Eurozone 2015: Act or Crash

Alphen, Netherlands. 12 January. John Maynard Keynes once said, “…the oppression of the taxpayer for the enrichment of the rentier is the chief lasting result [of deflation]”. On 7 January the Eurozone tipped into deflation when it was announced by the European Central Bank that year-on-year prices had fallen by 0.2%. This is the first time the Eurozone has dipped into deflation since the height of the financial crisis in 2009.  Some economists (dismal scientists) suggest that ‘temporary’ factors such as the collapse of the oil price, the weakening Euro and stable European consumer confidence mean this latest deflationary dip will be temporary.  However, many indicators suggest otherwise.  The Eurozone economy is bereft of economic growth (Italy has not grown since 1999), few of the vital structural political, economic and regulatory reforms necessary to render the single currency credible or the Eurozone economy world competitive have been made, there is over-reliance on Germany as the engine of growth and both consumer and bond market confidence is fragile in the extreme.  Even the slightest shock could tip the Eurozone into a full blown deflationary crisis that could in turn tip much of Europe into a full-blown depression. That trigger may well come this month with the 25 January Greek elections and the prospect of the fiscally ill-disciplined Syriza party gaining power.  It is that prospect which saw German Chancellor Angela Merkel scurry to London last week for talks with David Cameron.  Even though the UK is outside the Eurozone such a crisis would need Europe’s two strongest economies to act closely together.  It would also need an awful lot more, which is why 2015 is a tipping point and why Europe needs a game-changer.

In a 1933 Econometria article economist Irvine Fisher established a proper understanding of the dangers of deflation.  Entitled, The Debt-Deflation Theory of Great Depression the article demonstrated just how dangerous structural deflation can be for both economies and societies.  During a deflationary spiral, which the Eurozone is in or very close to entering, the value of assets and incomes shrink rapidly pushing up the real burden of personal and corporate debt.  Soon debts can no longer be repaid which weakens vulnerable, debt-exposed banks some of which suddenly collapse.  Such a collapse effectively destroys confidence in the entire banking sector as investors and depositors rush to withdraw their cash and governments are forced to borrow and use the money of already hard-pressed taxpayers in an effort to prop up the banking sector.  A bond market crash then ensues as the cost of government-borrowing soars and confidence further evaporates leading in turn to emergency asset sales and the further driving down of confidence, hoarding and the effective end of normal economic activity with catastrophic social and political consequences.

The Eurozone today is full of individuals, corporations and governments with a high degree of personal debt.  It is unlikely Eurozone states would be able to stimulate or re-inflate the Eurozone economy as they are already dangerously indebted and their taxpayer’s effectively broke.  In such circumstances only external help from a rich, powerful state or other actor such as the International Monetary Fund or World Bank could help to stabilise the Eurozone economy.  Such ‘help’ would invariably come with political strings attached and calls for deep reform.  However, because so many Eurozone societies have been weakened by an economy now in its third recession in six years state institutions are possibly incapable of hard reforms for fear of social unrest.

The Euro itself is central to the problem.  Neither state nor super-state the EU lacks both the political and economic cohesion and fiscal and economic discipline to apply even the limited instruments possessed by the European Central Bank to effect.  In the end, the taxpayer’s of the eight member-states that actually pay for the twenty-eight member EU, led by Germany and to a significant extent Britain, are likely to be called upon to bail out the Eurozone by spreading the cost of Eurozone debt AND by stimulating the economy through counter-deflationary/inflationary measures such as the printing of money. 

The hope would be that the use of so-called Eurobonds and quantitative easing would help restore some semblance of economic confidence and all-important economic growth.  However, such is the fragility of the wider world economy, and the propensity for further geopolitical shock, the scale of the Eurozone debt mountain and resistance to reform in debtor states that any such stimulus by the ‘eight’ would in effect have to be permanent.  This situation would quickly lead to the complete and irrevocable bankrupting of the creditor states, the final crash of the Euro and with it the destruction of people’s hard-earned savings and pensions.  In other words deflation and depression could lead to a first order European political disaster.  

