3 december 2011, the european province of belgium

It's almost 18 months since belgium had a government (19 september 2010), but it finally looks like negotiations are about to conclude. Somewhat remarkably given that the elections saw immigrants cast in a rather negative light, the prime minister looks set to be a half-orphan of poor italian workers: the american dream in belgium. He's also openly gay (not the first pm, a distinction that went to iceland's johanna sigurdardottir) and even more remarkable, a french speaker, the first since 1974. That's a bit of a blow for the richer flanders half of the country, which still looks ever closer to becoming an independent state, kosovo being the model. If brits think scotland is on the verge of independence, it's worth reflecting belgium already has separate newspapers, tv stations and even foreign aid budgets. The markets will no doubt be positive about a government's formation, especially as the agreement has a commitment to a 2.8% deficit, but the ups and down on belgian bond yields can hardly be said to track the coalition negotaiations. For all the talk about the enormity of the steps to fiscal union angela merkel has begun to explicitly talk about now, belgian is a case study of how far down the line the euro area already is in terms of the whole endeavour carrying its component countries, or at least the smaller ones. As a sign of how far down the line many things already are, it is surely possible to see a positive in that perhaps there's a bit less massive upheaval to get to the nirvana of stability and normality than everyone expects.

27 november 2011, merkozy

I wrote my second-ever new europe column on germany, and seven years ago it was quite insightful to flag that "everything about the eu rests on germany". Then, it was still understated: no-one coined the "kohl consensus". Gerhard shroeder ended that culture of restraint, bringing a rather more muscular germany, its capital now berlin, its whole economy yoked to the deep sacrifice of rebuilding east germany, which brought lower wages and sent jobs abroad, lowering germany's unit labour costs by some 20%, one of the causes of the euro's current problems (15 october 2011). It also brought angela merkel to power. And in that time too it turned around its trade: in 1999 german exports to portugal, ireland, spain and greece were €30bn, 5x the €6bn to china; by 2010, it exported €53bn to china, more than the pigs combined. Now germany is bigger and better by quite a way than anyone else, especially france, which has lost the battle central to its whole european policy of maintaining parity with germany. Having built the eu and played its first decades brilliantly, france has long since seen it slip beyond control, the main reason for the 2005 "no" referendum vote. Competition, english and new member states were not made in paris. Whilst brussels was built on the french civil service model, the newer ecb is thoroughly bundesbank. Thus, as the economist said (excellent article), france needs germany now because it's so weak, and germany needs france because it is so strong. Merkozy, despite the fact that they really don't like each other, very much has the wheel of the 17, and by default the 27, even if the new italian premier was ceremoniously invited along to the last "g2" summit. Behind that though, it is clearer than ever that it is germany more than ever that is the new european superpower, finally no longer economic giant but political dwarf. That mantle instead seems to have been inherited by europe itself.

26 november 2011, who killed mark duggan ?

Encyclopedias have been written about the summer's riots (9 august 2011), but less about the event that triggered them - the death of mark duggan. Quick and strong justice was rightly brought to bear on many rioters and looters, but the wheels seem astoundingly slower for what is potentially a much worse crime. 4 months on, no-one has even been arrested, let alone charged, tried or sentenced. It is not outlandish to expect that this could have been a murder inquiry, yet somehow, justice seems to have been postponed pending the work of a rather obscure and lowly-regarded quango (the ippc) that investigates complaints against the police. Yet the ippc may have lost its credibility before it even started its investigation into the death by initially parroting the line that duggan had fired a bullet at a policeman, which it later said was wrong. Without getting into the he said, he said arguments, the ipcc does seem to be rather accident-prone and have the appearance of amateurism, which has led to the build up of a perception of non-seriousness and urgency in their work compared to what may otherwise have been. The ipcc's plea for everyone to await their release of the evidence before rushing to judgement must be respected, but the incongruity of the different time that passes in these circumstances compared to any matter where the police are not involved means that the system just can't be right, and everyone can surely understand the very strong opinion at community level on this. Justice must be done, and be seen to be done, and at the same speed and intensity for all, and that just doesn't seem to be happening.

