Euroopalla on johtaja – mutta johtaako se mihinkään?

Euroopalla on johtaja – mutta johtaako se mihinkään?

Euroopalla on johtaja – mutta johtaako se mihinkään?

By Ian Bond, 11 September 2014
From Helsingin Sanomat

Link to press quote:
http://www.hs.fi/ulkomaat/Euroopalla+on+johtaja++mutta+johtaako+se+mihink%C3%A4%C3%A4n/a1410327773942

A UK without Scotland

A UK without Scotland

A UK without Scotland

Written by Charles Grant, 12 September 2014

If Scotland votes Yes…
    
At the time of writing it seems possible that the Scots will vote to leave the UK in the referendum on September 18th. The consequences of a Yes to independence are unfathomable but would stretch far beyond the British Isles. A Yes would not only shake up British politics but also increase the likelihood of Residual UK (RUK) leaving the EU, boost separatism elsewhere in Europe and diminish the global standing of what was left of Britain.

A Scottish exit would create problems for the Conservative Party. This would be the second time that it had been responsible for the departure of part of the British Isles from the United Kingdom. Ireland became independent in 1922, but it is often forgotten that when the Irish asked for Home Rule in the late 19th and early 20th centuries, most of them did not want independence. On several occasions Liberal governments tried to give Ireland Home Rule but were blocked by Conservatives in the House of Lords. This went on for decades, eventually driving the Irish (excepting the Protestants in Northern Ireland) to seek independence.

The Conservative prime minister, David Cameron, will take some of the blame if the Scots leave. He agreed to the timetable of Scotland’s first minister, Alex Salmond (a vote in 2014 rather than 2013 allowed the Scottish National Party more time to build support); to a ballot paper question which, though modified by the Electoral Commission, is favourable to the SNP (‘Should Scotland be an independent country’); and to the exclusion of further devolution as a third option on the ballot (which would have reduced the numbers voting Yes).

The austerity policies of the Cameron government must also bear some responsibility for the Conservatives’ appalling image in Scotland. One of the most potent arguments for independence is that Britain is an increasingly right-wing, Thatcherite and inegalitarian country. Much of that is hyperbole, but the nationalists have been able to argue that if Scotland wants to emulate modern, high-principled and social-democratic Nordic countries, it must break free of Tory Britain.

Cameron would come under pressure to resign, but he might limp on as a lame duck prime minister, even less capable of controlling his party’s powerful eurosceptic forces. If Cameron resigned his replacement would probably need to take a more anti-EU stance in order to be elected party leader. The party could move towards making radical demands for EU reform that other EU governments would not or could not grant; the upshot would be the Conservatives recommending a No in a referendum on maintaining EU membership.

Ed Miliband, the Labour leader, would also be damaged by a Yes. He is scarcely more popular in Scotland than Cameron. The recent surge in support for the Yes campaign has come mainly from Labour voters in working class areas. They do not regard the prospect of another Labour government at Westminster, with Miliband as prime minister, as exciting. The referendum is only happening because Labour – traditionally, the dominant force in Scotland – became so grey and uninspiring that the SNP was able to win office in 2007.

But whatever the failings of Cameron and Miliband, the Scottish campaign reflects larger, pan-European trends. In many parts of Europe, populism, much of it nationalist, is on the rise. In Britain, in the recent European elections, Nigel Farage’s UK Independence Party won more votes than the Conservative or Labour parties. Salmond’s SNP is different from UKIP in important ways: it lacks the latter’s hostility to the EU and immigration. But they both tap the same hostility to Westminster, elites and established political parties (Farage and Salmond have also both expressed qualified praise for Vladimir Putin). And though many of those working for a Yes are young and idealistic, in favour of a new sort of politics, their campaign, like UKIP, is gaining strong support from those who are less educated and fearful for their futures.

RUK would be more right-wing and eurosceptic than the full United Kingdom and thus more likely to leave the EU. The Conservative Party has long described itself as a unionist party but has only one Scottish MP, eight in Wales and does not contest elections in Northern Ireland. A party that was more centred on England, seeing UKIP as a key foe, would probably become more unashamedly for English nationalism.