There are two immediate possible political steps that might buy European leaders some more time.  First, much deeper integration of fiscal and monetary policy could be pursued by the Eurozone in parallel with the sharing of sovereign and bank debt across all Eurozone and/or all EU taxpayers.  However, such a move would in effect entail the creation of a European super-state and almost certainly see Britain’s exit from the EU.  Second, those economies which bear too high a level of debt and refuse or are unable to reform their inefficient economies could be cut free from the Eurozone.  Greece is the obvious candidate. However, if a crash begins even Italy, Europe’s fourth largest economy, might be forced to exit the Euro.  That would either lead to a consolidated Euro focused on north and western European economies or simply mark the end of the Euro and with it Project Europe. 

There is a third game-changer option; move the strategic economic goalposts. Some economists believe a Transatlantic Trade and Investment Partnership (TTIP) with the US and Canada could boost trade and growth significantly.  Indeed, whilst TTIP could never resolve the Eurozone’s many structural contradictions it could act like a kind of economic NATO affording collective economic defence to its members against the kind of speculations and panics that might trigger a great European depression. 

TTIP would create a market of some 900 million people between the world’s most advanced economies and signal to the markets a willingness to take strategic steps to prevent deflation, TTIP could also help force Europeans become more competitive and re-inject meaningful growth into Europe, although to do so would mean Europeans abandoning the expensive social models to which they are so attached and which renders Europe so uncompetitive.  Above all, TTIP would buy European leaders time to undertake the reforms vital to prevent a depression which they have singularly failed to do since the 2010 Eurozone crisis.

There is of course at least one major caveat (and whole host of minor ones).  For TTIP to be successfully concluded American and Canadian politicians would need to be certain that they and their taxpayers are not being suckered into some kind of implicit, back-door Marshall Plan that would end up with them funding Eurozone debt.  Equally, it is not in the either the American or Canadian strategic or economic interest to see Europe fall prey to depression.

In an important article last week entitled A Comeback Strategy for Europe former Swedish Foreign Minister Carl Bildt and former EU foreign and security policy supremo and NATO Secretary-General Javier Solana Bildt and Solana called on Europeans to conclude a TTIP agreement quickly.  Critically, the high-some twosome said, “…TTIP’s goal is to unleash the power of the transatlantic economy, which remains by far the world’s largest and wealthiest market, accounting for three-quarters of global financial activity and more than half of world trade” However, Bildt and Solana contrasted the stalled TTIP talks with the progress being made in creating a Trans-Pacific Partnership or TPP and the very real danger of European economic decline in the absence of TTIP.  They also gave a stark warning: “If the TTIP stalls or collapses while the TPP moves forward and succeeds, the global balance will tip strongly in Asia’s favour – and Europe will have few options if any for regaining its economic and geopolitical influence”.

2015; the year Europe must act…or crash. There can be no more muddling through.

Julian Lindley-French  

Je Suis Charlie…et Maintenant?

Alphen, Netherlands. 8 January. Je suis Charlie! My revulsion against those who carried out yesterday’s murderous attack on the journalists of Charlie Hedbo is complete.  Indeed, whilst at times extreme by lampooning power Charlie Hebdo helps hold power to account.  This is not easy in a twenty-first century world of big, distant pretend-democracy that so belittles the individual citizen. That great French philosopher Voltaire reportedly once said, “I disagree with all you say, but I defend your right to say it”.  That simple mantra is and must remain the essence of free speech in a liberal democracy and must be upheld at all costs.  Another geat French philosopher Tocqueville said that the more freedom one enjoys the greater the responsibility on each individual.  As society becomes progressively polarised between the tolerant and intolerant the boundaries between freedom and responsibility are being redefined and challenging the very cohesion of modern, multicultural societies.  Indeed, this attack was not simply an attack on a liberal, European society; it was also a reflection of it.  Therefore, it is vital that we the European people wake up to the profound challenges implied by this attack at the social, political and indeed geopolitical levels. 

A French friend of mine said to me yesterday, “une infirme partie des mussulmans est composée de vraies fascistes…”  The two most important words in that sentence are “partie” (section of) and “fascistes”.  Fascism is defined by the Oxford English Dictionary as “a system of extreme right-wing or authoritarian views”. There is no doubt that the intolerant views which inspired the killers do indeed represent a form of fascism in that the individuals in question reject any view other than their own and are prepared to kill to enforce their intolerance.  

Here's the rub.  For too long liberal European governments have acted as incubators for such extremism for fear of offending the Muslim community.  They have preferred instead to say such attacks have nothing to do with Islam and focussed on preventing any backlash in the wake of such attacks.  Worse, at times they have financially-supported extremist groups who sit on the border between non-violence and violence in the hope that extremist ideologies could somehow be co-opted. For example, my own country Britain still has no strategy to counter the non-violent extremism which is but a short step from violent extremism. Such absurd political correctness must end.   

