Postscript to last blog – Mrs S changes her mind

The news this morning is that the SNP leader has changed her mind.  Its not the EU that she wants to join if Scotland votes for independence from the UK, just something else – like EFTA say.  Problem with EFTA is that the loss of independence is even worse than it is with the EU because you have to obey the rules but don’t get a seat at the table when they are made.  Goodness me, what a swift u-turn!  She  did not want to jump out of the frying pan into the raging fire but only into the embers.  The score looks like  Sturgeon nil, Mrs May five.

Once she gets her mind round the shape of the Scottish economy (if she is capable of that) she might notice that staying with the UK even after it leaves the EU would not have the disastrous economic impact that all those witches of Macbeth (the economists) predicted.  Whisky sales might even go up as new markets are open…


Article 50 – the starting gun is ready to be fired

Yesterday the House of Lords finally gave in and voted through the Bill required to give Theresa May Parliamentary authority to write a letter to the EU notifying the desire of the UK to leave the Union.  At last – after so much ‘debate’ much of it, particularly in the House of Lords, either deliberately avoiding facts or displaying ignorance of the EU and how it works.  All these months of pointless debate cannot change the facts – someone has to negotiate our departure and they cannot have their hands tied.

When the UK voted to leave the EU it did not vote to stay in the EU.  That means that it cannot stay in ‘The Single Market’ which is the EU’s flagship policy because that is so constructed that its laws take precedence over those of the member states.  Other options come with restrictions.  Leaving does mean leaving but it certainly does not mean that trade with the other 27 member states will cease overnight – indeed many other countries trade with the EU even in the absence of free trade agreements.  It does not mean that EU countries will cease selling their goods in UK markets.  The EU is no longer able to function as a close protectionist bloc in the circumstances of 21st century global markets.  It may hate Amazon, Starbucks and Google but it has not been able to keep them out.  Macdonalds too is everywhere – even threatened to arrive in Florence.  The Scots will still be able to sell their Whisky.  Here too the market is not primarily European where Brandy is a formidable competitor but global.  A bigger threat to Scottish Whisky producers is Japanese fakes.

The SNP, in the shape of Nicola Sturgeon, tried to put a big spanner in the works yesterday.  She is calling for a second referendum on Scottish independence – or is she?  She says another referendum is necessary because Scotland voted to stay in the EU in 2016 which is a ‘material difference’.  By relying on this argument in favour of another independence referendum she is muddying  the waters.  She seems to want membership of the EU more than independence.  Not all of the SNP supporters voted to remain in the EU. The two issues do not completely overlap.  By becoming a member of the EU Scotland would throw away its hard won freedom of action granted in the devolution settlement. It would have to adopt the Euro.  Its estimated 9% budget deficit (at present the hole is filled by the rest of the UK taxpayers) would flout the fiscal rules of the EU.   It would lose all capacity to free its fishing industry from EU control.  It would not be able to design an agricultural policy suitable for Scottish circumstances.  The UK voted to leave the EU because it was such a great and growing restriction on our freedom of action.  Mrs Sturgeon seems to want to jump from the frying pan right into the fire –  more freedom of action will be lost than gained by Scottish independence with EU membership.  And, as the EU moves further towards greater integration the noose will progressively tighten.

The UK voted to leave the EU to gain a little more leeway in making our own decisions.  Mrs S seems to want to leave one Union which has given her country wide freedom of action and generous financial support for another which will progressively remove much of her current freedom to choose policies for the benefit of the Scottish people.  But, perhaps that exchange of nooses does not matter.  Sentiment and Mrs S’s hurt feelings are more important than prosperity and freedom of action for the Scottish people.


The EU has no idea what its future might be – the Commission’s view

Today the President of the European Commission, Jean Claude Junker, unveiled the Commission’s contribution to the debate on the future of Europe – to be discussed by the 27 Heads of State in Rome at the end of March.

Mr Junker presented his ‘White Paper’.  It did not conform to the purpose of a White Paper which is to set out a government’s preferred way forward.  Instead he presented five different ways forward for the EU and invited comments.  His document should have been called a ‘Green Paper’ which is merely a consultative document, maybe offering more than one way forward.  The EU copied these terms from the UK’s practice and in the past has distinguished between the two types of proposals.  The term ‘White Paper’ was chosen to give the impression that the Commission had concluded on the best route forward when in fact it had not.

That the Commission cannot pick out the best route forward for the European Union indicates just how confused the Europeans are about their future and the future nature of the institutions in which they work together for greater unity.  Some want to press on to the new federal European state, others want to return powers to the nation states.  Some are content to continue muddling through.  There is no clear vision.

