EU Decision-making: Going the Wrong Way About It

 

January 31, 2012

We’re heading towards a Soviet-style union run by a Politburo made up of national political leaders uninterested in consulting the European Parliament on important decisions affecting our lives.

Whilst in Brussels where the EU heads of government were busily hammering out measures aimed at solving the euro-crisis, Martin Schulz held his first speech as President of the European Parliament. He rightfully incriminated the cumbersome and un-democratic way EU political leaders make decisions bearing on the future of Europe’s almost half a billion citizens. To be sure, the EU is not a fully functioning union yet and the fiscal arrangements concluded on January 30th only serve to reinforce this.

As Martin Schulz has complained, the European Parliament is rarely consulted before a vital, Europe-wide decision is made. Indeed, it seems national leaders act as a veritable Soviet-style Politburo. The German chancellor, like Russia’s leaders had within the Soviet federation, is increasingly able to railroad the other national leaders into agreeing to policies that will ultimately bring about… the unravelling of this union, as well. We have been used to comparing Germany to the other exporting powerhouse, China. So why compare it to Russia now? To their credit, the Chinese are pouring tens of billions of dollars into infrastructure projects within their ASEAN neighbourhood every year, sometimes without even being asked. Moreover, they are buying hundreds of billions of dollars worth of US treasury bonds, only to keep their business partner afloat and able to buy Chinese goods. Would anyone see the Germans doing likewise ? Not unless they really had to, and then on condition they get to take over the fiscal management of the country in need of assistance.

Look no further than the adoption of the so-called «golden rule», as a panacea for solving the sovereign debt crisis and so much more (!). Unfortunately, however, most of the countries that were forced to adopt austerity measures aimed at balancing their budgets have been beset by huge social turmoil, du jamais-vu in post-war Europe. To the current leaders who met in Brussels on Monday, warnings constantly issued by Nobel prize laureates like Joseph Stiglitz or leading economists like Martin Feldstein seem to matter little, if at all. If the trend continues, I sincerely wonder who is going to be left with enough funds to buy German cars and German machine tools around here… As Christine Lagarde has courteously reminded her German hosts recently, for every surplus country like Germany, there have to be a number of deficit countries left, in order to absorb its exports. There’s simply no other way about it. This is why the «golden rule» can only have a boomerang effect on the German economy, but to people affected by political myopia, that, of course, is no valid reason to desist.

And what if the European Parliament, since the spring of 2011, was in favour of the introduction of eurobonds? Nobody has invited its representatives to have a say at the summits where such decisions are taken. Let’s face it: for complex issues, inter-governmentalism as a decision-making mechanism has proven highly detrimental to the running of the Union’s affairs. More often than not, the Commission and the European Parliament look on as powerless spectators of the ongoing series of policy blunders which, instead of solving the crisis, aggravate it.

Whilst national governments are being constrained to stop much-needed investments in infrastructure and other projects, the European Commission is supposed to pick up the slack and spend some 82 billion euros on regional projects in order to kickstart growth. Now, if anyone believes that this sum is going to make a significant dent in the continent’s unemployment, good luck to them. Sure, as Martin Schulz has observed, the adoption of a 0.05% financial transactions tax would bolster the EU’s budget by 200 billion euros per year, but who listens to Euro-parliamentarians ? As in the illustrious Soviet example, apparently nobody…

Author : Spotlight on Geopolitics
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External Relations  , E.U., euro

The US' Strategic Defence Review Assessed

 January 28, 2012

The Defense Strategic Review (DSR) released by the Pentagon on the 5th of January 2012 summarises the Obama Administration’s geopolitical agenda and strategic priorities. From it, experts can discern which country is considered the new enemy of the USA, although President Obama’s speech on the occasion does not mention China by name.

In France, the refocusing of the US strategy on the Asia-Pacific region is viewed by Professor Jean-Jacques Roche from ISAD as a positive development. Whilst he observes that some of the new EU members (countries like Poland, the Czech Republic and even Romania) might express their misgivings about the planned US troops withdrawal , Western suppliers of military hardware should supposedly rejoice. Professor Roche believes that the Pentagon’s DSR could kick-start the accelerated development of the European Defence Agency (EDA) and increase the mutualisation of the defence capabilities of the EU’s member countries.

