Posts Tagged ‘euro’

EUROPE – WHAT IS TO BE DONE?

June 24, 2016

Living in Europe for 35 years, I greatly appreciated the people and their various ways of life. I was happy to return to live in England, since I imagined that within the European Union we could be one. So now that Britons have dropped a nuclear bomb on the relationship with Europe, I am devastated.

That we should have a constitutional crisis, utter confusion, no government and no plan for the future was eminently foreseeable. Yet a majority of voters, including friends of mine, embarked on this apparently reckless course. Why did the Remain camp fail to convince?

Voters knew David Cameron was no friend of Europe, so he had no credibility in declaring he would campaign “heart and soul” to stay in. No more persuasive were statesmen who urged Britain to stay inside the Union to play a leading role in reforming it. If Britain could not fix the defects before, why hang around? As for experts’ prophecies of economic disaster, voters clearly thought economic forecasting had too bad a track record.

A Leave friend wrote on Facebook “Now we will be back in the driving seat again!!!” Indeed so, and the responsibility rests primarily with Leavers to draw up strategies, act and take care of the people of Britain. Just now, they have no Prime Minister, no government and no plan. We Remainers however must realise that the European Union cannot continue as the framework for relating to the continent. Leavers and Remainers have a joint responsibility to end the chaos and devise new ways of functioning with our neighbours.

As for European leaders, they should take this bombshell as a warning. It is not enough to dwell on the Union’s success in ending post-war animosities and providing a democratic framework for liberated Eastern Europe. The people of Hungary and Poland have elected governments that patently care little for this.

It is not a time for European leaders to close ranks to hold the Union together at all costs. Britons are not the only people who are dissatisfied. Who today expresses enthusiasm for the Union? Jean-Claude Juncker, Head of the European Commission, has failed to rise to his task. Angela Merkel performs a useful role as a “nice German” at the heart of Europe but will not act decisively as a leader.

However Europe must have smart people able to solve issues such as the bias of the euro system in favour of Germany. Germans’ insistence that other countries should merely act economically as they do is unrealistic. If limited liability laws enable individuals to go bankrupt, renege on debts and eventually return to economic activity, why can this not be done also for Greece?

The European Union has to resolve the chaotic inflows of migrants, the number one issue in the British campaign. There is talk of “defending frontiers”, but the free passage provided by Schengen has been built into infrastructures of airport and road systems, and can scarcely be dismantled. Britain, for all the boasts of the Leavers about regaining sovereignty, has only a handful of coastal patrol craft, and Italy or Greece have even less chance of sealing off their huge coastlines. However Spain does. It pays money to Morocco and Mauritania in return for measures to head off migrants. Such measures do not choke off channels altogether, but manage the flows better.

Financial stability and migration are among the big issues of our time. They need imaginative ideas and cooperation, far more than exasperated reactions to bothersome bureaucrats.

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SLOVENIA: FALLEN ANGEL OF EX-COMMUNIST EUROPE

December 21, 2013

Spik 2013

In the days of Communist Yugoslavia, Slovenes stood out for being in touch with the West and capable of generating a large proportion of the country’s GDP. Independent since 1991, Slovenia quickly qualified for the European Union, the euro and Schengen.

Yet now it counts with Greece, Cyprus and Spain among the eurozone’s worst financial miscreants. Its main state-owned banks are in dire need of bailouts. As auditors pick through the books, they discover loan after reckless loan for dud projects run by political cronies and personal business friends, secured by precious little.

Governance of the banks is revealed as irresponsible, slack and amateurish. Even the Catholic Church is saddled with large bankrupt businesses which are anything but spiritual. Pope Francis has removed the Archbishop of Ljubljana and the Bishop of Maribor. So much for Slovenes’ reputation for economic competence.

Now the government is starting to bail out the banks. Eager to cling to the independence gained only in 1991, it refused to apply for a bailout from the EU and the IMF, which would have meant foreign supervision. In order to preserve a minimum of international credibility, it reluctantly brought in foreign consultants to inspect the books.

As a result, it embarrassingly turns out that the government needs to put in 4.8 billion euro, four times the amount it originally calculated.

Moreover, EU rules on state aid oblige it to sell its number two and three banks, as well as 75% of the largest. The best hope that the Slovenian Central Bank governor could voice was that foreign buyers (there are no domestic candidates) will sort out the governance mess.

Slovenia has escaped bailout tutelage by the EU and the IMF, but the cost of going it alone will be huge for the Slovene people.

In hindsight, it is clear Slovenes were too complacent because of their success in Communist Yugoslavia. Their capabilities proved inadequate for an open modern economy. Whereas Poland privatised quickly in the earlier 1990s – and got through the recent financial crisis unscathed – in Slovenia, the state still owns half the economy.

So anxious were Slovenes to preserve their independence that they did their utmost to keep out foreign investors. This can now be seen as a damaging fantasy.

