Tag Archives: economy

In Europe, the Era of Easy Decisions is Over

The EU’s strategic weight in the world will be reduced by the absence of the UK, as the EU is losing a relatively young, diverse and creative member state. 

[John Bruton | Oped Column Syndication]


Make no mistake about it, the latest version of Brexit is a very hard Brexit. The UK Government has abandoned the legally binding commitment in the previous deal to align with EU regulatory standards to the greatest extent possible. That is now dropped in favour of a political aspiration.

The more the United Kingdom diverges from the European Union standards the greater is the likelihood that the EU will have to place tariff and other barriers in the way of UK imports to the EU, and now also to Northern Ireland. The problem will be particularly acute for agricultural goods.

The EU/UK trade negotiation has yet to begin, but I believe it will be both lengthy and difficult. This is a direct result of the “red lines” for Brexit chosen by the UK (no custom union membership, no single market membership and no European Court of Justice jurisdiction). This was a legitimate choice for the UK to make, but the costs of the choice are yet to be revealed and understood. When they are, it will be too late to change course.

Many in the UK say they just want to “get Brexit over with”. The impatience is understandable, but the truth is that agreeing the Withdrawal Treaty will not actually get Brexit “over with”. The additional bureaucracy will be permanent. If there is not to be a no deal crash out, the transition period will have to be much long than the end of 2020, because the trade negotiation will only be in its early stages by then.

The only way to get  the agony of Brexit over with, would be to revoke Brexit. There is little popular support for that, so Brexit will drag on and preoccupy British politics for years.

By choosing a harder Brexit than Mrs May, and agreeing that the controls will be in the Irish sea, Boris Johnson has chosen to prioritize the interests of  hardline Brexiteers in England over the interests of the DUP in Northern Ireland. Such a choice was inherent in Brexit, which is why it will remain a puzzle for historians to discern why the DUP chose to support Brexit with such enthusiasm in the first place.

THE WORLD AFTER BREXIT

I would like to turn now to the world after Brexit, and about the European Union, of which we will continue to be a member and in whose success we will now have a disproportionate interest.

The world has become a much more unpredictable place than it was 10 years ago.

The era of easy decisions may be over.

A European country, Ukraine, has been successfully invaded by it neighbour, Russia, breaking solemn undertakings that had been given. We have been reminded of the importance of defence.

There is widespread evidence of interference in elections and democratic processes by authoritarian regimes in other parts of the world. Voting software is being infected. Campaigns are being hacked. National rules on election spending can be circumvented via the social media.

The United States has created doubt around its defence commitments to Europe. It has walked away from its Kurdish allies in Syria, and Europe was not able to fill the gap, although the refugees from that conflict are more likely to end up in Europe than in America. In fact Europe is dependent on Turkey and North Africa to curb mass migration to the southern shores of the EU.

The EU has not developed a migration policy, which, if properly organised , could bring dynamism to our continent to compensate for the loss of dynamism that will inevitably flow from the ageing of the native European population.

The US is undermining the rules based international order in the field of trade. It is refusing to allow the appointment of replacement judges to the WTO’s appellate court, which will soon lead to that court ceasing to function. This is happening just at the time that our nearest neighbour may find itself relying on the WTO once its post Brexit transition period expires.

THE RISE OF CHINA

China is returning to the dominant position it held in the world economy in the two millennia up to 1800.

It is doing this on the strength of its human capital, not its physical capital. It is educating more engineers that the US and the EU combined.

It is doing it through its competitive and  innovative firms, not through its monopolistic state enterprises. Chinese R and D spending will exceed US Rand D this year and far exceeds EU R and D.

It is ahead of everyone in 5G communications, at the time the world economy is becoming ever more digital.

Chinese firms own Volvo, Pirelli and recently bought the firms supplying robots to the German car industry. EU could not buy the equivalent Chinese firms.

Chinese military spending exceeds that of all EU states combined and is already half that of the US.

If the US thinks it can use trade policy to arrest Chinese development, it is probably making a mistake.

But the US is right to insist on fair competition. China must be treated in the WTO as a developed country, and not get concessions intended for much poorer countries.

In its response to the Chinese challenge, the EU should maintain its robust competition policy and should not try to pick industrial winners from Brussels.

THE RESPONSE OF EUROPE

Europe would be much better placed to defend its own interests, and to act as a balancing power in the world, if the euro functioned as a global reserve currency.

To achieve that, we need to create a Capital Markets Union and complete the Banking Union. This requires a harmonisation of company insolvency rules throughout the EU or the Eurozone.

The Eurozone must have a capacity to cope with localized shocks and to prevent contagion.  We need viable proposals for a Eurozone wide reinsurance of bank deposits, and Eurozone wide reinsurance of the unemployment  benefit systems of member states..

BREXIT IS A SETBACK FOR EUROPE……..STAGNATION MUST BE AVOIDED

There is no doubt but Brexit has been a setback for Europe.