The shock of the attack is made all the worse by the unwillingness of European leaders to come clean with their peoples about the nature of the threat posed by Islamism. Indeed, since 9/11 European peoples have been treated like children by their leaders.  For example, British security services are at any one time dealing with between 2-3000 terrorist plots.  People are not stupid. By trying to pretend to people there is no problem a gap has grown between leaders and led to the point in which today citizens no longer trust leaders to act in their best interests.  Therefore, it is time leaders started to come clean with their citizens about the extent of the Islamist challenge European societies face because democracy can only function if there is trust between power and the people.  If not a political gulf will emerge at the heart of politics which will soon be occupied by extreme populists on both the political left and right.

The attack was also a function of the new geopolitics, a chilling example of how the Islamic civil war raging across the Middle East can so easily reach into increasingly atomistic European societies.  Whilst the murders seem to have been carried out by two brothers of French-Algerian heritage there can be no doubt that they are but the foot soldiers on the front-line of a complex web of power, patronage and money.  As they fled the scene one of the attackers shouted to a witness, “Tell the press we are Al Qaeda in the Yemen”.  

Al Qaeda in the Yemen is part of a wider group known as Al Qaeda in the Arab Peninsula (AQAP).  If the claim is true they are part of a well-organised group with over a thousand members which has carried out a range of attacks across the Middle East and the West.  The primary aim of this Sunni insurgency is to rid the Muslim world of infidels.  Perhaps the most chilling implication of this attack is that the likes of Islamic State and AQAP now see Europe as part of their world and claim a 'right' to enforce strict Islamist blasphemy laws herein and force the rest of us to bend to their will. 

AQAP’s funding reveals the extent of the threat and the strategic ambiguity of the relationship between European governments, Saudi Arabia and the Gulf States. The US State Department suggests much of AQAPs funding comes from fake charities, extortion and robbery.  However, the Americans also suggest that a significant part of the funding comes from groups in Saudi Arabia and the wider Gulf region.  Saudi money has long been used to buy off the threat posed by extremism to the kingdom via the funding of Islamic schools across the world, including Europe. These are schools that too often espouse an extreme view of Islam and weak European governments have for too long tolerated such extremism within their own borders. That must now stop and the funding chains destroyed.

At the top of this post I cited Tocqueville’s suggestion that freedom and responsibility are inexorably intertwined. So is respect. The attackers are not the whole story of Islam in Europe much though they would like to imply they are. Last night in the centre of Paris thousands of French Muslim citizens also proclaimed themselves as “Charlie”.  Like me they reject extremism and have reached an accommodation within themselves between faith, freedom and responsibility. 

Yesterday, I came under pressure to re-tweet a Charlie Hebdo cartoon of the Prophet Muhammad.  I refused.  This is not because I am a coward or some bleeding heart liberal obsessed with reality-warping political correctness. Indeed, I pay a big price for my willingness to challenge power.  However, I have no desire to insult the Prophet, Islam or the decent, law-abiding Muslims who I call compatriots, fellow citizens and friends.  In so doing I exercise my free will, my sense of communal responsibility and express my respect. To me that is the most powerful act of defiance.

Je suis Charlie...et maintenant?

Julian Lindley-French

Nous sommes tous français maintenant!

Alphen, Netherlands. 7 January.  The news from Paris about the appalling Islamist terrorist attack on the offices of the satirical magazine Charlie Hebdo is truly shocking.  There is no point in speculation at present but every reason to send my thoughts and wishes to those who lost their lives this morning and to their families and loved ones.  

All I can say is that I have never felt as European as I do at this moment and that whatever our differences as Europeans this attack reaffirms my absolute belief in the values, beliefs and freedom which we must all uphold as Europeans. 

On 12 September, 2001 Le Monde ran the headline “Nous sommes tous americains maintenant”.  Let me say for the record as an English, Briton and European, nous sommes tous français maintenant!

Vive la France! Vive la liberté! Vive la fraternité! Vive l’Europe!