Even if Ed Miliband won the general election in May 2015 his government would have little legitimacy, if his majority depended on Scottish MPs, as it almost certainly would. There would probably have to be another general election when Scotland left the UK, which SNP claims would happen in March 2016.  Labour would find it much harder to win a parliamentary majority without Scottish seats in Parliament. So a Scottish Yes would increase the chances of a Conservative government, and thus an EU referendum (Labour, like the Liberal Democrats, opposes a referendum unless more powers are transferred to the EU). And without five million relatively pro-European Scots, it would be harder for pro-EU voters in RUK to defeat the sceptics in a referendum.

British pro-Europeans who hope to win such a referendum will learn some lessons from the Scottish campaign. When middle-aged men in suits tell voters that departure will lead to less foreign direct investment and economic instability, many of them are unimpressed. Advice from the establishment can often seem patronising. The No campaign in Scotland has focused on economics and attempted to make people fear the unknown. Only belatedly has it tried to tell a positive story of how all parts of the union benefit from it.

The obvious lesson for an EU referendum is that pro-Europeans should not focus only on economics and negativity. However, it is much harder to create a positive narrative about the EU than about Great Britain. The English and Scots share a common history and have achieved a great deal together; they have not fought since the battle of Culloden in 1746. But it is only 70 years since Britain was fighting other Europeans, and the achievements of the EU – such as peace and prosperity – appear not to touch many British hearts.

A Scottish Yes would cause shockwaves elsewhere in the EU, particularly in countries with separatist movements. Catalan separatists already treat the Scottish referendum – whatever its result – as a victory, since Scotland is being allowed to vote. The Catalan government, led by Artur Mas and his moderate Convergencia i Unio party, wants a referendum in November 2014, but the Partido Popular government in Madrid has refused to allow it. This obstinacy is pushing more and more Catalans to favour independence.

If the Madrid government and the constitutional court continue to block the referendum, Mas may try to hold one anyway or simply call Catalan elections. Financial scandals have weakened Convergencia i Unio, so the more extreme Esquerra Republicana de Catalunya would stand a good chance of forming a government. This party has promised to declare independence if a referendum is not allowed. A Scottish Yes would surely embolden the Catalans, encourage more of them to insist on independence, and make Spain’s constitutional crisis more intractable. What happens in Scotland and Catalonia will make its mark on the Basque country, Flanders and other parts of the EU.

A Scotland that leaves the UK would have to apply for EU membership. The accession of an independent Scotland would be much more complicated, and take much longer, than the SNP imagines. As John Kerr has pointed out, Scotland could not accede until it had agreed terms with each of the 28 member-states, all of which would have to ratify the accession treaty. It would be technically very difficult, though hopefully not impossible, to ensure that Scottish citizens and companies did not lose the benefits of membership during the period between Scotland’s quitting the UK and joining the EU.

Many issues between the EU and Scotland could not be sorted out until RUK and Scotland had agreed the terms of their separation. The currency question would be a problem in both sets of negotiations. Scotland could not join the EU without committing to join the euro. But if it wished to regard that as a long-term goal and in the interim to have its own currency or use the pound, EU member-states might indulge it. London, however, would not agree to Scotland using the pound and having the Bank of England as its lender of last resort unless Edinburgh ceded substantial powers over economic policy.

Like any country applying to join the club, Scotland would find that it had to accept the terms imposed on it by the other member-states and EU institutions. For example, Scotland would not get a share of the UK’s rebate on its contribution to the EU budget. Spain would be one member in no hurry to allow Scotland to show that independence can be won easily and quickly (and it might extract a price in fishing rights).

At the same time as the difficult RUK-Scotland and EU-Scotland talks were under way, a Tory-led RUK could be trying to negotiate a new deal with the EU and, following a referendum in 2017, perhaps an exit. The EU could put the Scots on hold while it sorted out the (for most governments) much bigger problem of RUK’s departure.