True, the EU had maintained its unity and stability, in stark contrast to the way in which the UK system has been convulsed by the divorce. But that does not take away from the fact that we are losing a relatively young, diverse and creative member state.

The EU’s strategic weight in the world will be reduced by the absence of the UK.

The population of the remaining members of the  EU are, in global terms, relatively elderly, pessimistic and risk averse. This could lead the EU to make big mistakes.

I give some examples of this.

Many member states refuse even to contemplate the amendment of the EU Treaties because of the risk of defeats in referenda. If that remains the attitude, the EU will simply stagnate. Every successful human organisation must have the capacity to change its rules if this is demonstrably necessary. The US is unable to amend its constitution and we can see the problems that has led to.

Unlike the US, the EU has been able to attract and accommodate new member states over the last 50 years. At last week’s Summit, France the Netherlands and Denmark blocked the opening of accession talks with North Macedonia even though that country has done everything the EU asked to qualify, even changing its name, which was a highly sensitive matter.

The fact that this rejectionism was led by President Macron, who makes great speeches about European integration, is particularly disquieting. I hope he changes his mind. Yes, we need tougher means of ensuring that the rule of law in respected in the most rigorous way but that could have been dealt with in the negotiations with North Macedonia, which would have gone on for years any way.

THE SINGLE MARKET

We must defend the integrity of the EU Single Market, at the borders of the European Union and throughout its territory.

Ireland must be seen to be, fully compliant with EU Single Market rules. Otherwise Ireland’s geographic position will be used against it by competitors for the investment.

The EU Single Market is not complete. There is much more to do.

An April 2019 Study “Mapping the Cost of non Europe” estimated that

  • completing the  classic single market would add  713 billion euros to the EU economy.
  • completing Economic and Monetary Union would add a further 322 billion, and
  • completing a digital single market a further  178 billion euros.

A more integrated energy market would save a further 231 billion and a more integrated EU approach to fighting organised crime would be worth 82 billion.

Cross border VAT fraud is costing 40 billion. This will be an area of special concern in regard to traffic between Britain and Northern Ireland.

These are some of the reasons why we must complete the Single Market.

Services account for three quarters of EU GDP.

But  we have been very slow in creating a single EU market for services.

In the field of Services, only one legislative proposal had been adopted during the term of the outgoing Commission, a proportionality test for new regulations on professions.

All other proposals are blocked.

I think that a major obstacle is vested interests in national or regional governments, who do not want to give up power.

By completing the Single Market, the EU can show that it has much more to offer to the world than a post Brexit Britain.

To help complete the Single Market, Ireland should be open to qualified majority voting on energy and climate matters.

We should also be open to carefully defined individual amendments to the EU Treaties if they can be shown to the public to deliver real benefits.

A LEVEL PLAYING FIELD

The existing Withdrawal Agreement protects UK environmental, product and labour standards, in a way that a mere Trade Agreement will never do.

In any trade negotiation with a post Brexit Britain, maintaining a level competitive playing field will be vital.

No subsidies, no cartels, and no undercutting of EU standards must be insisted upon.

Likewise the UK must not be allowed to undercut the EU on worker protection, environmental and product quality standards. The UK will have to set up bureaucracies to devise and enforce UK standards. 200 EU environmental laws will have to be replaced by the UK. Westminster will be busy.

EU WIDE DEMOCRACY

It is over 40 years since the first European Parliament election.

While the  EP elections are hotly contested, the contests are often really about national issues.

A genuine EU wide debate does not take place, because the elections are confined within in national constituencies. An EU “polis” or public opinion has not yet been created.

My own view is that the President of the Commission should be elected separately from the Parliament, using a system of proportional representation (PR).

We must have strong national democracy if we are to have a strong EU, and we must have strong national democracy if we are to have strong states.

There are remarkable differences in the level of confidence people in Europe feel in their own national democracy. According to a recent Pew Poll, 72% of Swedes have confidence in how their national democracy works. Within the Netherlands confidence in their system was  68%, in Poland it was 61% and in Germany 65%.

But , at the other end of the spectrum, only  31% of British, and 32% of Spaniards and Italians had confidence in their own democratic systems.

To build confidence in the EU, we also need to rebuild confidence in democracy itself, at every level of governance.


John Bruton is the former Prime Minister of the Republic of Ireland  (1994-97) and the former European Union Ambassador to the United States (2004-09). He has held several important offices in Irish government, including Minister for Finance, Minister for Industry & Energy, and Minister for Trade, Commerce & Tourism.


Europe Needs Common Long-Term Strategy for China

Addressing the challenges posed by Beijing requires European unity, as no member state alone has the resources and negotiating power necessary to deal with China on an equal footing.

