Another sad step toward failure for the EU (Updated)

British Prime Minister David Cameron won concessions from the other EU members that loosens Britain's ties and commitment to the Union, concessions that make him willing to campaign for Britain staying in the Union in the referendum coming up in possibly in June. (Daniel Brössler und Alexander Mühlauer, Cameron setzt sich bei Brexit-Verhandlungen durch Süddeutsche Zeitung 20.02.2016)

I don't want to be so pessimistic as to say it's another nail in the coffin of the EU. The EU may well continue to exist for many years. But its one-time promise is dying. Or rather it was killed by failure of leadership by people like Cameron, Angela Merkel and François Hollande on major issues like the euro crisis and the years-long refugee crisis.

This week I've been reading a paper by Jürgen Habermas that he delivered in November 2007, "Europapolitik in der Sackgasse" ("Europe at an Impasse"), published in Philosophie und Politik/Philosophy Meets Politics 9:2008. He was pleading for continuing the process of increasing European integration, emphasizing how the EU could become a major force offsetting US cowboy foreign policy, and how it could serve as a model worldwide for regional cooperation.

It reads now like nostalgia, a fond remembrance of a hopeful path not taken, and now the chance is gone.

Today we have the grandees of the EU congratulating themselves that they have encouraged nationalism within the EU by caving to Britain's demands for special treatment and less integration with its partner nations.

The refugee crisis grinds on, with no decent solution in sight.

And there's this, from Wolfgang Münchau, Four signs another eurozone financial crisis is looming Financial Times 02/15/2016:

The rout in European financial markets last week was a wat­ershed event. What we witnessed was not necessarily the beginnings of a bear market in equities or an uncertain harbinger of a future recession. What we saw — at least here in Europe — is the return of the financial crisis.

Version 2.0 of the eurozone crisis may look less frightening than the original in some respects but it is worse in others. The bond yields are not quite as high as they were then. The eurozone now has a rescue umbrella in place. The banks have lower levels of leverage.

But the banking system has not been cleaned up, there are plenty of zombie lenders around and in contrast to 2010 we are in a deflationary environment. The European Central Bank has missed its inflation target for four years and is very likely to miss it for years to come.

He also observes:

Looking back, the cardinal error committed by the European authorities was the failure in 2008 to clean up their banking system after the collapse of Lehman Brothers. This was the original sin. Many other mistakes subsequently compounded the problem: pro-cyclical fiscal austerity, the ECB’s multiple policy failures and the failure to create a proper banking union. It is interesting that every single one of these decisions was ultimately the result of pressure brought by German policymakers.

You're doing a heckuva job, Angela Merkel, a heckuva job!

Not-bad news from the EU: Juncker nominated for EU Commission Presidency

The EU Council of heads of state has finally nominated Jean-Claude Juncker as the EU Commission President.

Here is a Euronews report, Jean-Claude Juncker nominated as EU Commission President 06/27/2014:

Since his party won a plurality in May's European Parliament elections, this is good news. Or at least, the news could be worse. How much of a hissy fit David Cameron and the British will pitch remains to be seen.

This BBC News report is very Britain-centric, EU backs Juncker to head Commission in blow to UK 06/27/2014. But the rebuke this represents to David Cameron's nationalistic posturing is an important part of this decision:

Prime Minister David Cameron called it "a serious mistake". "This is going to be a long, tough fight," he said.

He had pushed for a vote on Mr Juncker - breaking with tradition - and 26 out of 28 countries backed him.

Only Mr Cameron and Hungarian PM Viktor Orban voted against him. Mr Juncker is also likely to win a vote by Euro MPs.

Juncker's nomination still has to be approved by the European Parliament, a very likely outcome.

It certainly doesn't solve the basic problem of the "democratic deficit" in the EU, which Spiegel International's image of a few weeks ago defines so well:

But it would have made the "democratic deficit" worse if German Chancellor Angela Merkel had continued to join Cameron in blocking his nomination and they had succeeded.

Here's Cameron whining on the topic, Cameron: Juncker's election as Commission president is "profoundly wrong" EurAktiv

Here is BBC News' Profile: EU's Jean-Claude Juncker 06/24/2014.

Tags: angela merkel, david cameron, eu, european union, jean-claude juncker

Merkel and Cameron, EU allies for neoliberal austerity programs

Along with the struggles in the eurozone over austerity policies, there is a also one over how much say the European voters should have over the selection of the EU Commission President. The President is actually selected and nominated by the EU Council composed of the heads of government of the member states, after which the Parliament must approve or reject the nominee. Under current EU rules, the Council is supposed to give weight to the selection of the voters in European Parliamentary elections like that in May. But the Council is not obliged to select one of the figures that actually ran for the office with the backing of European-wide parties.

In May, the conservative party with the Luxembourgian Jean-Claude Juncker as its EU Presidential candidate won the largest plurality, with the Social Democrats with the German Martin Schultz as the Presidential candidate coming second.

But Merkel hasn't agreed to select Junker as EU President, even though she specifically endorsed him in the election. She evidently wants to make it clear that the EU Council of states, which she presumably finds more easy to dominate than the European Parliament, is clearly recognized as far more decisive than the public vote by the citizens. And thus doesn't want to see a precedent that the voters' choice should carry any particular weight in selecting the President.

This is part of the problem called the "democratic deficit" in the EU, which Spiegel International earlier this month managed to define succinctly:

Part of her consideration is her alliance of the moment with British Premier David Cameron, who also opposes Juncker's selection, in keeping the EU a relatively weak organization dominated by, well, her. As Albrecht von Lucke explains in EU: Tage der Entscheidung Blätter 7/2014 (accessed 06/23/2014):

Hier zeigt sich: Ganz offensichtlich ist Merkel der Verbleib Großbritanniens in der EU wichtiger als deren demokratische Vertiefung. Und hier liegt die zweite Ebene der aktuellen Machtprobe, nämlich der Kampf um die künftigen politischen Inhalte der EU. Dass Angela Merkel als „die britische Kanzlerin“ agierte[7] und sich dezidiert für Großbritannien aussprach, hat einen entscheidenden Grund: Merkels Verständnis Europas deckt sich in weiten Teilen mit dem des englischen Premierministers. Merkel steht wie Cameron für ein primär an Konkurrenz und Wettbewerb orientiertes Europa, gegen eine Vertiefung der Union und für intergouvernementales Regieren. Aus demselben Grund hatte sie bereits vor zehn Jahren den bekennenden Europäer Guy Verhofstadt verhindert und José Manuel Barroso aus dem Hut gezaubert, der bis dato in Europa nur durch seine Unterstützung des Irakkriegs aufgefallen war. Obwohl die britischen Konservativen im EU-Parlament künftig mit der AfD zusammenarbeiten, will Merkel den Bruch der EU mit Cameron unbedingt vermeiden. Denn sie hat mit Großbritannien stets gerne über Bande gespielt, um die neoliberale Achse zu stärken – etwa bei TTIP oder als Gegengewicht gegen Frankreich und eine mögliche Koalition der Südländer.