Whether or not RUK stayed in the EU, a Scottish exit would diminish its international standing. In the past few years that standing has suffered.  The Conservative-led government has been less assertive in international affairs than its Labour predecessors, partly because public opinion has become sceptical of an activist foreign policy (after Tony Blair’s wars in Afghanistan and Iraq), and partly because of the Conservatives’ reluctance to pursue international goals through the EU. Britain has been relatively passive during the Ukraine/Russia crisis (at least its early phases) and the rise of Islamic State in the Middle East.

But the departure of the Scots would cause much greater damage. Other countries would react with a mixture of pity and derision.  RUK’s armed forces and diplomatic service – already under pressure from government budget cuts – would have to shrink further, hampering its ability to play a leading role in NATO and the EU. As the details of independence were negotiated – including the need to divide up all common assets – the RUK government could find it hard to focus on foreign policy crises at the same time.

The SNP is committed to getting rid of the Trident submarines that are based at Faslane on the Clyde. But the cost of constructing a new submarine base in England would be enormous – and perhaps tilt the argument in London, where the political class is increasingly divided on the wisdom of retaining a nuclear deterrent, towards scrapping it. Any decision to abandon or diminish the deterrent would lower the US’s estimation of RUK. All these shifts would make it harder for Britain to argue that it should maintain its place on the UN Security Council (though it cannot be forced to cede it). The UK’s permanent seat and veto already appear to be an anachronism, when the likes of India, Brazil, Germany and Japan have neither.

Even if – as the CER hopes – Scotland votes No, there will still be huge consequences. A No is unlikely to be the end of the matter, especially if the vote is close, as is likely. Although 60 per cent of the Québecois voted to stay in Canada in 1980, another referendum was held 15 years later, which the separatists lost by only a whisker.

The Conservative, Labour and Liberal Democrat parties have promised that a No vote will trigger the devolution of tax-raising and other powers to the Scottish Parliament. That, in turn, is likely to provoke rising resentment among the English. If the Scots get special deals, why should they not? Further devolution would increase the urgency of answering the ‘Lothian Question’: why should Scottish MPs at Westminster vote on subjects that are devolved to Edinburgh, when English MPs cannot vote on those issues in Scotland? Meanwhile the Welsh and perhaps some other regions would ask for more powers to be devolved. UKIP would do its best to profit from a sense of grievance among the English.

The rise of populism and nationalism will continue to destabilise Britain and the rest of Europe – unless traditional elites do a better job of solving economic problems and practising the kind of politics that inspires voters.

Charles Grant is director of the Centre for European Reform.

The Trotskyites of the right are wrecking the Conservative party

The Trotskyites of the right are wrecking the Conservative party

The Trotskyites of the right are wrecking the Conservative party

02 September 2014
From The Guardian

Link to press quote:
http://www.theguardian.com/commentisfree/2014/sep/02/trotskyites-right-wrecking-tory-party

EU risks limp compromise on top jobs

EU risks limp compromise on top jobs

EU risks limp compromise on top jobs

By Ian Bond, 28 August 2014
From Wall Street Journal

Link to press quote:
http://online.wsj.com/articles/eu-risks-limp-compromise-on-top-jobs-1409261458

BfB/BNE/CER fringe event at the Liberal Democrat Party conference: 'Can Britain lead in Europe? Will EU reforms deliver growth and jobs?'

BfB/BNE/CER fringe event at the Liberal Democrat Party conference

BfB/BNE/CER fringe event at the Liberal Democrat Party conference: 'Can Britain lead in Europe? Will EU reforms deliver growth and jobs?'