Julian Lindley-French

Wing Commander G.P. Gibson VC, DSO and Bar, DFC and Bar, RAF

Alphen, Netherlands, 7 January. Yesterday I visited the graves of Wing Commander Guy Gibson and Squadron Leader Jim Warwick in Steenbergen not far from my home. Gibson was a boyhood hero of mine.  In May 1943 he led the famous Dambusters raid by 617 Squadron which breached the Eder and Mohne dams in western Germany using bouncing bombs that skipped across the reservoirs like pebbles.  Gibson was awarded the Victoria Cross for Operation Chastise, Britain's highest award for gallantry.

He was killed with with his Navigator Warwick in a two-engined RAF Mosquito fighter-bomber on 19 September, 1944 acting as Master Bomber for a heavy bombing mission.  There is some controversy about how this ace pilot with 170 missions to his name met his end.  One view is that unfamiliar with the Mosquito Gibson may have simply run out of fuel, although that seems unlikely.  Another view is he was shot down by a German Me262 jet fighter but there is little evidence a Luftwaffe jet was over Steenbergen that night.  

Most likely is that Gibson and Warwick were shot down be friendly-fire.  The rear-gunner of a Lancaster bomber returning from a mission over Rheydt near Monchengladbach reported seeing a twin-engined Dornier behind and below his Lanc at about the same time and place as Gibson's Mosquito went down and fired some six hundred rounds at the target which then disappeared.  Understandably twitchy about German night fighters friendly-fire was not uncommon given the losses RAF Bomber Command were still suffering at the hands of the Luftwaffe in late 1944.

The Mosquito seems to have gone into a vertical dive because at the crash-site the plane buried itself some 9m/9.5 yards into very heavy Brabant clay.  When the remains were recovered by the Dutch people they thought at first only one airman was in the wreckage so badly mangled were the remains.  However, the discovery of a third hand and socks with the name Gibson embroidered on them told another story.

Today, Gibson and Warwick rest in a peaceful cemetery on the edge of Steenbergen.  As ever, the Dutch people treat the graves with the utmost respect, solemnity and dignity.  It is the Dutch way.  At the site of the crash there are today three streets; Gibsonstraat, Warwickstraat and Mosquitostraat with a union flag made out in tiles at the exact point of impact.

It is now over seventy years since Gibson and the 125,000 other members of RAF Bomber Command lost their lives in the struggle to free the whole of Europe from Nazism, including Germany. The price was high and many innocent civilians died because of the British and American bombing but such was the scourge of Nazism it had to be eradicated...and must never return in whatever form.

Gibson's last recorded words over the radio were, "OK. Fine. I am going home". Thank you, Gentlemen.

Lest We Forget!

Julian Lindley-French     

Managing Strategic Mass Migration

Alphen, Netherlands. 5 January.  Last week three hundred and fifty nine-migrants were rescued adrift at sea off the Italian coast on the abandoned, ageing, decrepit livestock freighter Ezadeen.  On Sunday a major demonstration took place in Dresden against immigration.  That same day a poll in a leading British newspaper said that immigration was the most important topic for the May 2015 UK General Election.  Italian authorities now estimate that the human traffickers responsible for the Ezadeen made $3m/€2.5m profit from their trade in human misery with each migrant paying between $4-8000/€3-7000 for the trip.  These people are but the latest of some 200,000 migrants who made it across the Mediterranean to Europe in 2014.  Tragically, some 3000 people paid with their lives.  Managing mass migration into the EU is one if not THE most pressing strategic issue for Europeans.  What must be done?

Grasp the scope of the challenge: This is not just a European phenomenon. According to Global Strategic Trends 2014 the world’s population will grow from 7.2bn people today to between 8.4bn and 10.4bn by 2045.  97% of that growth will occur in the developing world with 70% in the world’s nine poorest countries. Driven by demographic pressure, conflicts, globalisation and organised transnational crime the world is witnessing the first wave of strategic mass migration with profound and destabilising structural implications for geopolitics and societies. And, such migration is likely only to increase. Indeed, with states collapsing and in distress across North Africa, the Middle East, Sub-Saharan Africa, Eastern Europe, Latin America, and much of Asia the imperative of people to move will grow rapidly and massively. 

Support front-line states:  87% of all refugees are in the developing world. Moreover, whilst there are some 230,000 Syrian and Iraqi refugees in Europe, there are still some 3m who remain in the region placing a huge strain on already-weakened countries such as Jordan and Lebanon.  For exanple, there are already 1.1m registered Syrians in Lebanon and some 0.5m unregistered.  Syrians now represent some 30% of the population and many Lebanese fear this massive influx will destabilise an already fragile state.  This week Lebanon will impose visas on Syrians. Supporting front-line states with aid and expertise must be a priority.