23 november 2011, angelordevil

As ever, it was quite a sight to see the mall decked out with the pomp of a state visit yesterday, with the turkish president in town, a country I know well from hosting a wonderful group of young lawyers and then in turn being taken around the antechambers of ankara and istanbul, making friendships I still have today (the photo is me with the last turkish president). By the time I was working for europe, accession talks were many years in, but by 2007 they were stalled, mainly over the cyprus issue, and they've now pretty much ground to a halt, even as others like croatia (25 may 2011) are nearing completion. There's a bitter flavour in turkey now, with the desire to join rapidly receding and spilling into a broader narrative about the retreat of the whole eu project, which the last ambassador just called a "spent force". Opposition to Turkish accession was an important part of sarkozy's election campaign, and crystallised broader feelings that "european kinship" didn't cross the bosphorus. I did though, many times, and loved it. I welcome turkey's rise and only hope that if accession isn't going to happen (which is clearly the case) then an accommodation can be found that finds not just begrudging acceptance but wholehearted enthusiasm on both sides, though I'm sure that's many years, many frameworks and many formulations away.

Attached File: turkey1.pdf

Attached File: turkey2.pdf

19 november 2011, nothing left

Once spanish elections tomorrow deliver a strong centre-right government, not one single large european country will have a government of the centre left; indeed of the 27 it's just denmark, cyprus and slovenia (austria's a left-right coalition), just over 2% of the population. And this at a time when it is supposedly the evils of capitalism, free markets gone mad and greedy profit-taking bonus-paying banks that have miserably failed, calling massively on statist support and plunging everything into recession and oblivion. So why have europeans turned so markedly to the traditional centre-right home of capital ? Part of the answer lies in a traditional wave effect, throwing the bums out and seeking change, and part is in sending nixon to china: were the left left to sort out this mess, it would seem like class war, with no hope of consensus. Also though, for all the political cross-dressing, the right at core means less public spending, the left more, and very unhappily voters have proved themselves astute enough to understand that if things are ever going to come right, the next period must be one of belt-tightening. Until the left get this, and adjust accordingly, their continuing retreat to the backbenches of europe is not going to slow.

17 november 2011, he’s back, jack

There are a few characters in my family (goodbye ralph, 15 february 2010), and one is my great uncle jack white, who was I think the second jew to be awarded britain's highest military honour, the victoria cross. He got it at gallipoli, when his boat came under attack, and as the only man not injured, he jumped into the water and, under heavy fire, tied telephone wire to the boat, took it in his teeth, and towed everyone to safety. I mustn't have been going to enough family barmitzvahs lately, as I saw a sign above my cousin's law firm today that led me to this amazing website and the discovery that jack's factory, which he returned from the war to be an apprentice at and went on to manage, is still there, and is in fact back in family ownership and booming. With its ingredients of wonderful style, design, textiles in salford, made in manchester, commerce, culture and narrative, all underpinned by such an amazing story, it's simply overwhelming for me, as it's my own family. I'll be making some calls over the weekend...

10 november 2011, the europeans are coming

Despite the fact that for rather too many people (especially brits) "europe" is in its death throes, the pronounced trend of senior eu officials and politicians vaulting back into prominent national positions continues apace, suggesting that most think they have savvy experience. Romano prodi, former commission president, was I think the first to make prime minister, and the last sensible italian one, very ably supported by my old ecb boss tomasso padoa schioppa (25 october 2009) as his excellent finance minister; the same role held in spain by ex-commissioner pedro solbes. In finland the foreign minister is the boyish alexander stubb, who I had the absolute delight of hosting for lunch once in frankfurt (31 august 2010) at one of our events back when he was a mere member of the european parliament. In between being a commissioner once and now again, michel barnier was french foreign minister. In britain, brussels used to be seen as a political graveyard, but now even the eurosceptic conservatives have promoted ex-mep theresa villiers almost to the cabinet, whilst the last government had ex-commissioner peter mandelson as deputy prime minister, and the current dpm is ex-mep nick clegg; his closest rival is another ex-mep, chris huhne. Next week may see another former commissioner (mario monti) again as italian prime minister, whilst tonight the former ecb vice-president is greece's new prime minister. Though I didn't really know him, I know that he was a hugely respected and capable workaholic, with an outstanding mind, who got where he has on the sheer merit of being a genuinely outstanding economist. The quiet storm that is lucas papademos has quite a job to do now, but if anyone can slowly, carefully, deliberately work through what needs to be done, it is this most honourable of men with surely exactly the right experience. We wish him well.