07 October 2014, 6:15 pm - 7:15 pm

Welcoming remarks by Phillip Souta, head of UK public policy, Clifford Chance

Location info

Leven Room, Scottish Exhibition and Conference Centre (SECC)
Exhibition Way
Glasgow
United Kingdom

Brexit will destroy the City of London as we know it

Brexit will destroy the City of London as we know it

Brexit will destroy the City of London as we know it

27 August 2014
From EurActiv.com

Link to press quote:
http://www.euractiv.com/sections/uk-europe/brexit-will-destroy-city-london-we-know-it-308000

EU enlargement

EU enlargement

EU enlargement

Written by Ian Bond, 31 July 2014

Eurozone economy stalls in second quarter as German GDP slips

Euro-zone economy stalls in second quarter as German GDP slips

Eurozone economy stalls in second quarter as German GDP slips

By Simon Tilford, 14 August 2014
From Wall Street Journal

Boris Johnson, Gerard Lyons and policy-based evidence making

Boris Johnson, Gerard Lyons and policy-based evidence making

Boris Johnson, Gerard Lyons and policy-based evidence making

Written by John Springford, 11 August 2014

The UK can only achieve serious reform if it is serious about leaving, and it can only be serious about leaving if it believes this is better than the status quo of staying in an unreformed EU. It is.

– Gerard Lyons, ‘The Europe report: A win-win situation’

In recent years, policy wonks have led a campaign championing ‘evidence-based policy making’. A new policy should only be put in place after it has been rigorously weighed against the evidence. If the evidence points in another direction, the policy should be ditched. This, of course, rarely happens: politicians have a pet project that they are convinced must be a good idea, and commission research that supports the project and ignores evidence to the contrary. British civil servants have come to call this ‘policy-based evidence making’. Nowhere is it more apparent than in Britain’s Europe debate: pro-Europeans and eurosceptics too easily throw around spurious GDP and jobs figures, often with weak or cherry-picked evidence, to support their case.

The Mayor of London, Boris Johnson, is the latest culprit. He has ambitions to lead the British Conservative party, and on Wednesday, he made a speech laying out his preferred reforms to the EU. Although he was careful not to say it explicitly, the thrust of Johnson’s speech was that Britain would be better off leaving than staying in an unreformed EU. Such a stance would help him win a leadership contest, given growing euroscepticism among Conservative MPs.

However, “if we get the reforms,” Johnson said, “then I would frankly be happy to campaign for a yes to stay in”. He pointed to research published on the same day as the speech by his economic advisor, Gerard Lyons. The research considered the impact of EU withdrawal on London’s economy, and provided four costed scenarios:

  •  Stay in a reformed EU, which Lyons thinks would cause London’s economy to grow by 2.75 per cent a year, to £640 billion in 20 years. 
  • Leave the EU but with “goodwill” on both sides, and with the UK pursuing a “pro-growth, reform agenda”. This would cause London’s economy to grow by 2.5 per cent a year, to £615 billion in 2034.
  • Stay in an unreformed EU, with growth of 1.9 per cent a year and an economy of £495 billion in 20 years.
  • Leave the EU but pursue autarkic trade and subsidy policies, with 1.4 per cent growth leading to GDP of £430 billion. 

Johnson and Lyons think that London, and by extension the UK, would be best off in a reformed EU, but that leaving would be better than staying in the status quo. These figures, at first sight, seem implausible. Lyons argues that EU reforms could raise London’s growth rate by 45 per cent, and that the status quo is only slightly better than leaving the EU and pursuing autarkic trade policies.

What are the reforms that would lead to such impressive improvements in London’s growth rate? These were Boris Johnson’s suggestions: “complete the single market”; reform social and employment law to reduce costs to businesses; further reform of, or better, abolition of the Common Agricultural Policy (CAP); “managed migration so that we know how many people are coming in”; a yellow card procedure so that national parliaments can stop “unnecessary” regulations; and an “end to the pointless attacks on the City of London”.

Consider whether these reforms, some of which the CER would support, are likely to promote the rates of economic growth that Johnson and Lyons suggest.