Here we see: The retention of Great Britain in the EU is more important to Merkel than its democratic deepening. And here lies the second level of the current power struggle, that is, the fight over the future political content of the EU. That Angela Merkel acts as "the British Chancellor" and makes decisions and speaks out decided for Great Britain has a definite reason: Merkel's understandin gof Euorpe overlaps broadly with that of the English Prime Minister. Merkel, like Cameron, stands for a Europe primarily oriented to competition and competitiveness (Konkurrenz und Wettbewerb), against a deepening of the Union and for inter-governmental rule {i.e., the EU Council}. For the same reason, already ten years ago she blocked the professing European Guy Verhofstadt and pulled José Manuel Barroso out of her magic had {as EU President}, who until then had attracted attention in Europe only by his support of the Iraq War. Even though the British Conservatives in the EU Parliament will work together in the future with the AfD {Alternative für Deutschland, a hardline rightwing anti-European party that could take significant numbers of vote from Merkel's CDU in the future}, Merkel definitely wants to prevent the break of the EU with Cameron. She has always been glad to go the extra mile (stets gerne über Bande gespielt) in order to strengthen the neoliberal axis - for instance, with TTIP {the Transatlantic Trade and Investment Partnership} or as a counterweight against France and a possible {anti-austerity} coalition with the southern {eurozone} countries.

A current Spiegel International report suggests that Merkel backing Cameron's anti-Juncker positions "is looking increasingly unlikely," and that Cameron may not even want Merkel's cooperation on the issue, preferring instead to posture at home as the guy who's defying the EU on behalf of British nationalism - my charaterization, not Spiegel's. (Melanie Amann et al, Commission Crusade: Cameron Outmaneuvered in Battle over Juncker 06/19/2014)

The article also reports:

More than anything, though, a European power struggle is afoot. If Cameron prevails, the European Council will continue to reign supreme and the Parliament will continue to look like little more than a European debate club. "The will of the voters is as legitimate in the EU election as it is in other elections," says Austrian Chancellor Werner Faymann. "To ignore the results of the election would damage European democracy."

Early on, Merkel backed Cameron's position. At a dinner of EU leaders two days after the European election, she threatened to assemble a blocking minority together with the British prime minister. Cameron's warning -- that if Juncker was named to the position, it could accelerate Britain's exit from the EU -- had its intended effect. Almost all significant UK parties are opposed to Juncker, who they see as a European technocrat unable to reform the Commission. Only the EU-skeptic party UKIP is in favor or Juncker, say pro-EU voices in Britain, noting that a Juncker presidency would make it even easier for the party to sell its anti-Europe message.

But in Germany, the chancellor was accused of not supporting her own party's candidate and she quickly made an about face -- after telephoning with Cameron first to explain her reversal. The British prime minister was understanding, but continues to hope for German support when the time comes.

Tags: angela merkel, austerity economics, david cameron, eu, euro, european union

Business Week's Peter Coy: "The austerity formula ... by and large isn’t working."

Peter Coy takes note of the elephant in the room that stomping the furniture, breaking the windows and knocking down the walls: "The austerity formula — cut spending, and growth will follow — by and large isn't working." (Austerity Has Diminished Britain — and Cameron, Too Bloomberg Businessweek 06/13/2013)

A G-8 meeting is coming up next week, and Coy thinks that the leaders will have enough sense to recognize that the Merkel-Cameron-Hollande-Troika austerity policies are a train wreck: "The big economies of continental Europe are shrinking or barely growing. Britain’s economy has expanded less than 1 percent over the past year. In the U.S., the chill of sequestration spending cuts is expected to reduce annual growth to 1.6 percent in the current quarter."

We can always hope.

Coy spells out how badly things have gone in Britain:

Cameron's big idea when he campaigned in 2009 and 2010 was to reassure global bond investors with promises of big cuts in spending that spared only the National Health Service and foreign aid, while raising the value-added tax on sales. Smaller deficits would lower interest rates, allowing businesses to borrow, invest, and hire. Interest rates fell, as promised, but growth never picked up because consumers remained overindebted, the banking sector was undercapitalized and in no shape to lend, and businesses didn't see enough demand to justify expansion. The European debt crisis, which suppressed British exports, was a factor. But so was the dampening effect of decreased government spending. Cameron envisioned a Big Society—his equivalent of compassionate conservatism—in which private charity would fill the hole left by government. That hasn't happened, either. As Spain and Greece have discovered, economic weakness cuts into tax receipts. So the budget deficit was still over 7 percent of gross domestic product in the year through March even though inflation-adjusted discretionary spending was down nearly 12 percent, according to the Institute for Fiscal Studies. [my emphasis]

This is no surprise to economists who still remembered basic macroeconomics. The idea that government austerity in a depression would be anything but harmful to the economy was demonstrated very effectively decades ago by Herbert Hoover and Heinrich Brüning.

But Coy proceeds to make this argument as though he doesn't realize its inconsistency with the section just quoted: "Some retrenchment was essential after the deficit surpassed 11 percent of GDP in 2010, a post-World War II high. The Conservatives argue that if Cameron goes wobbly in the knees now and eases up on austerity, the bond market might react badly, driving interest rates back up and worsening Britain's predicament."