The five options presented today are:  1. go on as we are, 2. give up on broader ambitions and concentrate on the single market, 3. let those who want more integration go for it (a two speed EU), 4. do less and do it better and  5. doing a lot more together.  Brief indications are given of the pros and cons of each of the five different choices.  Further more detailed papers are promised later in the year.  Even these will not indicate a preferred route, merely outline the choices.

So confusing has the EU and its future become that there is no longer a binary choice between more integration or more powers returned to member states.  There are all sorts of different possibilities.  But one aspect of the European Union’s activities is crying out for a clearer set of proposals.  The ‘White Paper’ does little to address the big Elephant in the room – how to make the Euro work better for the people of Europe, particularly for those in Greece, Italy and other less successful economies.  It merely refers to an earlier report (by the Five Presidents) which was itself not entirely crystal clear.

The European Commission is appointed and paid handsomely to come up with ideas to progress the European project.  It appears to have run out of steam. Mr Junker’s contribution to the debate on the future of Europe – by which he actually means the future of the European Union as an institution – indicates the extent to which the present Commission lacks the necessary intellectual power and political will to identify the best route to take.

We have now had the European Parliament’s ideas and those of the Commission.  In the last analysis it is the member states of the EU who will have to decide which road forward it takes.  So far indications are that they will be no clearer on the future than the Commission.

I personally believe that the EU would have a better chance of regaining the support of the citizens of its member states if it chose the fourth path set out today – the EU should do less and do it a lot better.  That, however, is not an option for the Euro.  What a confusion!

News from the forgotten Parliament – what the European Parliament thinks about the future of the EU

Last week the European Parliament adopted no fewer than three ‘Resolutions’ on the Future of the European Union.  They were the first of the three EU institutions to reveal their hand – neither the Commission nor the European Council has yet made their views public and are unlikely to do so in the next few weeks.

On the 25th March the leaders of the remaining 27 member states will meet in Rome to celebrate 60 years since the Treaty of Rome that set up the European Economic Community – now the EU.  Both the Commission and the Council are scratching their heads as how to approach this birthday at a time when the future of the EU has never been more uncertain.  Many of those leaders who meet in Rome will not even be in office by the end of the year.  Others may have different views.  But they will have to say something. Expect warm words on the great achievements of the past decades and a general agreement to keep muddling through.

Do not expect a ‘great leap forward’.  This would only be possible if the EU were faced with a serious external threat and/or had charismatic leaders with big ideas.  Instead the EU is faced with a myriad insoluble problems.  From the outside the biggest threat remains migration.  From the inside the biggest threat comes in the shape of an overloaded agenda where the dysfunctional institutions of the EU grapple unsuccessfully with big issues like the management of the Euro all the while taking on more and more concerns that really have no ‘European’ solutions. These include such matters as childhood obesity or gender balance on company boards.  Overloaded organisations are doomed to fail and the EU’s agenda is certainly overloaded.

What did the European Parliament contribute to the debate on the future of the EU?  The general public may be forgiven for not knowing what it said as it has proved impossible for this reader to track down media comment on the Resolutions in the days since they were adopted.  Why were there three resolutions anyway?  Because of the mad procedure of the European institutions which give control of issues to ‘Rapporteurs’ who put down what they think and then try to persuade their colleagues to agree with them. One is no longer enough because of fear of bias so we have to have a selection.   In the case of these three Resolutions the Rapporteurs must have been disappointed.  First the texts were heavily amended in Committee and then at the Plenary the support for them was not as overwhelming as would befit such important documents.

If we take each Resolution in turn we find first that around 13% of the 751 MEPs did not bother to vote at all.  Of those who did vote many abstained.  The first resolution drafted by the arch Federalists Bresso and Brok was the most successful with 329 in favour and 223 against with 83 abstentions.  It called for institutional changes within the terms of the current Treaties.  The second drafted by Verhofstadt, another arch federalist, also concerned with tinkering with the current institutions, was approved by 283 to 269 with 83 abstentions and the third approved by 304 to 255 with 68 abstentions.  This last dealt with institutional changes to the Eurozone including a specific EZ budget, a European monetary fund, a convergence code for the EZ economies and a bigger role for the European Parliament and the national Parliaments in the process. It was the most substantive but simply echoed the recommendations of the Commission on EZ management.   Only the first Resolution had a solid majority of those voting in favour against those voting against and abstaining.  In each case the numbers voting against, abstaining or not even bothering to vote were greater than those voting in favour.

