Merkel's Great Euro Deception

Bologna, Italy. 26 October.  “Oh what webs we weave when at first we seek to deceive”.  In the run-up to D-Day in 1944 the British ran a superb deception campaign called Operation Fortitude to fool the Germans as to the real location of the invasion.  It worked spectacularly.  Today, the Germans are being fooled again, this time by their own government.  The report by the so-called EU-European Central Bank-IMF Troika on Greek efforts to reduce €13.5bn of their budget deficit in return for more of my money and a two-year extension is pure theatre.  Berlin took the decision a long-time ago to give Greece the extra time and money.  Chancellor Merkel’s pretence to be awaiting the Troika report before making a decision was revealed by Athens this week to be what it is; political sleight of hand.  The reason is simple; Chancellor Merkel wants to mask the truth about the real cost of saving the euro until after the September 2013 German federal elections. 

It was Luxembourg Prime Minister Jean-Claude Juncker who famously remarked, “We know how to solve the crisis.  We just do not know how to get re-elected afterwards”.  It was a point this week reinforced by German Finance Minister Wolfgang Schauble who contradicted French President Hollande’s outbreak of insane optimism by saying that Europe is only “in the eye of the storm”.  

The figures are simply staggering and Schauble is of course correct. Hence the need to hide the hard truth from the German, Dutch (i.e. me) and other northern, western European taxpayers who are going to have to foot the bill with broken hopes, dreams and bank balances.  Even the most optimistic assessments suggest a Grexit (a Greek exit from the euro) would cost at least €320bn.  And that does not take into account the secret EU (my) money being poured into banks across the Balkans which to all intents and purposes are insolvent.  If the euro then began to progressively fail German banks alone would need at least €500bn to remain solvent or 20% of Germany’s gross domestic product.  Even modest move towards a banking union and limited debt mutualisation would cost between €300bn and €400bn of which the German taxpayer would be liable for at least 30%. Moreover, mutualising debt would increase German interest costs by at least €15bn per year whilst cash transfers to poorer EU economies to bring their deficit-busting revenues up to that of mid-ranking EU member-states would cost the German taxpayer at least €250bn per year.

The consequences of Chancellor Merkel’s perennial kicking of the now famous can down the seemingly interminable road are dangerous in the extreme.  At some point I will run out of money and the ECB’s printing presses will run out of ink and then the markets will take savage revenge.  Moreover, Chancellor Merkel may no longer be able to control this farce.  At the next EU summit Britain, the Netherlands and Sweden will veto the European Commission’s future budget.  This will mean that much of the regional aid and many of the infrastructure projects undertaken in recent years in central, eastern and southern Europe with the promise that my money will be used to pay for them will effectively default.

Such a default will plunge Europe into another political crisis and bring into sharp relief the sheer incompetence of EU leaders in failing to deal with a crisis that they themselves have turned into a pending disaster.  Chancellor Merkel has much of the responsibility for this dereliction of duty to the European citizen for whilst she has talked Europe, she has meant Germany and only short-term Germany.  As a consequence of this prevarication the fundamental issue; growth-killing structural deficits that plague most EU member-states has not even begun to be addressed.  Indeed, her entire strategy of hoping sufficient growth will turn up to make the problem go away is doomed by her very inaction which increases the cost to her own taxpayer with each passing day.

Furthermore, whilst no-one can doubt her commitment to this most political of projects (and therein lies the problem) her prevarication and short-termism now makes it ever more likely the real crisis when it comes will either destroy the euro or force a democracy-busting, Franco-German axis crippling British-exiting leap to some form of weak political union wanted only by the self-interested Euro-fanatics in Brussels DC.  That crisis will now come in the first quarter of 2014 and it will hit hardest in places like Italy from where I write you this missive.

To paraphrase Geoffrey Chaucer the truth will out – eventually.  As President Hollande said last week Chancellor Merkel has her own deadline.  Let us all hope it is not so late that the can has grown so big that not only can she no longer kick it – but it kicks back with a vengeance.  Chancellor Merkel must come clean with the German people now.