When a depression starts, GDP shrinks. Debt doesn't shrink as fast as GDP, and automatic stabilizers like unemployment insurance pay out more and tend to push the deficit and debt up. This is exactly what needs to happen in a depression. So what is Coy talking about when he says that "some retrenchment" was necessary just after he's described what actual harm resulted from the real existing "retrenchment" Cameron's government?

Tags: angela merkel, austerity economics, britain, david cameron, eu, euro, european union

The Iron Lady, Frau Fritz and what may be left of the future of the EU

Clive Crook looks at the recently deceased British Prime Minister's one-time criticism of the European Union in Margaret Thatcher, Britain's Prime Euro-Skeptic Bloomberg Businessweek 04/11/2013. He recalls that it was Thatcher's determined opposition to further European political integration that prompted her downfall in 1990, which didn't come as the result of an election but from her rejection by her own party over European policy:

Returning from a European Community meeting in Rome, she gave a speech in Parliament that attacked plans from the European Commission (the Community’s executive branch) for a politically integrated Europe. "No, no, no," she said. Her exasperated deputy prime minister, Geoffrey Howe, decided to quit. Howe, until then a Thatcher loyalist, was one of the most boring speakers the House of Commons ever produced — a former Labour minister once said that facing his criticism was like being "savaged by a dead sheep" — but his resignation statement was electrifying. It dispelled the illusion of Thatcher’s power and sparked the rebellion that brought her down.

European Commission President Jose Manuel Barroso on Thatcher's passing, Barroso on the death of Margaret Thatcher EUXTV 04/08/2013:

He explains that Thatcher had an unattractive combination of two kinds of Euro-skepticism:

When it came to Europe, Thatcher had an attitude problem, one that other Europeans would recognize as characteristically British. She was right on points of substance but expressed and inflamed a national disdain for the European project that served her country badly.

British euro-skepticism has two strands, and Thatcher exemplified both. The rational strand is pragmatic and liberal (in the European sense). It's fearful of big government and hopes to keep a self-replicating bureaucracy in check. It wants to locate democratic accountability mainly at the national level until a real European political identity has established itself, and it thinks that process shouldn't be rushed. It recognizes Britain’s acute dependence on a thriving European economy, celebrates the gains from trade in Europe's single market, and is open to further integration to serve that purpose, but it rejects political union as a goal in its own right.

There’s also an irrational, illiberal strand. Its core is chauvinistic and attached not just to Britain's history — "We will fight them on the beaches," and all that — but also to the myth of its undiminished geopolitical weight. Britain doesn't need Europe, according to this view. What's Europe ever done for us? [my emphasis]

Crook sees present Prime Minister David Cameron as following in the "rational strand" that he identifies. And he discusses how Cameron is using his Euro-skepticism to threaten a new referendum on EU membership as a way to pressure the other EU members into making more special concessions to Britain.

Crook's article does not give a sense of how drastically EU politics has changed. The "European project" was never primarily about making a big ole free trade zone for the corporations to enjoy at the expense of workers. It was primarily about preventing war and promoting democracy. Thanks in no small part to the position of people like Thatcher and Cameron, the EU project has now degenerated into a German-dominated commercial racket.

The three largest powers in the EU are Germany, France and Britain. Their leadership has been critical in making or breaking the European project. And all three countries have been working hard in recent years on policies that will break it. German Chancellor Angela "Frau Fritz" Merkel has done the most harm, of course, using the euro crisis to impose conservative German fiscal policies of the Heinrich Brüning type on the eurozone. Former French President Nicolas Sarkozy was Frau Fritz' partner in doing so. François Hollande got elected President opposing the Merkel-Brüning policies. But after he was elected, he could scarcely wait to reverse himself and become a loyal supporter of those policies, including proposing austerity policies for France.

Cameron and Britain have been worse than useless to the EU during the euro crisis. Britain looks prescient in not joining the euro. But it was more nationalism and lack of support for EU that led them to stay out rather than any astute economic analysis by the British decision-makers. They certainly haven't had any useful advice or material assistance to the eurozone during the crisis. On the contrary, Cameron has been implementing Merkel-Brüning austerity policies in Britain, with the damage to the economy that comes with it. And he's tried to exploit the eurozone crisis to weaken financial regulations affecting Britain and further distance himself from the EU.

The narrow nationalism of Cameron and Frau Fritz is well along in consigning both their nations to be bit players on the world scene. The only way Britain, France or Germany can continue to be major forces in world politics is through a European Union. And they have failed to pull it off, or so it currently appears.

If the European project is to be resuscitated, one of the things that would have to be done in any case is to exclude Britain from it, so long as its foreign policy is so tightly tied to that of the United States. Under the current world-hegemony foreign policy the US is pursuing and has pursued since the fall of the Soviet Union, the US aims to prevent the rise of any "peer competitor" on the world scene. Before Frau Fritz began her current wrecking operation in 2009, the EU was a candidate for such a status. So US policy since the Clinton Administration has favored a weaker EU without a common foreign policy, so that the US can when it wants play the various EU nations off against one another, as the Cheney-Bush Administration did over the Iraq War and "missile defense." For the EU to achieve its full potential as a global power player, it would need a common foreign policy. And that will not be possible with Britain included so long as the "special relationship" to the US holds.

But with the current Merkel-Brüning austerity policies dominant, all talk about any long future for the EU, much less the euro, seems more and more abstract and speculative. Here's the EU putting the squeeze on Spain and Slovenia for insufficient austerity, EU warns Spain, Slovenia over troubled economies EUXTV 04/11/2013:

And the squeeze on Cyprus. And Protugal. EU helps Cyprus, Portugal and Ireland over bailouts - economy Euronews 04/12/2013:

Tags: angela merkel, austerity economics, david cameron, eu, euro, european union, france, françois hollande, maggie thatcher

Video reports on David Cameron's anti-Europe declarations

From Euronews, British referendum casts shadow over Davos 01/24/2013:

Merkel, on the other hand, talked about pushing for more union and, more immediately, a continuation of her brutal austerity program (German Chancellor Angela Merkel urges EU political changes Euronews 01/24/2013):

Deutsche Welle English reports on the contrast between the two in Merkel and Cameron lay out differing European visions 01/24/2013:

Aljazeera English reports on some of the criticism that Cameron's threat received, European leaders slam Cameron over EU comments 01/23/2013:

Tags: angela merkel, austerity economics, david cameron, eu, euro, european union

David Cameron and Britain's future in the EU (or, not)

The current leadership of the European Union is a disgrace. Especially in the leading three countries, Germany, France and Britain.