It is very surprising that these votes have not attracted media attention.  In the past the European Parliament has been characterised by its extreme enthusiasm for more and more European integration and for supporting the European Commission at all costs.  Faced with a big opportunity to demand a great leap forward all they can do is suggest some little pussy steps – most of which will be pushed back by the member states who do not agree about anything especially new powers to the European Union.

On the plus side perhaps this is a sign that the European Parliament is becoming a little more mature and thoughtful.  Only a little – but its highly ambiguous votes last week are a sign that it is no longer an easy push over for the European Commission.

Reality dawning – a fresh start for the EU after 60 years

The leaders of 27 member states will meet in Rome on 25 March 2017 to celebrate 60 years since the signing of the Treaty of Rome.  They are working on a ‘relaunch’ of the European project to fulfil its primary objective of the ‘ever closer union of the people’s of Europe’.

Over the last three decades the Union pursued its objective through a relentless programme of uniform laws binding on the member states.  The ‘acquis’ is colossal running into hundreds of thousands of pages of legislation, much of it now obsolete or hardly operational.  Disputes keep the ever growing number of European judges busy.  The people, in whose name this regime has been established, are getting restive.  One member state is about to give notice and there are rumblings in others.  The peoples of Europe don’t seem to have become more united, even if the elites manning the European Commission, the European Parliament and the Court of Justice may feel as if they are are one closely bound class.

After the informal summit last Friday in Malta, comments by Angela Merkel to reporters seem to indicate that there could be a completely new direction in the European Union.  She is reported as having remarked ‘there will be an EU with different speeds, that not everyone will take part in the same levels of integration’.  Two of the key issues areas are the Euro and Defence.  There is a need for new institutions to keep the Euro together – although achieving the necessary transfer of sovereignty may prove difficult for some of the 17 current members to swallow.  The issue of defence is highly contentious as some member states are neutral and others spend little on this vital function.  Only some member states may be willing to accept further integration in these two key policy areas.

Mrs Merkel’s comments have to be taken together with the communique from the Benelux organisation (which still exists and often takes a common position on European issues).  In a statement issued 3 February 2017 the organisation said that in future there would have to be ‘different paths of integration and enhanced cooperation’.

The clever Benelux countries, whose interventions shaped the institutions of Europe from the very start, once again point the way forward.  Just as they insisted on a Council of Ministers as the ultimate decision making body in the 1950s so they are pointing to the use of the new Treaty power of ‘enhanced cooperation’ as the way to make progress.  Under this rule if nine member states wish to progress with an initiative they can do so by making a separate Treaty lodged with the United Nations.  It has been used sparingly but most significantly for the establishment of a European Unitary Patent.  It could become the primary method of making decisions replacing the ‘Community Method’ in which the Commission is in the driving seat.  The EU would become much more intergovernmental and more variegated.  That, surely, would be better than having the whole edifice put at risk by an outdated adherence to the religion of complete uniformity.

Pity that the 27 had not adopted these ideas when the British Prime Minister was negotiating a new relationship for the UK.  Had they done so Mr Cameron would have been able to make a positive case for continued UK membership.



Seeing some sense on Brexit – the White Paper

Ever since the UK’s Referendum on EU membership in June 2016 there has been vigorous but ill-informed debate about what Brexit really means.  The confusion was even evident in the debates this week in the House of Commons on the Article 50 Bill.  Some, like the Scottish National Party say they want to remain ‘in the single market’, others want to remain ‘in the customs union’.  The White Paper issued today clarifies these confusions.

By triggering Article 50 the UK signals that it is going to leave the European Union.  It is giving up its club membership.  That means, of course, that it gives up all the benefits and obligations entailed in club membership.  That means that it will no longer be bound legally by the rules devised for the operation of the European Single Market or by the terms of the Customs Union.  You leave the EU, you leave it….

The White Paper provides much useful information to stop the more extravagant claims for the European single market.  First of all it is a single market only in part, mostly for manufactured goods.  The single market for services ‘ is not complete’ (p.41).  Indeed, it is very far from complete and probably is an impossible dream. Services are very different from manufactured goods and the markets for services are much more local.  But services are the fastest growing sector of all developed economies.

The White Paper clearly lays out the evolving patterns of trade between the UK, the EU and the rest of the world.  In the early years of membership most countries find that their trade with the rest of the Union increases but as the years pass it increases, if at all, at a slower rate (from 4.0% per annum to 2.5% for the UK 2005/2015).  The UK’s trade with the EU is declining as a percentage of its total trade – from 54% in 2000 to 44% in 2015.  The bulk of the trade is between the UK and Germany.  By contrast the UK’s trade with the rest of the world is growing.