Julian Lindley-French

El Alamein: The End of the Beginning

Tartu, Estonia. Baltic Defence College, 23 October.  Seventy years ago today the British Eighth Army, comprising British, Australian, Indian, New Zealand and South African forces, launched the Second Battle of El Alamein.  It was a battle that with Stalingrad would prove to be one of the most important of World War Two in the war against the Axis Powers.  Taken together the two battles sounded the first toll of the death knell for Hitler’s Thousand Year Reich.

 

In what in many ways was a classical set-piece World War One assault a heavy British artillery barrage supported by air power hammered the one hundred thousand strong German Afrika Korps and their Italian allies before one thousand tanks and two hundred thousand men assaulted the Axis lines.  Over the next eleven days General Bernard Law Montgomery, whose name became synonymous with this battle struggled to break through.  Montgomery pulled his severely over-stretched enemy, at the very end of his lines of supply, north and south across the Egyptian desert to the west of Alexandria and Cairo.  Finally, on 4 November no longer able to parry Montgomery’s thrusts the German commanders, absent their sick leader Rommel, broke.  By the end of the battle the Afrika Korps had been reduced to less than thirty tanks.  

Losses were steep on both sides but nothing like those suffered at the parallel Battle of Stalingrad (2 August 1942 to 2 February 1943) which eventually saw the Red Army defeat Von Paulus’s German Sixth Army.  Within days of the victory at El Alamein Anglo-American forces landed in Morocco and rolled up the Afrika Korps which surrendered to the British in May 1943.

For the British the victory was particularly timely.  Whilst the Royal Navy had by then effectively defeated the Kreigsmarine’s surface fleet, German submarines continued to threaten the British people with starvation.  And, although the retaliatory strategic bombing campaign of the Royal Air Force was beginning to wreak havoc in Germany it was at an immense cost.  On land the British had won no significant battle since the 1939 outbreak of the war.  With the Americans rapidly taking over the strategic direction of the Western war from the British and with Stalin increasingly dismissive of British efforts Churchill desperately needed a major victory against the Wehrmacht to preserve at least a modicum of influence with Roosevelt and Stalin.  El Alamein provided Churchill with just such a victory even though by late 1942 it was plain to see that Britain’s power was waning fast and that it would be the Americans and Soviets who would henceforth call most of the strategic shots.

 

In the wake of El Alamein the Western Allies began the long slog first through Sicily, then onto the Italian mainland as they laid the groundwork at Salerno and Anzio for the critical D-Day amphibious assault on 6 June, 1044.  In the wake of El Alamein Nazi Germany became increasingly trapped in a three-dimensional vice between the Anglo-Americans, the Red Army and Western air power. 

It is fair to say that the May 1945 defeat of Nazi Germany really began in the wastes of Stalingrad and the dust and sand of the Egyptian desert because taken together the two victories broke the myth of invincibility that the Wehrmacht had acquired.  Having already defeated the Italians at sea critically El Alamein gave the Western Allies undisputed control of the Mediterranean.

 

There are also lessons from El Alamein for the defence and military strategy of today.  Defence strategy that is not properly grounded in national grand strategy i.e. the organisation of large means in pursuit of large ends, is but a meaningless waste of taxpayer’s money.  El Alamein served a very clear strategic end.  Military strategy that is not embedded in and conscious of a workable political strategy and its context is merely a waste of lives and materiel.  El Alamein was essential to the ultimate success of the Western political strategy.  Above all, El Alamein was the proof of that old military adage; do what the enemy least desires, where and when he least wants it.

But El Alamein is testament to another military truism.  Decisive advantage comes only when the critical weight of mass, manoeuvre and mobility has been established.  Military innovation is important but cannot act as a short-cut to such advantage.  Today, innovation is driven too much by the triumph of hope over experience.  For example, a platoon will never do the job of a brigade, let alone a division.