German Chancellor Angela "Frau Fritz" Merkel has imposed brutal, destructive austerity economics on the "periphery" countries Greece, Ireland, Italy, Portugal and Spain. (See Graeme Wearden and Larry Elliott, Angela Merkel tells Davos austerity must continue The Guardian 01/24/2013) In the process, she essentially dictated to Greece and Italy which governments they could have at some points in the process. The opposition Social Democrats (SPD) and Greens have largely played along with her awful policies that may very well have doomed the euro and the EU itself.

French President Nicolas Sarkozy was Frau Fritz' partner in imposing austerity. The Socialists won the Presidency last year under François Hollande, campaigning against Merkel's austerity mania and her fiscal suicide pact, aka, the Stability Pact. Once elected, Hollande quickly capitulated to Angie on EU austerity and the fiscal suicide pact, and started slashing the French budget, too.

Britain has always been a diffident EU partner. They aren't eurozone members. But they also didn't offer any useful aid or even advice as Frau Fritz dragged the eurozone further and further into crisis. Current Conservative Prime Minister David Cameron cheerful adopted his own version of austerity economics during a depression in Britain, though, which shoved the British economy into a new recession. Awesome. (See Larry Elliott, Austerity plan is failing,IMF tells Osborne The Guardian 01/24/2013.)

Now, Cameron is making noises about holding a new referendum in Britain after the 2015 election on whether Britain should remain an EU member. A threat he articulated this week at the Davos World Economic Forum, in what Carsten Volkery calls "the most important speech of his political life." (Camerons EU-Pläne: Allein gegen alle Spiegel Online 23.01.2013) He also declared that Britain would never become part of the eurozone.

The truth is that if the EU is going to survive the euro crisis in anything like its current form, it will have to move toward a far higher degree of political and economic integration than Britain can be expected to accept. And, in any case, Britain remains largely subservient to the US in every important question of foreign policy. And the current US strategy of global hegemony requires the US to block the rise of any "peer competitor" in the world, one of which the EU could be. And the US has used Britain to help keep the EU relatively weak. There is little prospect from the European viewpoint that this will change in the immediate future.

So for the EU to succeed, if that's still a feasible possibility, they will have to do so without Britain as a member. Wolfgang Münchau basically says the rest of the EU should let them leave without a fuss and wish them good riddance. (Reisende soll man nicht aufhalten Spiegel Online 23.01.2013)

That said, that doesn't diminish the irresponsibility of Cameron in his anti-Europe course. Yannis Palaiologos writes about his latest antics in David Cameron's Malaise Speech The American Prospect 01/24/2013:

Prime Minister David Cameron gave a big speech on Britain and Europe in London on Wednesday morning. In it, he expressed his country’s dissatisfaction at the evolution of the European Union, in particular in the age of the euro crisis. Lamenting the slipping competitiveness of European economies and the mounting democratic deficit of the EU, he vowed to renegotiate the United Kingdom’s relationship with Brussels by clawing back as many powers as he could from the control of the EU bureaucracy. He also promised to put the new deal to a referendum at some point during the second term he hopes to win in the 2015 elections. A “no” vote in that referendum would spell a British exit. ...

Last July, William Hague, the avowedly eurosceptic foreign minister and former party leader, launched what he called a "comprehensive audit" of EU powers in the UK, due to be completed in 2014. The Fresh Start group of Conservative MPs recently provided the prime minister with their own suggestions for repatriation, which included aspects of justice and policing, employment law, fisheries and financial services. Meanwhile, the right-wing UK Independence Party, openly campaigning for a British exit, keeps gaining in support and has become a real thorn in the Conservatives’ side.

President Obama called Cameron to discourage talk of a Britsh exit from the EU. (Marcelo Justo, Cameron consulta la salida de la UE Página 12 24.01.2013)

Cameron's flighty, demagogic stance is yet another example of the spectacular shortcomings of the current EU leadership. Louise Armitstead reports (Europe is being 'out-competed' and must change, says David Cameron Telegraph 01/24/2013:

After angering his EU partners on Wednesday by announcing plans for a referendum on membership, the Prime Minister said of his push for change: "This is not about turning our backs on Europe. Quite the opposite.

"This is how I see it – just over half of EU countries are in the single currency. You move towards a banking union, towards a fiscal union and that has huge implications for those of us not in the euro, like the UK, and we are frankly not likely to ever join.

"It is not just right for Britain, it is right for Europe."

Glen Newey in the LRB Blog (Cameron’s Euro Fudge 01/24/2013) describes the dilemma anti-Europe sentiment in Cameron's Conservative Party and without places him:

In fact, there’s only one script that does the trick for Cameron: he wins in 2015, claws back sovereignty from the EU, before asking for, and winning, UK voters’ assent to the new deal. All other branches of the game-tree lead to catastrophe, either in the form of career-wrecking credibility loss or a UK exit from the EU – maybe, though probably not, without Scotland. And, even before getting over the 2015 election hurdle, Cameron runs the risk – as happened in 1997 – that branding Europe as the UK's bête noire makes it harder for the Tories credibly to demonise Labour at the same time.

There is a democratic deficit in EU institutions, and as the 50th anniversary of Adenauer and de Gaulle's Friendship Pact this week underlined, the EU is mainly a Franco-German show: a recent televised exchange between Helmut Schmidt and Giscard d’Estaing brought home how committed leading actors in the EU and its forerunners have been to a single Euro-state. But exit, as Cameron knows, is far from cost-free. After the US, the UK’s next seven leading export partners are in the EU. It will be interesting to see how many UK exporters to France and Germany will want to cheer on risking a return to tariff barriers. Meanwhile, though Angela Merkel has been polite about Cameron’s in/out, there have been suggestions that – as English nationalists sometimes mutter about Scottish independence – separation might be pre-empted by blackballing.