One exception is Lek, one of the country’s largest companies, which was bought by Novartis. Its procedures were radically overhauled at the insistence of the Swiss. Now it is solidly implanted in the group as a leading producer of generic pharmaceuticals. At a time when Slovenia’s GDP is falling precipitously, Lek is hiring not firing.

Moral number 1: ex-Communist states of Eastern Europe, even Slovenia, underestimated how much they need to change to adapt to the modern world.

Moral number 2: Slovenia now needs the national unity which won it independence in a 10-day war in 1991. In view of the vicious infighting which pervades its politics, this however seems unlikely.

Its outlook unfortunately is grim.

– Marcus Ferrar is co-author (with John Corsellis) of Slovenia 1945: Memories of Death And Survival After World War II.

LIBERATING AND CONVENIENT

August 23, 2012

Whilst I’ve been away from the UK in Europe, I’ve crossed frontiers a dozen times, and never had to show a passport or identity card, nor declare goods to customs. Eurozone citizens crossing with me did not have to lose money through changing currencies. I lost 8% to the money-changers by having to change sterling.

When I return to the UK on Sunday, I will have show an identity card at Trieste airport as I leave the Schengen zone. When I arrive in the UK two hours later, I will have to queue to show my identity card again.

I’m still trying to discover the supposed benefits of British insularity. Our currency is devalued far more than the euro is. Staying outside Schengen means we are excluded from sharing of security information.

Nobody likes too much regulation, but that’s not the sole preserve of the European Union – national governments do it too. Democratic accountability in the EU? Maybe not great, but Britain has a first-past-the-post voting system that usually gives exclusive power to a party winning around a third of the votes. Not supremely democratic either.

At least I have not only British nationality, but also Swiss, so like most Europeans I can travel around with a small plastic identity card in my wallet rather than a passport. Switzerland doesn’t even belong to the EU, but it has adapted itself to many EU norms and remains safe even after opening up its frontiers within Schengen.

In most respects I love living in England, the place where I was born and grew up, so I’m working hard on my insularity. But for the moment, I don’t quite get it. Just now, I find European harmonisation liberating and convenient.

German domination of Europe? No chance. They’ll pay up.

July 21, 2012

As a swathe of Eurozone countries teeter on the verge of financial collapse, Germany with its healthily growing economy gains power and influence in Europe. Its unrivalled strength is already well established.

Little more than half a century ago, Germany also dominated Europe. Germans occupied much of the continent, killed and pillaged with abandon, conducted racial genocide and enforced their will over enslaved peoples with arrogant cruelty.

Are we on the verge of something similar? No we are not, and the reason is that war guilt continues to deter Germans from exploiting their growing power. In the 1930s, they rallied to a hysterical firebrand addicted to violence and killing on a massive scale. Today they elect an Angela Merkel who is dumpy, down-to-earth and understated. She could hardly be more different.

Germans have totally admitted their war guilt. No ifs and buts – they comprehensively assume responsibility. Through their financial generosity to the Soviet Union, Poland and other countries who suffered worst from their wartime savagery, they recognised their obligation to atone.

After World War II, Germans were largely excluded from political or military leadership in Europe. All that was tolerated was that they work hard to rebuild their economy. Which they did with great success, creating a well-functioning free market, a reputation for quality and a social contract for industrial peace.

In the 1970s and 1980s, West Germany was assisting people oppressed by post-war Communism. Now they are helping bail out nations which of their own free will have spent beyond their means. Will Germany continue its generosity to people who have brought their ills upon their own heads?

Most probably yes. Germans still shy away from military involvements and show no inclination to exercise political leadership in Europe. For them, insertion into a European Union with no real leaders suits their low-key ambitions. They are ready to pay the price for its imperfections and concentrate on thriftily building their wealth.

Germans will do as much as they can to influence others towards greater fiscal propriety until disaster looms. Then they will pay up.

The rest of us can be happy that Germans still feel their guilty obligations. It is right that they do, and helpful to us all.

For more about Germany and Britain since 1912, see A FOOT IN BOTH CAMPS: A GERMAN PAST FOR BETTER AND FOR WORSE by Marcus Ferrar, published July 2012 https://www.facebook.com/marcus.ferrar#!/afootInbothcamps

Greece: cradle of democracy and philosophy – and now also destroyer of Europe?

May 16, 2012

Greeks were the first to organise themselves politically to represent the common interest. Philosophers such as Plato and Aristotle showed the power of reason, which never lost its influence despite religions which insisted knowledge came only from divine revelation.  Greeks have thus inspired us over the ages.

Will they now write a third chapter in their history by destroying the vision of a Europe which no longer tears itself apart – as it did at huge cost in human lives in the last century?

Since joining the European Union, Greece acquired a reputation as the member which consistently flouted its rules. Its citizens lived far beyond their means and today show no signs of acknowledging responsibility.

Predictions are that the new elections will favour parties who care nothing for Europe and nothing for the financial ruin they will bring by reneging on the country’s debts. In doing so, they may bring down the euro and perhaps even the European Union.