 

Winston Churchill said of El Alamein, “This is not the end, it is not even the beginning of the end but it is, perhaps, the end of the beginning”. 

Lest we forget.

Julian Lindley-French

 

The EU Muppet Show!

Alphen, Netherlands.  18 October.  It’s the EU Muppet Show tonight…and its official!  Der Spiegel, a German political magazine reputedly close to Chancellor Merkel, suggested that Angela has likened PR-Meister David Cameron and the British to the Muppet Show's Statler and Waldorf.  These are the two old blokes who heckle the Muppets from a theatre box who think the show is rubbish and are forever complaining about Fonzo the bad comedian.  

Angela’s alleged irritable dig at the British got me thinking.  If Cameron is Waldorf or Statler (it is not clear) who are the other Muppets?  Kermit the Frog is easy.  That has to be France’s President Hollande, the insanely optimistic kind little frog who yesterday said that this would be the last EU summit with an agenda dominated by the Eurozone crisis, before going on to accuse Angela of being too parochially German because she does not want Germany to pay off everybody else’s debts, particularly French debts.  

Fonzo, the bad comedian unsure himself whether anything he ever says is even vaguely funny can only be Manuel Barroso, President of the European Commission and one of the EU’s leading federalist Muppets.  Fonzo is a close friend on Brussels’ Sesame Street with EU ‘President’ Hermann ‘The Beat’ van Rompuy who is perfectly cast as Animal, the fanatical drummer who is forever making a lot of noise but little music.  Luxembourg Prime Minister Jean-Claude Juncker is Dr Teeth and together they formed Dr Teeth and the Electric Mayhem, an anarchic federalist Muppet band that plays crazy music that no-one ever wants to listen to other than themselves.

Carl Bildt is of course the Swedish Chef because he speaks a language no-one can understand and is always trying to cook something up from an alternative recipe that no-one can swallow.  Mario Draghi, President of the European Central Bank must be Beaker the mad scientist who is forever undertaking mad experiments in his mad laboratory none of which ever work, but which cost an awful lot of money.  Gonzo the Great must be Muppet stuntman and Spanish Prime Minister Mariano Rajoy because he is always performing insane political and economic stunts and will soon be, well, gonzo.  If there was a Dutch prime minister he would be Zoot, the fifty-something burnt out musician in Dr Teeth and the Electric Mayhem who never speaks, occasionally makes a sound, probably smokes something dodgy, gets stoned and then is never heard from again.  

Italian Prime Minister Mario Monti must be Sam the Eagle the tall, erect, Euro-patriotic self-appointed and utterly unelected leader of the EU Muppets.  Sam gives unwanted self-important lectures on the need to better integrate the Muppets and regards the whole show as beneath him, forever trying to impart some dignity and gravitas and forever failing.   

The rest?  They are the Frackles, a race of little monsters that come in many different colours, shapes and sizes that make tweeting noises from the margins and which Angela is forever trying to herd in her direction.  It is like herding cats.  New on the scene and keen soon to become a Frackle is Alec Salmond, or the Scottish Argyle Gargoyle as he is known in the EU Muppet Show.  Argyle can gargle Gershwin perfectly but otherwise no-one understands a word he says.  And then there is Foo-Foo, Miss Piggy’s dog, which probably barks Belgian. 

Today, the same cast of characters gather in Brussels for yet another EU Muppet Show.  This is the twenty-second time the EU Muppets have met NOT to manage the Eurozone crisis since it broke in 2010. Expect the French and others to push for a full banking union in an attempt to drive down the borrowing costs of the Italian and Spanish Muppets (and their own of course) and the German Muppets to offer only a Kommissar Muppet to ‘oversee’ the whole fiasco. The Berlin Muppets are ever fearful of losing control of their regional banks which provide cheap loans to their municipalities in the landes (German states).  The British Muppet will grumble impotently from the margins and then return home to tell the Muppets in London that he successfully defended the British interest and all that he now has to do is decide just what that interest is.  