Tags: angela merkel, austerity economics, david cameron, eu, euro, european union, france, françois hollande

Angie on Greece: kick the can, impoverish the people

German Chancellor Angela "Frau Fritz" Merkel is trying to kick the can of the Greek debt problem further down the road. (Nicolai Kwasniewski, Griechenland-Kredite: Europa entscheidet sich fürs Weiterwursteln Spiegel Online 21.11.2012)

Since the Greek debt crisis broke out in 2009, Frau Fritz has been trying to do just enough to prevent Greece from defaulting, which could have set off some bad consequences for German banks and still could; to keep Greece in the eurozone; to avoid telling the German taxpayers that they were going to lose a lot of the money they've been loaning to Greece for the previous two purchases; and to insist on a brutal program of austerity that is crushing the Greek economy, impoverishing the Greek people and making the debt crisis unsolvable within the framework on which she's insisting.

And in doing so, she's been behaving with an arrogance and raw nationalism that every previous Chancellor of the Federal Republic had been careful to avoid.

Euronews provides a brief report on the latest drama, No agreement on Greek debt 11/21/2012:

As Wolfgang Münchau wrote last week, the period of being able to pretend to German voters that they aren't going to have to eat big public expenses to save the euro and handle the Greek debt issues is effectively over. But Frau Fritz is still trying to keep the game going. As Nicolai Kwasniewski explains, right now the European Central Bank (ECB) is basically keeping Greece afloat by buying Greek short-term debt. Greece is due another tranche of previously-committed aid to avoid debt default but Frau Fritz is currently blocking its distribution to Greece.

The official reason is that they need to do "further technical work on some elements of the package." The sticking point is that the IMF is insisting that the EU (i.e., Angie) recognize the reality that a large portion of the Greek debt has to be written off. Which means that Germany actually loses billions of dollars in their aide provided to Greece in the form of a loan. As Andreas Rinke and Lefteris Papadimas explain in Greece's lenders fail again to clinch debt deal Reuters 11/21/2012, referring to the meeting that just took place between eurozone finance ministers, the ECB and the IMF:

A document prepared for the Brussels meeting and seen by Reuters showed Greece's debt cannot be cut from 170 percent of GDP to 120 percent, the level deemed sustainable by the IMF, unless either euro zone member states write off a portion of their loans to Greece or the IMF extends its deadline by two years.

Germany and other EU states say writing down their loans would be illegal. The European Central Bank, a major holder of Greek bonds, has refused to take a "haircut" on its holdings.

Berlin contends a debt haircut would not tackle the roots of Greece's debt problems and would be unfair to other euro zone countries that have taken tough steps to improve their finances.

"It would cost money, it would be a fatal signal to Ireland, Portugal and possibly Spain, as they would immediately ask why they should accept difficult conditions and push through difficult measures ... and it would have consequences under budget law," Norbert Barthle, budget spokesman for Merkel's Christian Democrats said.

Without corrective measures, the Eurogroup document said, Greek debt would be 144 percent in 2020 and 133 percent in 2022.

Juncker said after a meeting a week ago that he wanted to extend the target date to reduce Greek debt by two years to 2022, but [IMF Director Christine] Lagarde insists the 2020 goal should stand. She is believed to favor euro zone member states taking a writedown.

Andy Dabilis reports in Eurozone Talks Break Down, No Aid for Greece Yet Greek Reporter 11/21/2012:

After 12 hours of talks in Brussels between Eurozone finance chiefs and International Monetary Fund Managing Director Christine Lagarde failed to reach an agreement on how to manage Greece’s runaway debt and unlock a long-delayed $38.8 billion loan, Prime Minister Antonis Samaras said he would meet with the financial bloc's leader, Jean-Claude Juncker.

A dismayed Samaras, who had rammed through the Parliament an unpopular $17.45 billion spending cut and tax hike program demanded by lenders in return for more aid, headed for Brussels on Nov. 21, hours after the long talks failed, to prepare for a Nov. 22-23 meeting of European Union leaders and to talk to Juncker.

John Psaropoulos elaborates in Greece Awaits Payout Decision The New Athenian 11/19/2012:

The decision to release the money was meant to have been taken at last Monday’s Eurogroup meeting. But that meeting was dominated by a dispute with the International Monetary Fund, which believes that Greece’s debt is not sustainable unless a large chunk of it is forgiven. Since banks and private sector lenders already forgave 107 billion euros last march, representing more than half of their Greek bond holdings, it is now incumbent on European governments to offer a discount, something the eurozone has been resisting.

Greece has taken a surprisingly soft stance on the restructuring of its debt. The IMF's insistence on official sector involvement was not grasped by the Greek side. Asked about it on Friday, Finance Minister Yannis Stournaras said "I don't have anything to say about that, thank you."

Reuters quotes ECB board member Joerg Asmussen as saying that the Eurogroup will not address the sustainability issue on Tuesday, leaving it to later meetings.

Europe is also consumed by larger concerns, namely a dispute between net contributors and net beneficiaries over the size of the next seven-year European budget. Fiscal hawks like Germany and the Netherlands want the roughly one trillion euro budget cut significantly. An emergency EU summit has been called for Thursday to resolve the dispute.

This scene with Greece gets uglier by the day. Frau Fritz forces the Greek government parties to fall on their swords politically and then kicks them in the teeth. (Kind of like the Republicans negotiating with Obama on the debt ceiling in 2011, come to think of it.)

The German Social Democrats (SPD) have a pretty pitiful record in dealing with the euro crisis, usually reinforcing the neoliberal/austerity framework that Frau Fritz is using to wreck the economies of euro "periphery" countries like Greece, as Rinke and Papadimas describe:

Any options that cost the German taxpayer more money come with a heavy political price tag with elections less than a year away and would have to voted through by an increasingly restive Bundestag.

"If we get the impression we are being cheated, we won't come to the rescue anymore when you need our support," Social Democrat leader Peer Steinbrueck warned in a speech to the chamber just before Merkel took the podium.

Until now Merkel has been able to count on the support of parties like the SPD and Greens to help push through controversial bailout votes in the lower house.

That is seriously pitiful on the SPD's part. It's no wonder that for all her spectacular mismanagement of the euro crisis, she and her party still lead the SPD in the polls.