The two reasons given by the US for the elaboration of the new military doctrine are the changed geopolitical environment and the radically different fiscal circumstances. In other words, the adoption of the new strategy is supposed to save the US some $450 billion over ten years, fiscal consolidation being nowadays regarded by Washington as a national security imperative…

We can also gauge from the document who the US’ current friends and enemies are. Unfortunately, China is identified as a potential foe, in the same paragraph with Iran. In the Middle East, America’s friends and allies are the Gulf countries and Israel. In Asia, India, South Korea, Taiwan and Japan are the allies supposed to offer the US the means of putting in place – if needed – a balance of power mechanism against China. This time around, the US needs Russia on its side, especially in the wake of the upheavals in the Middle East – hence the reset.

Interestingly enough, the Indians are advised by their own experts to refuse bandwagoning on the issue. Thus R.S. Kalha, an ex-Secretary of the Indian Ministry of Foreign Affairs, notes that in the past the US had forced India to settle on Kashmir. He rightly observes that South-East Asian nations are loath to become close allies of either China or the United States, for such an option could prove disastrous for them. R.S. Kalha believes that the Indian leadership should be prudent on the matter, as a clear-cut alliance with the US might prove detrimental to Indian interests. He knows that the nature of the US – China relationship is very complex and that a military conflict between the two giants seems highly unlikely, as long as China needs the American export markets and the US needs China to continue to buy its T-bills. To be sure, the relationship between the two powers is deeper and more complex than the one established by Washington with its Soviet counterpart during the Cold War.

The reception of the Pentagon’s DSR by the Chinese government was a rather cool one. The Chinese leadership seems unwilling to intensify confrontation and to become a new cold war target for Washington. The People’s Daily has insisted that China should continue with its economic development and avoid being dragged into a military competition with the US, as the Russians had. Still, the Chinese intend to continue to take care of what they call their ‘peripheral security interests’, in spite of the new assertiveness of the new US defence policy in Asia. For all other issues, the Chinese apparently intend to cooperate with the US in solving potential tensions via dialogue. (sources: Le Monde, Pentagon Paper, People’s Daily, IDSA India)

Towards a two-union Europe ?

 January 15, 2012

Standard & Poor’s decision this week to downgrade the country ratings of France, Italy, Spain and Portugal, not only aggravates the sovereign debt crisis, but it actually divides the EU in two.

The most affected group is made up of the Latin countries bordering the Mediterranean. Their interest bills are going to rise to levels that, in some cases, will make it prohibitive to finance their budget deficits and therefore to continue to provide quality public goods and services to citizens. To make matters worse, this group of countries has to swallow the bitter German pill of budget austerity at a time when long-term economic recession and possibly even stagflation look increasingly likely.

The second group of countries, headed by Germany, has kept their AAA credit rating. It includes Denmark, Sweden, the Netherlands and the UK, for example. Switzerland and Norway also belong to this group, although they are as yet unaffiliated to the EU. The main preoccupation of Germany and its like-minded northern European partners is fighting inflation, not unemployment. This is in sharp contrast with the economic philosophy of the Latin group of countries, which are quite tolerant of higher levels of inflation and budget deficits, provided these are used to significantly bring down unemployment.

Whilst a two-speed Europe might not be in the cards, in a not too distant future we might be faced with the prospect of two separate European unions, built out of the ashes of the current one. Thus, as Angela Merkel herself threatened in 2008, the Germans might be more interested in building a Baltic union, which could conceivably attract Russia as an associate, whereas the Latin countries might wish to explore further a separate Union for the Mediterranean that could potentially integrate Tunisia, Morocco, Libya and Algeria.

As far-fetched as this sounds, such an outcome might, however, prove to be the only solution to having a too-large and dysfunctional union, in which national interests prevail at the expense of the greater good of all existing members. In truth, the provisions of the Maastricht Treaty, the austerity packages and the German insistence on having an European Central Bank solely dedicated to fighting inflation do not work in practice for a majority of EU members, and especially for the first group of countries mentioned above. At this point in time, all good ideas aimed at solving the EU’s woes — such as fiscal union, the emission of eurobonds, a central bank dedicated to fostering employment, a common defence and security policy that works — have been discarded by Germany and some of its closest allies. In these conditions, no expert or responsible politician could be blamed if alternatives to the current union arrangements are actively being considered by them.