5 november 2011, greeks punch gift horse in mouth

Sometimes, a little time to reflect is better than instant reaction, and a week on, as opposed to a day, the results of last week's euro summit look pretty much as they did on the night: it is enough. Or at least, it is until it's not, when the actors showed themselves determined enough to go the next half-mile. The day after, the greek prime-minister's referendum announcement shattered the "no surprise" rule, and merkel and sarkozy responded in kind, breaking the "never talk about a break up" rule, saying that there was a choice for greece: take the medicine or leave the euro. That was the dose of salts needed, as while some 60% of greeks are against the bailout package, some 70% want to stay in the euro, and so the referendum proposal disappeared as quick as it arose. All this though destroyed the build-up to the much built-up g20 summit, and with the sherpa work not done, the result was dazed and confused, and so no contribution at all to the stability desperately needed. And all this in the week that the most powerful man in the eu is replaced by an italian, just as all the pressure moves to italy's woeful debt burden, and yet more pressure is put on the ecb to use its unique muscle to solve at a stroke the new and fundamental problem created in today's credit conditions of italy being solvent but unable to manage its liquidity, due to its (hardly new) dependence on constant refinancing. Laying some groundwork for that is the reason behind berlusconi's abrupt summoning by said m&s, obama and the head of the imf (21 may 2011), who told him that his country is now being monitored by the imf like it was argentina. It's going to be a big week for mario.

27 october 2011, is it enough ?

So, they (and its with a slight pang of regret it's not "we") finally seem to have come to a solution, or at least to a state that things can settle: greece can "default" in an orderly way, the other countries seen as weak but not insolvent can be left to trade their way out to stability, the banks get a bigger cushion of cash, and the first steps are taken on the long road towards stopping all this ever happening again, through treaty-change towards economic union. By nature I am an optimist, and a deep euro enthusiast, and so maybe I cannot help but be biased. However, yes, I think this is enough. The problems were never going to be solved by a dramatic gesture, but by a process around which there is confidence. It may take an age to get to china walking one step at a time, but if you walk long enough, you get there eventually. So, though confidence may again fizzle out, though the devil of the details may yet risk elements of the package unravelling, I do think that two rubicons have been crossed. First, greece has gone, and second the argument over the way the others will be guaranteed the breathing space they need, namely fiscal or monetary, has been definitively answered. It's the former, and so now all can just get on with it, and if at some point some element needs bolstering, that will happen. A classic distraction has even been thrown in to stop people talking about the deal, getting them to talk instead about whether greece should have been in the euro in the first place instead (correct but irrelevant). This gives confidence a few more precious hours to build in this ludicrous news cycle led mass media world we live in (see 15 august 2011). So there it is, we can breathe a bit easier, think a bit further ahead, and sleep rather better across europe tonight, as pax merkela reigns.

24 october 2011, no deleveraging at home

The big force behind the tea party movement in america is the perception that through government action thrifty and sensible americans are paying for the reckless overstretch of others, "do we really want to subsidise the losers' mortgages ?" ranted rick santelli, "this is america ! How many of you people want to pay for your neighbour's mortgage that has an extra bathroom and can't pay their bills ?". That's moral hazard of the personal kind, with a policy also echoed in europe. Now, they're at it again, as obama announces more government loans for homeowners whose mortgages are rather too high. Like quantative easing, the basic rationale for this seems to be stimulus, i.e. how can we get people borrowing and spending more again. The high priest of the policy, lawrence summers, says that us house-owners losses have reduced their wealth by over $7,000bn in the last 5 years, which obviously knocks confidence and reduces their spending. As I've said before though, this can't go on, and not because I've much sympathy for tea partiers, but because the time is never, ever going to be right to deleverage: but here we are, and it isn't going to feel great, especially for house buyers that gambled on ever-increasing prices. A hard lesson for all, that there's no such thing as a one-way bet.

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