[Lucrezia Poggetti | East Asia Forum]


China’s rise and its geopolitical ambitions have started to manifest more clearly inside Europe, making the need for a China strategy ever more compelling. European unity is key to effectively addressing the challenges posed by Beijing. After years of closer trade and investment ties, the European Union is realising that close economic relations with China have brought about political and security challenges it was not prepared for.

This newfound awareness is visible in the EU’s latest attempts to protect its strategic sectors and critical infrastructure. This includes the adoption of an EU framework for foreign investment screening and the issuing of guidelines for the security of Europe’s 5G networks.

The European Union has come to appreciate that it needs a strategy for China as, far from being solely an economic player, China is a rising political and security actor with geopolitical ambitions. This was evident in the European Commission’s ‘strategic outlook’ of March 2019, which informed EU leaders’ more assertive tone at the subsequent EU–China Summit in April 2019. Many observers have noticed Brussels’ unprecedented labelling of China as a ‘systemic rival’ and ‘economic competitor’. Less emphasis has been put on the European Union’s acknowledgment that China’s geopolitical goals ‘present security issues for the EU, already in a short- to mid-term perspective’. According to the strategic document, these are visible in China’s increasing military and technological advances and cross-sectoral hybrid threats such as information operations and large military exercises.

Addressing the challenges posed by Beijing requires European unity, as no member state alone has the resources and negotiating power necessary to deal with China on an equal footing. Paris and Berlin have demonstrated support for Brussels’ call for a ‘whole-of-EU’ approach vis-a-vis China, at least symbolically.

During Chinese President Xi Jinping’s state visit to France in March 2019, French President Emmanuel Macron invited European Commission President Jean-Claude Juncker and German Chancellor Angela Merkel to join his meeting with the Chinese leader. The German government also announced its intention to invite all member states to a 2020 EU–China Summit under its EU Presidency. This move raised eyebrows in Brussels, but Berlin hopes to encourage other members to pursue a common approach to China and refrain from Beijing-led ‘multi-bilateral’ talks.

However, governing elites in some European Union member states look at China through the prism of economic opportunity, downplaying the risks. They believe that close political ties with Beijing are key to unlocking greater economic opportunities, which cripples the EU’s efforts to devise a common strategy.

This approach is based on the naive assumption that politically cosying up to the Chinese leadership fosters a special relationship that translates into privileged economic treatment. Such an approach also assumes that a bilateral partnership on equal terms with China is possible. It disregards the fact that the Chinese government can retaliate any time, should it consider it necessary for its own agenda, regardless of whether memoranda, ‘strategic partnerships’ or any other agreements have been signed.

Lately, attempts to devise a coherent EU approach to China have not only hit a wall in Europe’s eastern flank — with the Chinese-led 16+1 grouping of Central and Eastern European countries expanding to 17+1 after welcoming Greece — but also at its core. In March 2019 Xi spent four days in Italy, where the country became the first EU founder and G7 state to officially endorse the Belt and Road Initiative (BRI). This is telling of a broader trend in which Europe criticises the growth of China’s global infrastructure scheme, and demands that the Initiative meet transparency and sustainability standards, while at the same time various European governments endorse the BRI.

Against this backdrop, how can the European Union ensure that its members look to China from a more long-term strategic perspective and act cohesively? An essential step is to close the knowledge and perception gaps across the continent. While it is up to national governments to increase their own countries’ expertise on China, the European Union can lead in driving debates about China’s rise and the implications for Europe. This would benefit those states where information about China is currently largely funded or driven by Beijing.

Democracies in China’s wider neighbourhood — like Australia, New Zealand and Taiwan — have been at the forefront of dealing with China’s systemic challenge. Exchanging notes with these partners would provide European countries with useful information on Chinese activities and response measures to adopt.

The recent 5G recommendations and the new investment screening mechanism show that a few concerted steps have been taken since 2016, when it became more visible that China’s influence was impacting European cohesion vis-a-vis Beijing. Allegedly, members of the China-led 16+1 grouping of Central and Eastern European countries also better coordinated their positions with Brussels in preparation for the latest Summit in Croatia.

The reshuffling of EU institutions that will result from the European Parliament elections raises questions over how Brussels will reshape current efforts into a more coherent and strategic approach towards China going forward. Beijing will likely try to use the opportunity offered by the upcoming changes in the EU administration to advance its interests. Securing European interests vis-a-vis China through a long-term common strategy is increasingly a necessity.

This article was originally published on East Asia Forum.


Lucrezia Poggetti is a Research Analyst at the Mercator Institute for China Studies (MERICS), Berlin.


EU Election Thoughts: Immigrants must be Seen as Potential Allies and the Future

Considering EU’s labour shortage and economic condition, it is important for the European left, right and center to see immigrants for what they are: potential allies and the future.

[Conn M. Hallinan | Oped Column Magazine]


As the campaigns for the European Parliament get underway, some of the traditional lines that formerly divided left, right and center are shifting, making it harder to easily categorize political parties.