Render asylum fit for purpose: 50% of those making the perilous journey are not refugees but simply people seeking a better life and whilst no-one can blame people for that most basic of human instincts the sheer numbers involved means immigration must be controlled. In 2013 EU member-states issued 2.3m work permits.  However, if host populations are to accept those with a right to stay they must be confident that those with no right to stay are returned to their country of origin.  European publics have no confidence in immigration systems at present or the leaders who promise endlessly to 'fix' the problem but never do. What is needed is a humane return policy allied to sanctions on those third countries who refuse to take back their nationals and yet receive EU/national aid.   

Recognise migration as a Europe-wide challenge:  It is utterly unfair to expect hard-pressed countries like Spain, Greece and Italy to cope with such flows on their own.  As regular readers of this blog know I am wary of more Europe but mass migration is one area which needs a collective European position.  Relations between EU member-states are already suffering due to a lack of either policy or effective enforcement.  Italy is no longer finger-printing many new arrivals who simply move untracked onto other parts of Europe.  France, which under EU rules should be dealing with the migrants seeking to enter Britain from Calais, is threatening to push UK border controls back to Dover to force the British to deal with the problem.  Britain refuses to deal with many of the so-called ‘pull factors’ which make the UK such an attractive destination. Equitable resettlement across Europe is needed for those with a right to stay to avoid beggar-thy-neighbour national immigration policies.  Instead of trying to destroy states the EU must act as the co-ordinator of collective state action.  A first step would be a far better system for identifying migrants and their countries of origin.

Make agencies work together: A critical element in any policy must be the interdiction and prosecution of human trafficking gangs.  Europe’s attempt to deal with the traffickers has thus far been lamentable.  Schengen Area external border controls must be tightened by in turn strengthening Frontex, the agency responsible for assisting EU member-states with securing the EU's external border. At present Frontex has only 300 people working for it in Warsaw.  Efforts must also be made to ensure Europol and Frontex work together more effectively which is not the case today.

European politicians and their electorates are both wrong about strategic mass migration. Politicians are wrong to wish the issue away.  Electorates are wrong to believe there are any quick fixes.  The essential dilemma for Europeans is how to maintain humanitarian principles and protect societies from the extremism, social instability, wage suppression and crime which unfortunately such migrations also (and undoubtedly) spawn.  Managing mass migration is a strategic issue and as such must be dealt with strategically and honestly.

Julian Lindley-French  

2014: The Year Grand Illusions Burned Away

Alphen, Netherlands. 30 December. In December 1914 British and German troops declared an unofficial Christmas ceasefire, swapped tobacco and so the story goes played a football match together in no man’s land, which apparently the Germans won, on penalties no doubt.  With the hindsight of history that uplifting moment of humanity was but an interlude in a bitter World War One struggle that would see many of those who took part dead within the year.  In a sense the West, particularly the European West, has been enjoying just such a ceasefire with history these twenty-five years past since the end of the Cold War.  Four grand strategic shifts made 2014 the year that grand illusions finally burned away.

The Return of Realpolitik in Europe: In 2014 President Putin did something many fellow Europeans thought impossible; he used force to resolve a territorial dispute to Russia’s apparent advantage.  Putin cited the encroachment of both the EU and NATO on Russia’s borders as justification and in so doing destroyed the comforting illusion that balances of power and Realpolitik had been banished from Europe forever.  On 26 December President Putin re-issued Russia’s 2010 military doctrine albeit modified to reflect a particularly aggressive tone.  The message is clear; in spite of the sanctions and the collapse in the oil price which has so damaged the Russian economy the militarisation of the Russian state will continue in 2015, even though the policy is doomed to end in failure.  Expect 2015 to see NATO and its members probed and provoked further by Russian forces.

The Return of Geopolitics: China’s increasingly assertive stance and growing pressures across South and East Asia highlight the world’s new seismic, systemic epicentre and a new domain of warfare.  North Korea’s December 2014 cyber-attack on Sony Pictures on the eve of the release of a film satirising Kim Jong-un, the North Korean leader, is a sign of things to come.  The US responded to the attack by shutting down the internet in North Korea. With China and Russia engaged in industrial levels of cyber attacks the use of the ether as a domain for warfare is very much the future of geopolitics in the twenty-first century. The aim is not so much the permanent destruction of an opposing state’s centre of political gravity, à la Clausewitz.  Rather, in the growing struggle between the liberal and the illiberal the aim is to keep open societies permanently off balance through attacks and the threat of attack on critical national infrastructure thus changing the balance of resources liberal states commit to protection at the expense of projection.  Expect this struggle to intensify in 2015.

