the constitution will be played out over months, not days.

And the economics of integration that have dominated Europe for the last 30 years have come to an end. Forget convergence. The big trend in the next few years will be Europe’s economies going their own way, not with each other. In time, even the euro’s survival might be called into question.

“The initial reaction might be relatively muted because the markets had already discounted `no’ votes in both countries,” said Stuart Thomson, a fixed-income strategist at Charles Stanley Sutherlands in Edinburgh. “What it does do is put a stop to any thoughts of fiscal integration, because that was really the next step of the process. Without that, it is difficult to see what is underpinning the euro.”"

He Would Say That Wouldn’t He II

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In some ways I think this story may run and run over the months to come. Bloomberg have an update on their earlier article. According to the latest account:

1/. The German Finance Ministry have declined to comment on the Stern report that discussions took place last week between Finance Minister Hans Eichel, Bundesbank President Axel Weber and various economists on a possible failure of European Monetary Union.
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