Europe’s younger generations take the benefits of the European Union largely for granted – that is, freedom of movement and employment, relaxed personal relations, democracy, rule of law, common standards, no passport queues at airports, and, yes, a common currency which facilitates price comparisons and is immensely convenient.

Greeks now risk writing themselves into history as the destroyers of this harmony. They will be remembered long for their selfishness and fecklessness if they choose that path. It is hard to believe Europe’s young people will let them get away with it. But if they succeed, how many will still remember Greeks as pioneers of democracy and philosophy?

 

The euro? Greece may be on the way out but Turkey has already embraced it

May 16, 2012

If you are one of the millions who visit Istanbul nowadays, you can pay for most things with the euro. Greeks may be about to vote in a government which will take their country out of the common European currency. But Turkey, which does not even belong to the European Union, is already unofficially using it.

Even in the teeming tunnels of the Grand Bazaar, dating back to the 18th century, cash machines offer the euro and dollars besides the Turkish lira. Try getting a euro out of a cash machine in Britain. No chance.

Turkish cars carry number plates with the blue flash on the side used by member countries of the European Union. The plates carry the letters TK, as if it were a member country. Only the yellow stars of the European Union are missing.

The concept of a united Europe may seem tattered to some. But to outsiders such as the Turks, it is still an alluring prospect.

EU fiscal harmonisation – why not? Look at C & E Europe

January 29, 2012

Many doubt that EU member countries would accept fiscal harmonisation, which implies ceding some sovereignty. If you look at the profound changes the ex-Communist countries of Central & Eastern Europe accepted to qualify for EU membership however, this does not seem impossible.

Those countries introduced market economies, democratic rights, the rule of law and safeguards for minorities in order to conform with EU requirements. This was all contrary to their previous practices, and required an enormous upheaval. It hurt, since the change to a market economy caused deep recession and unemployment for a number of years. They did it because membership of the EU is such a powerful draw in the long term. The people voted in referenda in favour of all the EU norms, including joining the euro and Schengen.

Now Greece, and possibly other countries, may be asked to allow the European community in some form or another to supervise its budgets. This would be only to the good, since local politicians have been unable to do what is needed. As in Central & Eastern Europe, Greeks may well recognise it is better for a time to have the EU calling the economic shots rather than their local politicians.

Already in Italy, Mario Monti, a former EU commissioner, is proving popular in an econ0mic reorganisation which the party politicians could not achieve. Sometime, it is easier to accept a tough lesson from an outsider.

As for Greece, European bureaucrats grew used to seeing it flaunt EU norms. They considered it too small to count. They won’t make that mistake again.

Panicked about the euro? Not the Europeans I talk to.

January 8, 2012

British newspapers and politicians have been predicting the imminent demise of the euro for months, but I don’t sense panic among the people who use it in their daily lives.

Travelling on the continent over the past month, I asked a German businessman, a Spanish tourist resort manager, some Italian cultural officials and a group of Slovenian professionals whether they feared the currency they used could collapse. All replied firmly they expected no such thing. They found the question surprising.

Of course it is hard really to believe the promises printed on the banknotes of any currency. However the currency remains viable if people at least behave as if the promises were trustworthy. For that reason, I believe the euro is in no real danger.

The euro will stay

November 18, 2011

My local butcher in Oxford, England, has a sign in his window “No euro: keep our pound.” That is about the level of debate on the euro’s travails on this offshore island of Europe.  Of course, if the butcher had taken euros three years ago and kept them, he would be sitting on a 25% gain against the pound.

The euro clearly is in trouble, and efforts of European leaders to manage the crisis are not impressive. British media pour scorn on them and it is taken for granted Britain is better out of it. Maybe, but only maybe. Britain has rising unemployment, 5% inflation, no economic growth, faltering exports, a very weak currency and persistently huge budget deficits. So misgovernment rules on the island too, perhaps even a little more.

The European Union was built on slow consensus-building from the start. That is what made it successful. Disparate peoples were not forced to accept more than they were comfortable with. So the European Union finds it difficult to reach decisions all subscribe to. Democracy prevails, not the smack of firm government, but that is not necessarily bad.

Rather than longing for a quick and final solution, I prefer to watch the process as an experiment which is charting new waters. I am fascinated by the debates over austerity v. pump-priming, price stability v. printing money,  supranational v. local fiscal discipline, and who eventually calls the tune. Unable to know infallibly which way to jump on most of these issues, I sit and learn by watching what goes on.

Eventually, I see Germany’s qualities of hard work, thrift and efficiency coming to the fore. He who pays the piper calls the tune. An impeccably pacifist Germany holding more sway over the way we run our economies seems not a bad prospect.

I forecast the euro will stay, and in 10 years time will be used by more states than now. You read it here first.

By the way, the best internet coverage of the euro crisis is by the Neue Zuercher Zeitung www.nzz.ch. The Swiss can take their distance, not belonging to the EU, but they are sitting right there in the middle and keep their ears close to the ground.  OK, it’s in German …


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