The Struggle over “Ever Closer Union”:  In December Commission President Jean-Claude Juncker said in an interview that the EU should stop trying to micro-manage the lives of Europeans and focus instead on the big things.  On the face of it Juncker’s call marks a new pragmatism and a possible new balance between the EU member-state and an increasingly onerous and ponderous Brussels.  It is also a classic description of a federal state in which grand strategy, most notably foreign, security and defence policies are controlled by a federal hub, whilst the ‘states/provinces’ focus on the those issues most immediate and most pressing to the needs of the people.  In reality, and in the wake of Juncker’s illegitimate May 2014 coup, Juncker was simply drawing the federalist battle-line for 2015.  If the EU is to take on greater responsibility for the 'big issues' that means more not less Europe and ultimately the final end of state sovereignty in the EU.  Britain will never accept that and nor would it appear will Germany or France.  Expect the implicit geopolitics of the EU to worsen in 2015, especially if Greece as seems likely votes for the anti-austerity leftist Syriza movement and the Eurozone crisis re-ignites.

The Emergence of the Grand Strategic Super-Insurgency: In a December interview General John Allen, President Obama’s Special Envoy to a sixty-state anti-IS coalition, said that Islamic State was “…one of the darkest forces that any country has ever had to deal with”.  What makes IS different is its level ambition and a a bizarrely grand leadership that believes genuinely they can change the world. As such IS marks the beginning of a super-insurgency committed to the very destruction of the state first in the Middle East and then the world over.  Paradoxically, unlike the unworldly AQ leadership IS uses the means of the state against the state, funding its campaigns from the sale of state resources such as oil and gas and using force, disinformation and brutality in much the same way as many modern states.  Critically, IS is secretly backed by state and factional supporters who believe mistakenly it can be instrumentalised to their more narrow ends.  2015? Although President Obama has re-committed US forces to support Afghanistan it is likely IS will continue to seek to wreak havoc across the Middle East and through terrorism beyond.  It may also endeavour to extend its ‘brand’ into Afghanistan in conjunction with some elements of the Taliban.  Therefore, 2015 will prove the schwerpunkt in the first phase of what is going to be a long struggle with IS. 

Now that the grand illusions of the past twenty-five years have been burned away the challenge for leaders will be to confront the hard realities they masked and bring their publics with them.  This challenge will prove no harder than in Europe where leaders have for too long avoided hard realities and in which the disengagement of European security from world security has led to the grandest of all illusions – that soft power in the absence of hard power carries any influence at all.  If Europe and by extension the world is to be made more secure in 2015 then the European powers led by Britain, France and Germany must return to fundamental principles of statecraft.  That will mean in turn the sustained, collective and skillful management of state affairs in a world changing fast and not for the better through the sound and considered application of all forms of power soft and hard.

By the way, in December 2014 the British and German armies replayed that famous football match and the British won 1-0!  Well done, chaps!

Happy New Year!

Julian Lindley-French

Who Rules Europe 2015?

Alphen, Netherlands. 19 December. One of America’s Founding Fathers Alexander Hamilton said, “It is not tyranny we desire; it’s a just, limited, federal government”.  He could well have been speaking for 2014 Brussels.  2014 has been another bad year for the EU nation-state.  Federalism is creeping forward via the back-door at an inexorable rate and national leaders with the exception of Angela Merkel look ever more like powerless puppets trying to mask the extent of their own impotence.  The EU leadership vacuum emboldened federalists sufficiently to hijack the May 22 European Parliament elections and seize the European Commission.  The false legitimacy upon which Jean-Claude Juncker based his coup d’états was both impressive and dangerous and frames the central question for this coming year; who rules Europe?