In Italy, a right wing coalition calls for a guaranteed income, larger pensions and resistance to the heavy-handed austerity programs enforced by the European Union (EU). In France, some right wing groups champion the fight against climate change, decry exploitation of foreign workers and growing economic inequality.

In contrast, Europe’s political center seems paralyzed in the face of growing disillusionment with the economic policies of the EU. Even the social democratic center-left defends the doctrines that have alienated its former base among unions and working people, pushing such parties to the political margins.

If voters seem confused, one can hardly blame them — something that is not good news for the left and the center-left going into the May 23-26 elections. Polls show center-right and center-left parties — which have dominated the EU Parliament since it first convened in 1979 — will lose their majority. Parties that are increasingly skeptical of the EU may win as many as a third of the seats in the 705-seat body.

However, “Euro-skeptic,” like “populist,” is a term that obscures more than it reveals. In the polls, the two are lumped together in spite of profound differences. The Spanish left party, Podemos, is not likely to break bread with Italy’s right-wing League/ Five Star alliance, but both are considered “Euro-skeptic.” Podemos, along with Greece’s Syriza, Portugal’s three party center-left alliance, and La France Insoumise (“Unbowed”) are critical of the EU’s economic policies, but they do not share an agenda with xenophobic and racist parties like the League, France’s National Rally — formally, National Front — and the Alternative for Germany (AfG).

This doesn’t mean that the upcoming election doesn’t pose a serious threat, in part because the Right has adopted some of the Left’s longstanding issues.

In Italy, Mario Salvini, leader of the League, says the EU elections will be fought between a Europe “of the elites, of banks, of finance and immigration and precarious work,” and a “Europe of people and labour.” Take out “immigrants,” and the demagogy of the Right sounds a lot like something Karl Marx might write.

In France, young right-wingers put out a lively environmental magazine, Limite, which wars against climate change. Marion Marechal Le Pen — granddaughter of Jean Marie Le Pen, the rightwing, anti-Semitic founder of the old National Front — rails against individualism and the global economy that “enslaves” foreign labour and casts French workers on the scrap heap.

Of course, she also trashes immigrants and Islam, while advocating for a “traditional Christian community” that sounds like Dark Ages Europe.

During the 1990s, the center-left — the French, Spanish and Greek socialists, the German Social Democrats, and British Labour — adopted the “market friendly” economic philosophy of neo-liberalism: free trade and globalization, tax cuts for the wealthy, privatization of public resources, and “reforming” the labour market by making it easier to hire and fire employees. The result has been the weakening of trade unions and a shift from long-term stable contracts to short-term “gigs.” The latter tend to pay less and rarely include benefits.

Spain is a case in point.

On the one hand, Spain’s economy is recovering from the 2008 crash brought on by an enormous real estate bubble. Unemployment has dropped from over 27 percent to 14.5 percent, and the country’s growth rate is the highest in the EU. On the other hand, 90 percent of the jobs created in 2017 were temporary jobs, some lasting only a few days. Wages and benefits have not caught up to pre-crash levels and Spanish workers’ share of the national income fell from 63 percent in 2007 to 56 percent today, reflecting the loss in real wages.

Even in France — which still has a fairly robust network of social services — economic disparity is on the rise. From 1950 to 1982, most French workers saw their incomes increase at a rate of 4 percent a year, while the wealth of the elite went up by just 1 percent. But after 1983 — when neo-liberal economics first entered the continent — the income for most French workers rose by less than 1 percent a year, while the wealth of the elite increased 100 percent after taxes.

The “recovery” has come about through the systematic lowering of living standards, a sort of reverse globalization: rather than relying on cheap foreign labour in places where trade unions are absent or suppressed, the educated and efficient home grown labour force is forced to accept lower wages and fewer — if any — benefits.

The outcome is a growing impoverishment of what was formally considered “middle class” — a slippery term, but one that the International Labor Organization (ILO) defines as making an income of between 80 percent and 120 percent of a country’s medium income. By that definition, between 23 and 40 percent of EU households fall into it.

For young people, the “new economy” has been a catastrophe. More and more of them are forced to immigrate or live at home to make ends meet, putting off marriage and children for the indefinite future.

This income crunch is adding to a demographic crisis. In a modern industrial society, the required replacement rate of births to deaths is 2.1. The world’s replacement rate is 2.44. If economies fall under 2.1, they are in for long-term trouble. Eventually the work force will be insufficient to support health care, education, sanitation, and infrastructure repair.

The EU posts a replacement rate of only 1.57. Germany is one of the few EU countries that has shown a rise in the ratio—from 1.50 to 1.59—but that is almost completely due to the one million immigrants the country took in four years ago.

The three countries that are leading the crusade against immigrants — Hungary, Poland and Italy — are in particular trouble.

Hungary — where strongman Victor Orban has made immigration a central issue for his right-wing government — is struggling with a major labour shortage. Orban recently rammed through a law requiring Hungarians to work 400 overtime hours a year to fill the shortfall, and he has been berating Hungarian women to have more babies.