As we would expect from the principles of modern trade theory we find that trade is significant with countries in close proximity, in the case of the UK our closest EU partner is Ireland.  Notably, in the context of the shrill demands from Mrs Sturgeon that Scotland should remain in the single market, Scotland’s biggest customer by far is the UK and of its £49.8bn exports in 2015 only £12.3bn were to the rest of the EU.  Scotland is heavily dependent on the UK for trade and for subsidies and not particularly reliant on the EU for its economic success.  Another report recently indicated that if India would lessen its exceptionally high tariff on Scotch Whisky the trade would increase enormously.  In the EU Scotch has to compete with Brandy.

On the sensitive issue of fish. the White Paper points out that EU vessels caught 683,000 tonnes in EU waters in 2015 while the UK only caught 111,000.  A lot of water surrounds Scotland so Brexit might be very good news for its fishing industry.

Above all, the White Paper emphasises that global trade under globally agreed standards is becoming more significant to the UK’s economy than the constraining rules of the EU club.  It correctly points out that many of the new rules being made by the EU are a reflection of new global standards.  All in all the voters may have done the UK a service.  The EU begins to look somewhat redundant rather like those Pall Mall clubs that held out for so long against female members. They did so at their peril.  The EU too looks somewhat  out of date and generates too many silly  rules – the White Paper points out that over 1,000 new EU documents arrived in the UK Parliament in 2016.  The White Paper is a valuable corrective to inaccurate representation of the benefits of EU membership and points the way forward to a UK open to the world.

Blogging again – Letter from Italy

Its always a good idea to see what life is like in another member state of the European Union.  After last week in Italy, in Florence and Pisa, I ask what hope is there for the future of Italy so long as it is chained to the EU and, in particular, to the Euro?

Florence and Pisa are sustained almost entirely, it seems, by tourism.  Even in January large groups of Japanese were in town.  In one week it was astonishing to us how many disasters were striking poor old Italy.  There were earthquakes, avalanches, a fight between the finance minister of Italy and the European Commission over Italy’s budget deficit, continued angst about the future of the world’s oldest bank, MPS, and a scandal involving the British company BT which had, inadvisedly, opened businesses in Italy without due precautions against the long standing culture of corruption, bribery and fraud.  Just as the Black Death devastated Italy in 1348 so a combination of disasters and membership of the European Union seems to be sapping at its very heart today.

Florence was as beautiful as ever and some of the attractions rather improved.  Half of the Uffizi has been modernised and rehung – the other half is ‘Lavoro in Corso’ three of the  most threatening words in Italian.  All the wonders of Florence are the product of a civilisation that, as one commentator put it, ‘appeared like a comet, shone brightly, and disappeared’.  In the 1960s Italy’s comet appeared again and it became a leader in style, engineering and film among other things.  The comet has long passed.  In Florence most of the owner occupied shops which once showcased Italian made products have been replaced by the ubiquitous high-end chains to be found in New York, London, Paris and Capri.  Few seemed to have any customers.  Many are Italian in name only.

What really amazed us were the armoured cars accompanied by soldiers in battle fatigues carrying enormous guns.  They were outside Florence rail station, the Duomo, the Uffizi and even beside the leaning tower of Pisa.  We were not sure what they were there for.  Were their guns loaded?  Were they they to show tourists that the Italian government cared about them?  How would they act in case of emergency?

We got some idea of the Italian state of mind by watching TV debates in the evenings.  These were unruly affairs lasting around two hours.  The participants shouted at each other.  The moderator wandered round with a script but seemed not to be in charge. The first night the subject was Islam and Mosques.  The participants said they were not against Islam but definitely against Mosques.  They are clearly unhappy about the influx from north Africa.  The Italians are having to pay for all these people and their religion poses a threat in a country where there are still worshippers at a weekday Christian service.  The second night the subject was the Banks. The participants were equally shouty.  A former finance minister from the Berlesconi regime sat listening in considerable discomfort.  We could bear no more.  The next night we found another less upsetting channel.

The twin effects of uncontrolled immigration and membership of the Eurozone, on top of chronic poor domestic government and corruption, are having a depressing effect on one of Europe’s most talented countries.  Unemployment hovers around 12% with youth unemployment around 40%.  No wonder all the many beggars in Florence appeared to be immigrants.

None of this will put us off Italy but we long for the return of the comet to bring new life to our favourite European country.