Two reports this week demonstrate just how hard it will be to answer that question. The British Foreign and Commonwealth Office (FCO) this week published the last seven of the so-called Balance of Competences reports.  The previous batch of reports on a whole host of issue pertaining to the impact of the EU on British governance all reflected the FCO’s assumption that more Europe is better.  However, these final reports sneaked out cynically before Christmas to avoid too much debate implied something else: an EU engaged in an existential struggle with the member-states and a Brussels that uses maximalist interpretations of treaties to interfere ever more deeply into national governance and life.  Moreover, the ‘subsidiarity’ that David Cameron keeps hopelessly banging on about as critical to EU reform is seen by the Brussels institutions as a bit of a joke and a form of lip service to increasingly irrelevant national legislatures and executives. 

The second report was scribed by Sonia Bekker, a respected, Dutch left-of-centre academic at Tilburg University.  Entitled “Revitalising Europe 2020 to strengthen the Social Dimension” the paper appeared on the web-site of the think-tank Policy Network and warned against the drift towards an ever more bureaucratic union.  

Bekker is no Euro-sceptic, far from it. She applauds the aim of the Europe 2020 strategy to ensure 20 million fewer Europeans are at risk of poverty and many more actively participate in the European labour market.  However, she highlights what she calls the growing contradictions in EU “socio-economic governance” and suggests ever more EU regulation is more a curse than a solution. 

Specifically, Bekker questions whether taken together the Stability and Growth Pact, macroeconomic imbalances procedure, budgetary co-ordination, the so-called euro-plus pact and the Europe 2020 strategy itself actually amount to coherent policy.  She points out that these initiatives emerge from a range of different treaty areas and implies that the EU is in effect trying to enmesh the member-states in a giant spider’s web of over-regulation.  She also points to the growing gap between the rules imposed on Eurozone and non-Eurozone members.

Critically, she also concurs with the FCO’s concerns about EU mission creep.  Specifically, she highlights the European Commission’s “Country-specific Recommendations”. In the past such recommendations were broad suggestions for actions that a member-state might take at the most macro-economic of macro-economic levels.  However, the Commission is now ‘instructing’ member-states in areas such as healthcare and social security and using social funds to discipline member-states.  This tendency reflects a maximalist, back-door federalist approach that was seen to good/bad effect by the judgement this week by the European Court of Justice instructing Britain over its use of visas for non-EU citizens.  The aim: not to solve Europe’s manifold problems but to extend EU competences. Bekker states, “National challenges are often far too complex to formulate feasible and effective solutions at EU level”.  She also calls for more not less subsidiarity. “The key targets are the Europe 2020 goals and countries should have enough space to find their own way towards these over-arching goals”.

Now, I am a pro-European, EU-sceptic who like Abraham Lincoln and John Locke has a profound mistrust of distant, effectively unaccountable power, which is what the EU is fast-becoming.  Equally, I am not prepared to press the Armageddon button and call for the dismantling of the EU just yet.  Indeed, it is still my firm belief that a reformed EU can play a vital role in building a stable Europe and aggregating and exerting European influence in the world.  The tragedy for Europe is that the endless back-door, functionalist power grab by federalists far from helping Europeans solve its manifold problems is causing political paralysis. 

However, for such a vision to be realised back-door federalism must be stopped.  In its place a new political settlement is needed that preserves the primacy of the nation-state, establishes clear rights and protections for those member-states not in the Eurozone, and properly embeds state power in a legitimate but subordinate institutional framework with accountability first and foremost guaranteed by national parliaments working in harness.  THAT would represent a true balance of competences.

Sensible members of the European elite know full well that a European super-state can only come with time and a profound shift in political identity.  If they try and rush it millions of us would struggle to prevent it. My grandfather did not fight for liberty and democracy in World War Two to see it emaciated and strangled by a distant, super-bureaucracy overseen by a sham parliament in which I do not believe. 

In reality what Jean-Claude Juncker and his ilk seek is a twenty-first century European realisation of Hamilton’s just, limited federal government.  Unfortunately, no-one actually knows what precisely ‘just’, ‘limited’ and ‘federal’ mean in twenty-first century Europe.  In other words the EU is a political experiment and as such it is not one that is working.  Today, the EU is political paralysed as weakening states no longer sure of their sovereignty tussle with a powerful but as yet insufficiently strong Brussels probing to extend its competences. 

It is political paralysis more than any other fissure or friction that is preventing Europeans from addressing the root causes of its many problems.  Moreover, it is political paralysis that sooner or later will trigger a social, economic and political explosion if not addressed.

Who rules Europe 2015? Who knows.

Merry Christmas!

Julian Lindley-French