In Italy, the right-wing League/Five Star Movement rode anti-immigrant rhetoric to power in the last spring’s election, but with a replacement ratio of only 1.31 — the lowest in the EU — the country is losing the equivalent of the population of the city of Bologna every three years. All one has to do to see where this ends is to look at Japan, where an aging population has created such a crisis that the normally-xenophobic Japanese are importing health-care workers. China has similar demographic problems.

Playing on fears of a migrant “invasion” alarms people, but is it an assured vote getter? In recent German elections, the AfG ran strong anti-immigrant campaigns, but ended up losing badly to the Greens. The latter have a more welcoming posture vis-à-vis migrants than even the German Social Democrats.

If Germany does not address the problem, its population will decline from 81 million to 67 million by 2060, and the workforce will be reduced to 54 percent of the population, not nearly enough to keep the country’s current level of social spending.

Much was made of recent electoral gains by the anti-immigrant neo-fascist Vox Party in Spain’s southern province of Andalusia, but if Spain does shut down the flow of migrants it will be in serious difficulty. The country’s population has declined since 2012, and there are provinces where the ratio of deaths to births is three to one. More than 1500 small towns have been abandoned.

Polls indicate that immigration tops EU voters’ concerns. It is only a few percentage points ahead of the economy and youth unemployment.

The right — in particular Hungary’s Orban — has done a masterful job of tying “liberal” to the neo-liberal policies of the EU. Unfortunately, it is an easy argument to make. Most “liberals” in the west associate the term with freedom, democracy and open societies, but many people in the EU experience “liberal” as a philosophy of rapacious individualism that has dismantled social services, widened the gap between rich and poor and enforced a system of draconian austerity.

Of course Orban, Marine Le Pen, the League’s Matteo Salvini, and Germany’s AfG are interested in power, not the plight of the EU’s 500 million citizens. And for all its talk of resistance, the League/Five Star Movement government folded when the EU nixed an Italian budget that included a guaranteed income and higher pensions.

Global migration is on the rise as climate change drowns coastlines and river deltas and drought drives people out of arid climates in the Middle East, Africa, South Asia and Latin America. By 2060, as many as 3 billion people could be affected.

Therefore, the Left and center-left have a responsibility not only to resist the economic philosophy that currently dominates the EU, but also to see immigrants for what they are: potential allies and the future.

As for the Right, it is useful to recall some not-so-ancient history. In 1934, the Nazi Party’s German Labour Front struck a medal that read “Tag Der Arbeit” (“The Day of Labour”) and featured a Nazi eagle grasping a swastika, each wing tip embracing a hammer and a sickle — but the first victims of the Nazis were communists and trade unionists.


Conn M. Hallinan is a California-based independent journalist. He is a regular columnist for the think tank Foreign Policy In Focus and holds a PhD in Anthropology from the University of California, Berkeley.


 

Europe: Bizarre Policy and Economic Crisis

While there is massive immigration from other countries, many European countries’ domestic productive population that could help local economic growth is pushed out to immigration — a policy that is bizarre and does not help economic growth.

[Fotini Mastroianni | Oped Column Syndication]


The birth deficit concerns both demographers and economists. In many European countries, including Greece, the birth deficit is mainly treated with slogans and absurdities. In the process, a deeper analysis of the issue and its correlation with economic growth are ignored, despite the fact that the age structure of the population impacts the economy.

As the birth deficit is defined as the birth of fewer than 2.1 children per family, at least one of these children should be a girl in order to make up for the mother’s reproductive capacity.

Although many emphasize that birth deficit in Greece is particularly intense at the time of the economic crisis, this does not correspond to reality. As early as the 1950s, there was a downward trend in births (2.3 children per family), in 1981 it reached exactly the limits of reproduction (2.1 children per family). Since then, it has been declining with small growth periods due to the return of Greek immigrants and repatriates and the entrance of economic immigrants. Similar scenario exist in most of the other European countries.

An important factor for the birth deficit was internal migration from rural to urban areas and the transition of society from rural to post-industrial. In traditional rural societies, parents’ low status, lack of education, the closed social environment and the largest residential area (houses with a yard) — cause high levels of birth rates. In contrast, in post-industrial societies, the improvement of women’s position and educational level, women’s more frequent participation in social and economic activities, methods of contraception, income improvement, professional career accentuation (instead of family life) — reduce birth rates. In urban environments, the lack of living space (see apartments) has a negative effect on the creation of a family.

According to Schultz (1973), as parental income increases, the demand for more children decreases. At the same time, the transition to the post-industrial society is accompanied by a reduction in mortality and, thus, the aging of the population and the change in social trends. The acquisition of descendants for social recognition and self-esteem are no longer present, while the one-parent families and singles are increased and traditional families are reduced.