And, of course, tonight another fantasy Muppet breakthrough will of course be heralded in the fantasy land that is the EU Muppet Show.  Let’s see if this one lasts longer than a Brussels Cappuccino.  Yawn!

In the words of the Muppet Show song, “Why do we always come here; I guess we'll never know; It's like a kind of torture; to have to watch the show.”

And finally, there is one character missing.  She is large, domineering and always gets her way.  Who could that be?  I will leave that to your imagination.  One thing though Angela.  In the Muppet Show it is always Statler and Waldorf who have the last word!

Watch the EU Muppet Show tonight folks!

Julian Lindley-French

Scotland: The Die is Cast

Alphen, Netherlands. 16 October.  When crossing the Rubicon to begin the civil war that led to the destruction of the Roman Republic Julius Caesar said, “the die is cast”.  Roman law had it that any Roman army that crossed the small river near Bologna en route to Rome without the permission of the Senate was an act of treachery and must be seen as irreversible. 

Yesterday’s ‘historic’ agreement between British Prime Minister David Cameron and Scottish First Minister Alec Salmond to hold a “legally-binding” referendum on Scotland’s possible independence from the United Kingdom cast the die.  Whatever happens the United Kingdom will never be the same again, not least because of changes to the electoral law in the agreement that extends the suffrage without any say by Parliament.  Some would say that is illegal.

Certainly, a precedent has been established whereby a minority is given superior status over the rest of the UK, although as an Englishman I have long understood that we are second class citizens.  Indeed, the most fundamental change to my country for three hundred years could take place and I am to be denied a voice…again.

And yet for all that I support the Scots right to decide and will honour and respect their decision.  As an avowed democrat I am bound to the logic of my own argument.  What angers me most (and yes I am angry) is that Prime Minister Cameron seems to think it perfectly OK for the Scots to have a referendum that could lead to the dismemberment of my country and yet denies me a referendum on that other Rubicon – the place of the UK in an integrated Europe and the effective end of my state.  The two are clearly linked.  It is breath-taking hypocrisy.

Cameron is taking one hell of a political risk.  Some would say that for once he is leading but any glance at the agreement one can again see that this most lightweight of prime ministers has again been comprehensively out-manoeuvred. Others say that the Scots will never vote for independence as all the mainstream political parties will now join the unionist campaign.  First, that is to pay no respect to the great Scottish people.  Second, there is a long way to go before the end of 2014 when the vote is likely to take place.  Third, expect a lot of other states to start interfering that would love to see London humiliated, not least those on the near-Continent who would like to see the crushing impact this will undoubtedly have on the people of England, Wales and Northern Ireland translated into submission to the future diktat of Brussels DC.

The greatest impact will be on England which represents over 90% of the population of the United Kingdom and where the sense of injustice and a feeling that politicians NEVER listen to their concerns about anything that really matters is growing palpably.  Of course, the London political elite say that the English can vote for Parliament once every five years. Sadly, both government and Parliament are debased currency in England these days and widely seen by the population to have sold the English out left, right and Brussels.

If Scotland votes for independence it must mean independence.  Salmond says that the Bank of England will remain the lender of last resort post-independence and that Scotland would retain the pound.  As an Englishman with Scottish blood in his veins I utterly reject that because what Salmond is in effect saying is that he wants to destroy the UK and get the English to pay for it.  Cameron is so weak that he will likely agree to such nonsense but the simple fact is that if Scotland votes to go then it must pay its own way and the enormous subsidies paid to the Scots by taxpayers in the rest of the UK must end.

Whatever happens Scotland will have to live with an angry, dominant, let-down, resentful and utterly fed-up England and Edinburgh must never forget that even if London too often does.  If Scotland does vote to destroy the United Kingdom (for that is what is implicit in this vote) then I will wish the Scottish people well even if I passionately believe the UK is stronger with Scotland within it and that Scotland does very well out of the UK. 