Plus, Britain may be positioning itself to bolt from the EU altogether. (Jürgen Krönig, Warum Großbritannien die EU verlassen wird Die Zeit 21.11.2012) This in itself is a major failure of leadership on the part of Berlin, London and Paris. But there is a bright side. If the EU has a medium-term future, it will almost certainly have to be without Britain as a member. They are too little committed to the "European project" and too subservient to the US in foreign policy to be a full partner in the EU. The current point of open conflict is Tory Prime Minister David Cameron's push to limit the EU budget.

Tags: angela merkel, austerity economics, britain, david cameron, eu, euro, european union, greece

Britain's success (NOT!) with austerity economics

Robert Hutton give s us a glimpse of state of the British economy under Prime Minister David Cameron's austerity economics during a depression in The Loneliness of David Cameron Bloomberg Businessweek 11/08/2012:

Cameron’s signature policy—an austerity plan meant to wipe out the structural budget deficit by the 2015 election—has caused pain among voters and is certain to cause more. The government will have implemented £37 billion ($59.11 billion), less than a third of the £126 billion of cuts planned, by the end of the fiscal year. Welfare payments for housing have been capped, forcing some poor people to move out of expensive areas such as London. Pay has been frozen for police, teachers, nurses, doctors, and other public-sector workers.

The success of the austerity plan depended on the economy returning to a growth rate of 2.3 percent in 2011 and 2.8 percent in 2012. It didn't; the economy is only now emerging from a double-dip recession. The National Institute of Economic and Social Research forecast on Nov. 2 that the economy in 2013 will be 5.3 percent smaller than forecast in 2010. The deficit-elimination target has been pushed back to the fiscal year ending April 2017. That means the government will go into the 2015 election promising further spending cuts and tax hikes.

You would think that at least Germany Chancellor Angela Merkel would be proud of him. But he's being so much of a pain in the rear on EU matters that he's probably not getting even that much out of this lovely experiment in austerity economics.

Greece, Ireland, Italy, Spain and Portugal have all had similar experiences.

Tags: angela merkel, austerity economics, britain, david cameron, eu, european union

Frau Fritz and David Cameron work on destroying the EU

German Chancellor Angela "Frau Fritz" Merkel would like to keep the EU and the eurozone together under German domination. Her vision of Europe is a nightmarish alternative compared to the founders' vision over decades of a union focused on promoting peace, democracy and prosperity. Frau Fritz is only interested in using it to enrich German banks and businesses at the expense of her alleged European partners.

Britain's Conservative Prime Minister David Cameron, meanwhile, is doing his part to bring Britain closer to leaving the EU altogether. I actually think if the EU is going to survive as anything but a shadow talking society - similar to the Socialist International, for instance - whose European member parties, incidentally, have generally embraced the same kind of neoliberal policies that Frau Fritz promotes with some largely cosmetic variations. See Hollande, François.

Cameron has been doing his share of nationalistic posturing against the EU during his term as Prime Minister. And even without being subject to the direct financial blackmail of Frau Fritz and the Troika (EU, ECB IMF), Cameron has been pursuing austerity policies all on his own during a depression with interest rates up against the zero bound. With the result that basic macroeconomics would expect, as Paul Krugman regularly reminds us, e.g., The Economic Consequences of Mr. Osborne 10/24/2012.

But at least he proposed a British contribution to the EU budget that would keep funding even with what little inflation there is. But the opposition Labour Party, along with 51 rebels from Cameron's Tory Party, voted against the budget. Speaking of the Socialist International, the Labour Party is a member of it. The politics of this don't get a lot of coverage in the US, but the social democrats (including Labour) have been supporters of "Europe", i.e., the EU. The main opponents across Europe have been conservatives and hardline rightwingers. Until Frau Fritz managed turn turn the eurozone into a German club to wreck the weaker economies of the currency union and override normal democratic processes to impose Merkel-subservient governments on Greece and Italy.

But the social democratic parties have not generally not articulated a politics of solidarity with the people of the less wealthy eurozone countries, much less opposition to the disastrous Herbert Hoover economics now dominating Europe. And both the Labour Party and the German Social Democratic Party (SPD) are supporting cuts in the EU budget as a way to capitalize on public dissatisfaction by displaying an "anti-Europe" stance but one of a conservative type, not an anti-austerity type.

Nicholas Watt reports an anonymous "former Labour cabinet minister" saying of Labour's opposition to the EU contribution, "The danger is that we are stroking a dangerous underbelly of Euroscepticism." Well, duh! (BTW, why did that comment deserve to get anonymity?) (David Cameron suffers Commons defeat on EU budget The Guardian 10/31/2012)

He also indicates that some international negoitating posturing is involved:

The warning from some Eurosceptics that they are keeping their powder dry until the substantial Commons vote to approve the eventual EU budget deal shows that he will have a tough hand to play at the summit.

The prime minister will tell Angela Merkel at a meeting next week that he faces intense parliamentary pressure to freeze the EU budget. But No 10 expects the German chancellor to say that she faces a more important challenge – saving the euro.

Simon Hoggart also suggests, "Some say that [Cameron] wanted to lose, secretly wanted to go to Brussels with the vote in his back pocket." But he adds, "If so, it was a most humiliating triumph." (Haunted by the ghosts of Major and Maastricht The Guardian 10/31/2012) "Some say" is one of those lazy journalistic formulations for expressing the writer's/speaker's opinion, that one that FOX News has favored.

There's yet another EU Summit coming up this month, November 22-23. With the US Presidential election over, Frau Fritz and PM Cameron won't be under the same immediate pressure to postpone the next new acute phase of the crisis, so they will be more free to proceed in the destructive way they have been handling things the last three years. Not a cheerful prospect.

Tags: angela merkel, austerity economics, david cameron, eu, euro, european union, françois hollande

More on British Foreign Secretary William Hague and the EU

I previously posted this video of the PBS Newshour interview with British Foreign Secretary William Hague, British Foreign Secretary: 'We Should Be in Europe but Not Taken Over by Europe' 12/12/2011). But it's worth a bit more unpacking.