A key reason for the birth deficit in Greece (and in other European countries in crisis) is the minimal to non-existent support from the welfare state. Its complete collapse in the years of the crisis has aggravated the problem. Young people are not supported by the state to create a family, because there are no measures to help them combine their education or professional life with the family.

Greece was not an exception, but it coincided with the low birth rate of Western Europe. The high birth rate — according to relevant studies (Li & Zhang 2007, Li 2015) — has a negative impact on the economic development of a country, especially in the poor countries, compared to the rich. On the other hand, it is argued that when a country has a large part of its population in productive age, the highest degree of productivity will cause economic growth. If the population is elderly, then existing resources are used in a less productive way and, as a result, economic growth slows.

Different behavior of the age segments of the population is something that changes economic growth, i.e. young people invest more in education and fitness, while the elderly save and care for better healthcare. The population in productive age differs from the young and the elderly in the sense that they consume more than they produce (Bloom et al., 2001).

Based on the above, the lack of a birth increase strategy of the Greek governments and other Southern European countries is largely in line with the European Union’s requirements.

While there is a birth deficit and a shortage of a working-age population, the existing productive population is pushed tο immigration. Given the fact that this productive population is also highly educated, their immigration reinforces other economies such as the German economy and others. Massive masses of young immigrants (mainly males) are accepted in Southern European countries to fill the gap left of those who have emigrated.

This fact totally contradicts the economic theory of economic development. While there is massive immigration from other countries, the domestic productive population that could help local economic growth is pushed out to immigration. This policy is bizarre and certainly does not help economic growth of the European countries under crisis.


Fotini Mastroianni is an economist, MBA lecturer, writer, blogger from Athens, Greece. She had taught, among others, at the University of Wales & the University of Glyndwr.


 

Brexit is defeating itself

New barriers – including the fact that the UK will be (after Brexit) having different standards, trade arrangements and tariffs than the EU – will bring delays, extra bureaucracy, and eventually bankruptcies, in their wake.

[John Bruton | Oped Column Syndication]


Brexit, of its nature, means hard barriers between the United Kingdom (UK) and the European Union (EU).

This is because it means the UK having different standards, and, sooner or later, different trade arrangements and tariffs than the EU.

Whether these barriers are at the geographic boundary, or a few miles away, makes little difference.

These new barriers will bring delays, extra bureaucracy, and eventually bankruptcies, in their wake.

This is what Brexit means, and was always going to mean. Taking back control, by its nature, means more controls.

The UK Government says it wants to impose these controls for two reasons.

The first is to be able to control immigration to the UK from the EU.

The truth is that the bulk of the immigration to the UK is not from the EU, but from outside it. EU immigration to the UK will fall off anyway because the population of the EU countries, from whom immigrants have come to the UK, is set to decline.

The second is to be able to make its own trade deals with non EU countries.

This argument is unconvincing. On leaving the EU the UK will lose the trade agreements it ALREADY HAS with the EU, and through the EU, with other countries.

In fact, leaving the EU will mean the UK losing trade agreements with countries that account for 70% of all UK trade. It will need a lot of new agreement to make up for this sudden and dramatic loss!

The backstop would reduce the effect of this, but not remove it altogether, especially if the UK opts for a different VAT regime to the EU.

No Deal

If there is no deal, and no backstop, the European Commission, in a paper published in November, said: “Member States, including national authorities, will play a key role in implementing and enforcing EU law vis-à-vis the United Kingdom as a third country. This includes performing the necessary border checks and controls and processing the necessary authorisations and licences.”

The paper does not exempt any of the EU Member State from this requirement.

Indeed if the EU Customs Union and Single Market were to deliberately fail to control any of its borders, it would soon cease to exist, as a Customs Union and a Single Market.

This would not be in Ireland’s interest, to put it mildly.


John Bruton is the former Prime Minister of the Republic of Ireland  (1994-97) and the former European Union Ambassador to the United States (2004-09). He has held several important offices in Irish government, including Minister for Finance, Minister for Industry & Energy, and Minister for Trade, Commerce & Tourism.


 

Is Neo-Liberal Economic Model as Glorious as it is Portrayed?

Although neo-liberal economic model is proven to be a complete failure in the first country (the United States) of its full implementation, yet this model of complete misery is applied across the world, including Greece.

[Fotini Mastroianni | Oped Column Syndication]


The neo-liberal economic model is being represented as more glorified in many countries. In Greece too, the permanent message of the mass media is the glorification of the neo-liberal economic model, which supports the idea that the concentration of wealth in the hands of the rich people will be spread to the lower classes and, thus, create wealth for the whole society.

Is that the case?

The United States (US) is a global superpower and has become the economic model for many countries. However, many are unaware of the consequences of the US’s economic power for its own population, particularly for the middle and working class.

In the US, the winners are the very rich, while the other social classes belong to the losers. In particular, between 1979 and 2006, the working-class income rose only 10% in 27 years and the income of the middle class increased by 21%.