The die has indeed been cast.  How on Earth have we come to this?

Julian Lindley-French

The Good Ole US of E

Washington DC, US of A 14 October.  It was US President Abraham Lincoln who famously said, “you can fool some of the people all of the time, all of the people some of the time but you cannot fool all of the people all of the time”.  I wonder.  Writing this I am sitting in the cavernous Edwardian railroadness of Union Station.  This is what an ancient Greek railway station would have looked like had the Athenians got around to turning ideas into practice.  At least it is what a nineteenth century American architect thought an ancient Greek station would amount to.  There is a reason for all this lofty grandeur.  Union Station is but a stone’s throw from the Capitol, which is probably appropriate as it is built on the site of a notoriously rowdy Irish slum.  

This station sat at the very heart of the Union, part of a railway system critical to ensuring the cohesion of an America that spent much of the nineteenth century colonising ‘itself’.  One of the striking aspects of my latest visit to Washington is how many senior Americans think a ‘United States of Europe’ a good thing, particularly think-tankers.

Many Americans (not all) have a disarming tendency to super-impose their own self-image onto others.  This tendency is nowhere more apparent than views about Europe.  The somewhat bizarre award to the EU of the Nobel Prize for Peace (given the many people risking their lives for peace) has heightened a sense in some American minds that the end of the European nation-state is nigh and some latter day Rome might emerge.  There is even some of the growing intolerance one finds in the Euro-Aristocracy of those resisting the ‘irresistible’ for fear of the loss of ancient liberties and because some of us are quite fond of our old countries.  Some even imply xenophobia, much the same way that this terminally politically-correct country infers that anyone concerned about hyper-immigration must by definition be racist.  Above all it shows a dangerously simplistic misunderstanding of Europe.

My own objections to a ‘super-Europe’ reflect the unease of many Europeans already alienated from politics that there is simply no way to make what Messrs Van Rompuy, Barroso, Draghi et al want at all democratic, whatever their manipulations to the contrary to gain more power.  The European nation-state is not the equivalent of an American state and never will be.  Indeed, four of the world’s top ten economies and two of its leading military powers are EU member-states.  There is no common language, no common legal tradition and none of the shared political philosophy essential to the Founding Fathers.  As such there will be no Declaration of Rights and thus very few real checks and balances to restrain an over-mighty bureaucracy made powerful by a crisis much of its own crafting beyond a distant fig-leaf European Parliament that represents only itself.  

My own country Britain is often painted here as a recalcitrant outlier full of political Neanderthals who have spent too long on an island, rather than a great country with a long and proud libertarian tradition from which America inherited its concept of political liberty and for whom many of its citizens have died over the past decade or so.  

What is particularly worrying is how some of the think-tankers seem seduced by powerful EU interests into accepting the intolerant orthodoxy of European integration that views all dissenters as dangerous heretics. The strange (and oft hypocritical) thing is that these people imply the end of European state sovereignty, something they themselves could never imagine being imposed on Americans. 

Where I agree with the Euro-Federalists is that the next ten years will be the crunch for ‘The Project’, as the European Commission calls it, to build a ‘united’ Europe on their terms.  By 2020 the Europe we know could be sliding fast down the trash chute of history to be replaced by ‘Brussels DC’.  The critical moves towards banking, fiscal and political union currently on the table if followed through logically would indeed shift the balance of power decisively against the member-state (and with it democracy) such that it would become a mere rump.     

The EU works best as a form of intense inter-state co-operation in which national parliaments close to the people provide legitimacy and Brussels is there simply to aggregate effectiveness by helping to promote cohesion in those areas of trade, the free movement of goods and people and on some aspects of foreign and security policy where strategic unity of effort and purpose is essential.  It is not a sovereign state.