This portion of Hague's interview says a lot about Britain's lack of leadership in the EU over the years and more particularly about the bad faith of the current Cameron government toward the European project:

Well, Europe going forward, to me - if it goes in the right way - becomes larger, for a start. It includes the countries of the western Balkans and Turkey, actually, as members of the European Union. It emphasizes trade, both within its own single market and in a greater number of free-trade agreements with the rest of the world. Because the only way forward now for Western economies isn't government spending -we've reached the limit of that - and it isn't any monetary policy, other than what the European Central Bank can do. It is trade. It is the growth of enterprise. It's encouraging small businesses. It's opening up freer trade with the rest of the world. That is our vision of the way the European Union should be going. And Britain will continue to push that very hard. [my emphasis]

He puts two key points out into the open:

First, Britain now openly declares its view that the EU is and should be primarily a vehicle for neoliberal "free-trade" policies. The purpose of the EU from the start has been to promote peace and secure democracy in Europe. The economic integration, including the currency union, was always supposed to be a means toward the political ends. If Britain sees the EU as essentially nothing more than a big free-trade zone, then it really does reject the basic principles of the Union and they shouldn't be in it.

Second, trying to expand the Union further for the moment is a near-suicidal move. Which is entirely unnecessary, since Germany and France have gone very far toward insuring the end of both the eurozone and the EU with their foolish austerity politics and failure to come to grips with what would have been necessary to save the euro. But support for rapid EU expansion is something that Britain has pursued for years now, both to limit the pace of political integration and to keep in line with American foreign policy, whose main priority for the EU is to keep it weak enough to be unable to become a power strong enough to challenge the political hegemony of the US in world politics.

And he makes a point that may play well as propaganda for the American audience but is deceptive:

In Europe but not run by Europe has always been my mantra, if you like - has always been the course that I and my party [the Conservatives] have followed. So some people will say that. Others will say, oh, this is the beginning of isolation and so on. Neither of these extremes is true. The fact is that in Europe there are overlapping circles of decision-making - some countries in the euro and some not. We're glad we are not. ...

JEFFREY BROWN: Now, I think that's the second time you've said you're glad you're not in the euro. And you seem to say it with special glee, if I - if that's right, or energy?

WILLIAM HAGUE: Well, I say -

JEFFREY BROWN: Even with what's going on now, do you think this is exposing fundamental problems within the euro - eurozone?

WILLIAM HAGUE: The reason I say that particularly forcefully is because 10 years ago, when I argued in Britain that we should not join the euro, these same charges were made then that are made now: "Ah, you are isolating Britain in some way. You will lose influence in some way." Now it would have been a catastrophe for us to join the euro, and people can now see that clearly. And so we should have the same confidence in making our own decision now as we had then. Certainly the euro has fundamental problems, which do need to be addressed. If you create a single currency, inevitably you have to create some political mechanisms that follow that up - some greater fiscal controls among the countries involved, if you're going to make it work. That is what the eurozone countries are now trying to address.

Clearly, under the current conditions and rules of the currency union, Britain is demonstrably better off not being part of the eurozone.

But what Hague isn't saying is that the story of the euro also very much reflects Britain's less than full commitment to the European Union. If Britain had as serious as they claimed to be about making the European project work, they would have made active proposals to allow Britain to become part of the euro under terms that would have addressed the weaknesses of the current union, especially the role of the European Central Bank (ECB) as buyer of last resort of sovereign debt and the need for "eurobonds" based on the collective credit of the eurozone countries that could be used anywhere in the eurozone. Britain did not attempt any such thing.

Nor did they advance proposals that might have made a more workable constitutional arrangement for the EU that would have created or moved substantially toward a fiscal and transfer union during more prosperous times, which could have enabled the EU to sustain the political and economic shocks of a depression situation like the current one.

Even at the summit last week, Britain made no proposals that would have facilitated the changes within the current eurozone that might have saved the euro: the ECB as buyer of last resort, eurobonds, a fiscal/transfer union.

They certainly did not challenge the "Merkozy"/Herbert Hoover austerity economic dogma that is current destroying the EU, the eurozone, economic recovery and (in Greece and Italy) democracy. Because the Cameron/Hague government is completely committed to the same fool ideas about expansionary austerity.

Instead, Cameron went to the summit to get additional deregulation on behalf of the British financial lobby, scarcely pretending to care about the urgent crisis of the euro.

Finally, Hague leads of the section of the interview shown above this way:

There are huge concerns about the European economy, of course, here in America and in Britain there are huge concerns. But this is not a question for us of being isolated. On the whole range of global issues, and there's the European Union at work, the United Kingdom remains in a central and driving role. All the issues I've been discussing with Secretary Clinton this afternoon. But we won't sign up to everything, we won't sign up for everything that's not in our own interest. It wasn't in our interest to join the euro, definitely not. And it's not - it wasn't in our interest to sign up to the treaty that was on the table last Thursday night. [my emphasis]

Hague is Britain's chief diplomatic, so we have to assume he was choosing his words carefully there. There and elsewhere in the interview he frames Britain's role in the EU as one of cooperating when it is convenient from a narrow national-interest point of view.

But this is duplicitous. The EU is a transnational organization which explicitly surrenders national sovereignty to the larger EU organization. Cameron's proposals for new loopholes for Britain in the EU treaties is a recognition of that very fact. EU financial regulations are binding on EU members including Britain, not just on eurozone members. That's why he pushed for exemptions. One reason many critics are now faulting Cameron for his go-it-alone policy begun last week is that the EU doesn't need treaty changes from Britain to change financial regulations that affect the British financial industry Cameron was intending to protect.

So Hague blathering about how "we won't sign up for everything that's not in our own interest" is diplomatic smoke-blowing. Cameron didn't walk saying that he thought the summit's austerity economics and the ignoring of the needs of saving the euro were neither in Britain's interest nor that of the EU as a whole. He left because they wouldn't give them special new breaks on the regulation of Britain's financial industry.

Britain's diplomacy at the EU summit was neither strategically well-conceived nor tactically well-executed.

Tags: britain, david cameron, william hague

More on Cameron vs. Europe

John McDermott (Is this enough to save the eurozone? FT Alphaville 12/07/2011) points out one of the problems in Angela Merkel's EU-minus-one plan for imposing German supervision and austerity economics on the eurozone countries, which is doubts about whether the EU institutions themselves can be used to enforce treaty provisions not agreed to by every one of the EU members:

At any rate, the UK has blocked any new treaty for all 27 EU member countries, reportedly over its demand that the City be exempt from further Brussels financial regulation stemming from the new arrangements. Eurosceptics will be pleased but others will argue that Cameron runs the risk of missing the larger, more immediate threat to the UK economy, and – perversely – losing British influence in the areas where it is most required. In any case, it looks like a high watermark for UK involvement in the European Union.