This 21% is not as good as it may seem, taking into account the smallest number of people in American households (i.e. families with one kid compared to families with more kids in the past). Therefore, the income per person seems to be greater than it actually is.

In fact, the middle-class income rose by only 0.7% per year. It’s worth noting that the middle class is working much longer hours nowadays compared to the end of the 1970s. Without these extra hours, the increase in the US household income would be negligible. In contrast, the income of the rich for the same period has increased by 260%.

Regarding pensions, the middle class and working class are in a worse state. Employees are increasingly burdened with the cost of their retirement, and the state-guaranteed pension is only for a few.

Pensions are based on participation patterns like 401(K) plan, which is a retirement savings plan sponsored by an employer. This plan lets the employees save and invest a portion of their paycheck (pay cheque) before taxes are taken out. However, the scope of investment with this 401(K) plan is limited. One can invest money into mutual funds mostly composed of stocks, bonds and money market investments.

These schemes exposes the American employees to, for instance, the adverse affects of a fall of the stock market, such as in 2007 and 2008, as well as the one that is predicted for the near future. As a result, many Americans run the risk of having little or no income in their pensionable years.

Furthermore, medical costs have been squeezing the income of the middle class and the working class, as they have to bear the insurance cost. Employees spend too much on medical coverage ($ 7,290 per person in 2007 and 12,872 in 2018), while the state has less doctors, nurses and hospitals per individual than other wealthy countries. As a result, mortality – due to lack of early care in the US – is very high, and the ones who are over seventy-five years are at greater risk.

There’s the widespread believe of an American dream that one can be born poor, but s/he can become rich in the course and, thus, escape from the aforementioned problems.

However, the figures are disappointing. Only one in seven could rise to the high income class in the 1970s, whereas today the ratio is one in ten. Those who belonged to the high income category of 1% of the American population were in the same category in the 1970s as evidenced by the heredity of wealth. Hence, social mobility has been, and will be, more difficult for the lower classes due to the accumulation of wealth.

The neoliberal economic model is proven to be a complete failure in the first country of its full implementation i.e. the United States of America. Yet this model of complete misery for the middle and working class is applied throughout Europe and across the world, and Greece is no exception.


Fotini Mastroianni is an economist, MBA lecturer, writer, blogger from Athens, Greece. She had taught, among others, at the University of Wales & the University of Glyndwr.


 

The Spanish Labyrinth

Newly minted Prime Minister Pedro Sanchez faces at least two daunting tasks: cleaning up the wreckage wrought by enforced austerity and resolving the Catalan crisis after last fall’s independence referendum.

[Conn M. HallinanOped Column Magazine]


As the socialist-led government takes over in Spain, newly minted Prime Minister Pedro Sanchez faces at least two daunting tasks: cleaning up the wreckage wrought by years of European Union (EU) enforced austerity and resolving the Catalan crisis exacerbated by Madrid’s violent reaction to last fall’s independence referendum. Unfortunately, his Party’s track record is not exactly sterling on either issue.

Sanchez, leader of the Socialist Workers Party (PSOE), patched together parties in Catalonia and the Basque region, plus the leftist Podemos Party, to oust long-time Prime Minister Mariano Rajoy of the People’s Party (PP). But is the telegenic former economics professor up to the job, and will his Party challenge the economic program of the EU’s powerful “troika”—the International Monetary Fund, the European Central Bank and the European Commission?

The answers to those questions are hardly clear, and in many ways the cross currents and rip tides of Spanish politics still resemble Gerald Brenan’s classic study of the Civil War, The Spanish Labyrinth.

While the issue that brought Rajoy down was corruption—a massive kickback scheme that enriched scores of high-ranking PP members— his Party was already weakened by the 2015 election, and he has been forced to rely on the conservative Ciudadanos Party based in Catalonia to stay in power. In short, it was only a matter of time before he fell.

Sanchez promises to address the “pressing social needs” of Spaniards, although he has been vague about what that actually means. But Spain is hurting. While economic growth returned in 2013, unemployment is still at 16.1, and youth joblessness is 35 percent. Rajoy took credit for the economy’s rebound from the massive financial meltdown in 2008, but there is little evidence that budget cuts and austerity did the trick. The two main engines for growth were cheap oil and a weak currency.

The job growth has mainly been in short-term and temporary jobs, with lower pay and fewer benefits. That is not specific to Spain, however. Of the 5.2 million jobs created in the EU between 2013 and 2016, some 2.1 million of them have been short term, “mini” jobs that have been particularly hard on young people. Many continue to live at home with their aging parents, and 400,000 have emigrated to other European countries.

Education, health care, and infrastructure have all deteriorated under a blizzard of budget cuts, and Sanchez will have to address those problems. His party’s record on the economy, however, has been more centrist than social democratic, and the PSOE basically accepts the neo-liberal mantra of tax cuts, deregulation and privatization. It was PSOE Prime Minister Jose Zapatero who sliced more than $17 billion from the budget in 2010, froze pensions, cut child care funds and home care for the elderly, and passed legislation making it easier to lay off workers.