Americans must at least understand one thing; a US of E would be nothing like the good ole US of A. Certainly, no latter day Rome would emerge, more likely would be a very large Greece.

Julian Lindley-French

Why America Needs a Kennan Moment

Washington DC, USA. 12 October.  US strategist George F. Kennan, a hero of mine, once said, “The best an American can look forward to is the lonely pleasure of one who stands at long last on a chilly and inhospitable mountaintop where few have been before, where few can follow and where few will consent to believe he has been”.  This is an election town at an election moment.  For a foreigner it is a fascinating and frankly uplifting experience to see American democracy in action.  Still, having watched last week’s presidential debate between Obama and Romney from ‘over there’ and last night’s vice-presidential debate between Joe Biden and Paul Ryan from ‘over here’ I am struck by how poorly all the candidates really understand the fundamental principles of American foreign policy that Kennan helped establish. 

 

My reason for being here in DC is to attend a high-level round-table on current and emerging threats and adversaries.  Whoever takes the White House next month will face a world that is both complex and potentially dangerous, although not yet a world that is committed to a road to war and disaster.  Watching the debate here I am struck by the same doubt as one finds in Europe, albeit with an American accent. The economy is struggling; few of America’s recent foreign ventures can be called a success.  Like Europe, I see too many power Americans lying to themselves and to their people about the challenges that lay ahead.

In 1946 Kennan wrote a telegram from Moscow that at a stroke re-connected American leadership with strategic reality.  Kennan (with the help of Winston Churchill) ended Washington’s delusion that Stalin’s Soviet Union could ever be a partner in the post-World War Two world that Franklin Delano Roosevelt had envisioned prior to his 1945 death.  The Soviets were rapacious occupiers who for many central and eastern Europeans simply replaced one dictatorship with another. 

Today there is no Soviet Union but nor are China, Russia or Iran ever going to be strategic partners given their governments and systems of government.  China is locked in an internal power struggle within the Communist Party and between the Party and the People’s Liberation Army that has led it into conflict with ALL of its major Asian neighbours.  Moscow is run by a paranoid, illiberal, nationalist elite that still has ambitions to re-establish its hawkish sphere of influence in Europe and beyond should the West continue to falter.  The Arab Spring (or whatever one might call it) may lead to some flawed Muslim Brotherhood-type democracy (one man, one vote once?) but it is clear that Al Qaeda sees it as much as an opportunity for a future caliphate.  And then there is Afghanistan; America will need to be there in strength way beyond 2014 and completely renovate its strategy therein if a future president is to ever declare success, and pay the price in lives and geld that will demand. 

The thing about Kennan was not that he espoused an overly hostile anti-Soviet policy. He did not. Rather, he helped lead led the way to the creation of an American statecraft which not represented a profound break from the American isolationism of its peacetime past.  By so doing America established a strategic concept and culture for American leadership that in time won the Cold War.   America led not only because it could, but because it had to. 

Coming to Washington as I have over many years I have watched the hollowing out of American leadership.  Sometimes it has been masked by American bombast; sometimes by moments of excessive modesty (yes it does happen).  It has happened because American leaders have abandoned the principles of American leadership and the deep belief in the values and indeed the interests’ American success and world peace is built on.

International ‘relations’ are called as such because they are indeed just like relationships. It is not just about treaties, meetings and diplomats.  It is about power and the instinctive understanding of friend and foe alike of both one’s ability to realise one’s interests and whether one really believes one can.  My own country, Britain, is declining fast not because Britain is no longer capable of greatness, it is.  It is declining because the elite have lied so long to themselves and the British people that they no longer know what to believe in. 

The point about America is that after a bruising decade it must now decide whether to be lonely and lead or popular and decline.  I suspect there is not much ground between the two or that Americans have long to decide.

This election may well be the moment the long and painful decline from the America’s lonely mountain-top really begins.

America needs a Kennan moment.

Julian Lindley-French