  • The UK Department of Business, Innovation and Skills (BIS) estimates that completing the single market – by which BIS means a highly ambitious elimination of barriers to the trade in services – would boost British GDP by 7 per cent. If we spread that out over 20 years, that amounts to 0.35 per cent a year.
  • The CER Commission’s report on leaving the EU showed that EU social and employment rules do not prevent Britain from having one of the most flexible labour markets in the developed world; and that the negative impact of totemic rules like the Working Time Directive is small. There is little reason to believe that abolishing these rules upon EU withdrawal would have a large macroeconomic impact.
  • An abolition of the CAP would make little difference to London’s economy, since it has no farms that receive subsidies. A reduction of EU tariffs on agricultural products, on the other hand, might raise incomes by reducing Londoners’ shopping bills, but Johnson did not mention this.
  •  Counting immigrants from the rest of the EU would make no difference to the number who came. And, in any case, immigration raises GDP, rather than lowering it.
  • It is not possible to know whether greater use of a yellow card procedure – which is already in operation – would raise or lower GDP. More yellow cards might make services liberalisation more difficult, since national parliaments would have more power to thwart the European Commission’s efforts to open national markets. 
  • It is not apparent that the “pointless attacks” on the City of London have had a severe impact on London’s GDP. Rather, the main reason that UK banks’ regulatory costs have risen in recent years is due to domestic, not EU rules: the UK has been faster than other EU countries to raise capital, leverage and liquidity requirements.

A detailed and fair-minded appraisal of the macroeconomic consequences of these reforms might undermine the entire argument, and they are not available to the reader of Lyons’s report. The economic forecasts were provided by the Volterra consultancy, but the appendix does not tell the reader the method by which Volterra arrived at their figures. It simply says that “a reformed EU would, for example, offer free trade in services on the basis of passported regulation”, meaning a services market in which any supplier in the EU can provide services in another member-state without meeting its regulations. A free-trading Britain outside the EU “would encourage trade in services across the globe”. Their model, on the other hand, of an unreformed EU is one whose “prospects … are restricted on the supply side”. Then the report simply lists the GDP and employment numbers that Volterra has attached to these unspecific assumptions without explaining the model the consultancy used.

The report offers very little analysis of what might happen to the UK economy if it left the EU. Foreign direct investment (FDI), which the National Institute of Economic and Social Research has rightly pointed out is the constituent of GDP that is most at risk from an EU exit, receives one mention. Lyons acknowledges that Britain attracts more FDI than any other member-state, and cites a CityUK survey where 38 per cent of financial and professional services bosses said they would move some of their business outside London if Britain left. But Lyons dismisses their concerns, saying this “mirrors comments made by City leaders on the effect of the UK not joining the euro.” A fuller discussion is warranted. It is true that Britain’s decision to stay out of the euro did not prompt international banks to move operations out of the City. But Britain’s EU membership is one reason why: single market rules have allowed the City to be the eurozone’s wholesale banking centre. And higher trade barriers arising from an EU exit would be likely to reduce FDI in many sectors of the economy: market size is an important determinant of FDI flows, and Britain outside the EU would have less access to the single market, unless it pursued the ‘Norwegian option’ of joining the European Economic Area.

The discussion of the possible post-exit trade agreements is very brief: a page and a half. The Norwegian, Swiss and Turkish options are rightly dismissed as politically unworkable (all would require the UK to sign up to rules or trade agreements with little say over them). Lyons says that “the UK option” would be better. This would be a “comprehensive free trade agreement”. But it is hard to see how this option would lead to the kinds of growth rates he suggests. He thinks that the City would have less access to EU services markets than it has now. “It is unlikely [full access] will be granted”, and “it is not optimal” to lose full services market access, he says. And he does not believe that many EU rules would cease to operate in Britain – rules which he argues elsewhere in the report are severe constraints on British economic growth. While UK business “would decide to mirror EU regulations on products and services to allow ease of selling into the [EU] market”, he writes, these “would be business decisions, not something imposed by a centralised bureaucracy”. The report does say that Britain could repeal social and employment law. But it is hard to see how this would result in the growth that the report forecasts.

It is not ungenerous to say that the report’s headline figures were designed to lead to the conclusion that the current state of Conservative politics dictates: that staying in a reformed EU would be best; that leaving would be fine; and that the status quo is so bad that it is only marginally better than leaving the EU and erecting barriers to foreign competition. These are implausible claims that require some serious empirical backing to be convincing. The report does not even try.

John Springford is a senior research fellow at the Centre for European Reform.

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