It’s unclear yet what legal status the new 17+ group enjoys, and to what extent it can use EU institutions. To this observer, although the ECJ will be given new powers, it seems that without a new treaty we'’re left with little more than another Stability and Growth Pact.

And what British Prime Minister is saying publicly is not just that he's bowing out of participating in the "Merkozy" austerity treaty that the other 26 countries at the EU summit just agreed on.

As Nicholas Watt reports (Eurozone countries go it alone with new treaty that excludes Britain Guardian 12/09/2011, Cameron is saying he will try to block the other EU members from using EU institutions from implementing the Merkozy Treaty:

Cameron acknowledged there were risks in striking out alone. But he said Britain would protect its position by insisting that the institutions of the EU could not be used to enforce the new fiscal rules.

"While there were always dangers of agreeing a treaty within a treaty, there are also risks with others going off and forming a separate treaty. So we will insist that the EU institutions – the court, the commission – that they work for all 27 nations of the EU. Indeed those institutions are established by the treaty and that treaty is still protected."

Cameron indicated that Britain may go further and block the use of EU institutions if eurozone countries club together to shape financial regulations and labour laws.

The decision by Cameron will transform Britain's relations within the EU. Other projects, such as the euro and the creation of the passport-free Schengen travel area, have gone ahead without British involvement. But it is the first time since Britain joined in 1973 that a treaty that strikes at the heart of the workings of the EU will be agreed without a British signature. Britain signed the 1991 Maastricht treaty after winning an opt-out on the single currency and the social chapter. [my emphasis]

Tags: britain, david cameron, eu, european union

EU Summit

The latest EU Summit is over. Twenty-six of the 27 EU nations have agreed to make a new treaty outside the main EU one, which is called the Lisbon Treaty, to institutionalize austerity economics in their constitutions. In the middle of the worst economic period since the Great Depression.

Oh, and Britain balked at the treaty change.

This will not solve the euro's problems. Britain's refusal to go along is another big step toward the dissolution of the EU as it currently exists. The latest summit outcome is a prescription for accelerating the budding recession in Europe, aggravating the sovereign debt crisis, bringing down several of Europe's already-weak large banks, and sweeping away decades of patient diplomatic work to build peaceful and stable relations among European nations.

Other than that, Mrs. Lincoln, how did you like the play?

The stock markets didn't seem to be much perturbed on Friday, for whatever that's worth. European stocks went up, and as of this writing the Dow Jones looks on track to regain its losses of Thursday.

But however the stock market processes things on a given day, this is bad news, politically and economically. Europe's latest solution for the euro and banking crisis there is to double-down on austerity economics. Continue doing what's turned an easily-manageable debt crisis in Greece to a existential crisis for the European Union and a real threat of another global financial meltdown. And no way does the latest deal create a firewall for the United States against Europe's economic and banking problems.

A world on Britain's balking. What British Prime Minister David Cameron refused to do in the wee hours of Friday morning was to agree to the EU Treaty change that Princess Angie von Merkel was demanding. If the blankety-blank neocons hadn't spoiled the word "objectively" for a generation or more, I might say that objectively it's not a bad thing that Britain is well down the road to splitting off from the EU completely.

But politics is politics, so it's much more complicated that that. In terms of the real purpose of the EU - to promote peace and democracy and cooperation among nations in Europe - Britain should have been a full partner in the EU. Given economics grow rates in the rising BRIC nations (Brazil, Russia, India, China) and demographic trends in the BRICs and the rest of the world, without an effectively unified European Union, Europe and its individual countries will be minor players, bit players even, in world affairs during the 21st century. Britain cutting itself loose from the EU - which is what's happening with this latest move - means that in foreign policy they are choosing to be a permanent appendage to the United States in foreign policy.

On the other hand, as long as Britain's political class seems completely locked in to Britain's being a permanent appendage to the United States in foreign policy anyway, and the US' global dominance foreign policy strategy inclines the US to favor a weak EU, achieving a politically unified EU with a common EU foreign policy would require forming a revised EU without Britain's presence. In that sense, Britain's own distancing itself from the EU is not a bad thing from the viewpoint of the EU project.

But today's EU leaders, especially Germany's Angela Merkel and France's Nicolas Sarkozy, have effectively made the political and foreign policy goals of the EU project secondary or tertiary themes. The "Merkozy" duo are turning the EU into an enforcement mechanism for neoliberal economics, to which even democracy has to be sacrificed, as we see in Post-Democracy 1.0 in Greece and Italy right now.

British Prime Minister David Cameron has been an anti-Europe jackass in his actions this week. He is pandering to the nationalism of the strong anti-Europe of his Conservative Party. And, of course, to the British financial lobby, commonly referred to as "the City of London" or just "The City," similar to how "Wall Street" stands for the US financial lobby. Dany Cohn-Bendit, head of the Green Party caucus in the European Parliament, says, "Cameron is a coward" for not facing up to the anti-Europe Tories.

We could say that it's a smart move on his part not to agree to writing arbitrary budget deficit and debt restrictions into a binding international treaty. But here's where we would have to say "objectively". Because Cameron is as committed to foolish austerity economics as Angie and Nick are. Cameron is using a disaster capitalism/shock doctrine approach in Britain, using the depression as an excuse to achieve neoliberal goals of deregulation and dismantling of the parts of the government that particularly benefit the 99%. And he was very public about poking the other EU leaders in the eye, declaring in Bushian style, "I said before I came to Brussels that if I couldn't get adequate safeguards for Britain in a new European treaty then I wouldn't agree to it. What is on offer isn't in Britain's interests so I didn't agree to it."

On the other hand, since the EU is obviously on the fast track to self-destruction, why shouldn't Cameron score some cheap political points with posturing against it? The real question is which will be the first eurozone country to tell Angie to take her Ordnungsökonomik and her austerity treaties and go jump in a lake somewhere.

Tags: britain, david cameron, eu, european union