It was anger at the Socialists over rising unemployment that swept Rajoy and the PP into power in 2011. The PSOE has never recovered from that debacle, dropping from 44 percent of the vote to 24.9 percent today. It has only 84 deputies in the Parliament, just 14 more than Podemos.

When Podemos leader Pablo Iglesias proposed forming a government of the left. Sanchez rejected it and instead appointed all PSOE people to the cabinet. However, he will have to rely on support from the left to stay in power, and there is no guarantee that it will be there unless the Socialists step away from their centrism and begin rolling back the austerity measures.

Sanchez has a mixed record on leftism vs. centrism. He was ousted from the Party’s leadership last year by the PSOE’s rightwing when he considered forming a united front of the left. It was the Party’s rank and file, angered at the rightwing Socialists that allowed Rajoy to form a minority government that put him back in power. So far, Sanchez has been unwilling to consider the kind of alliance of left parties that has been so successful in Portugal.

The new government will also need the support of the two Catalan parties, and that will likely be an uphill slog. The Catalans just elected a government that supports independence, although its President, Quim Torra has called for “talks.”

The current Catalonia crisis was ignited when Rajoy torpedoed a 2006 agreement between the Spanish government and the Catalan government that would have given the province greater local control over its finances and recognized the Catalan’s unique culture. Under the prodding of the PP, the Constitutional Court overturned the agreement and shifted the dispute from the political realm to a legal issue.

At the time, the idea of independence was marginal in Catalonia, but the refusal of Rajoy to even discuss the issue shifted it to the mainstream. “Independentism, which until 2010 was a decidedly minority option in Catalonia, has grown immensely,” according to Thomas Harrington, a Professor of Hispanic Studies at Trinity College, CT.

The Catalans began pressing for a referendum on independence—nearly 80 percent supported holding one—although it was initially seen as non-binding. Even though Podemos did not support the idea of independence, it backed the basic democratic right of the Catalans to vote on the issue. The PSOE, however, was as hard-nosed on the issue as Rajoy and the PP. Not only did the Socialists not support the right of the Catalans to vote, they backed Rajoy’s crackdown on the province, although they decried the violence unleashed on citizens trying to vote during last October’s referendum.

Some 2.3 million Catalans out of the 5.3 million registered voters went to the polls and overwhelmingly endorsed independence in spite of the fact that Rajoy sent some 10,000 National Police and Guardia Civil into the province to seize ballot, beat voters and injure more than 850 people. Legal procedures have been filed against over 700 mayors and elected officials, and the Catalan leadership is either in jail or on the run. While Sanchez said the crackdown was “a sad day for our democracy,” he will have a lot of explaining to do to the Catalan government.

Unlike Rajoy, Sanchez says he wants a dialogue with the Catalans, although he also says he intends to uphold the Spanish constitution, which does not permit secession.

Catalan society is deeply split. The big cities tend to be opposed to independence, as are many trade unions. The left is divided on the issue, but many young people support it. As the Financial Times’ Tobias Buck points out, “The younger generation, who have been schooled in Catalan and have less contact with the rest of Spain than their parents, are among the most enthusiastic backers of independence.”

It is also clear that the brutality of Rajoy’s assault has moved people in that direction, although polls show independence still does not have a majority. But in a sense, that is irrelevant. When almost half the population wants something that “something” has to be addressed, and if Buck is right about the demographics, time is running out for Madrid.

There are other serious constitutional issues that need to be addressed as well. Rural areas are greatly favored over cities. While it takes 125,000 voters in Madrid to elect a representative, in some rural areas it takes as few as 38,000. There is also a need to address Rajoy’s draconian laws against free speech and assembly.

Just how stable Sanchez’s government will be is unclear. He must keep the Basques and the Catalans on board and do enough on the economy to maintain the support of Podemos.

The PP is badly wounded, and the rightwing Ciudadanos Party—the only one that voted against the no confidence resolution—will be looking to fill that vacuum. Ciudadanos calls itself the “center,” but its economic policies are the same as those of the PP, and it is rabidly opposed to separatism. It performed poorly in the last election and in regional elections in Galicia and the Basque region. It did well in the recent Catalan elections, but that is because the Popular Party collapsed and its voters shifted to Ciudadanos.

Sanchez must recognize that the Catalan issue is political, not legal, and that force is not an option. As Napoleon Bonaparte’s Foreign Minister Talleyrand once remarked, “You can do anything you like with bayonets, except sit on them,” summing up the truism that repression does not work in the long run.


Conn M. Hallinan is a California-based independent journalist. He is a regular columnist for the think tank Foreign Policy In Focus and holds a PhD in Anthropology from the University of California, Berkeley.