Is France’s Political Crisis Just Beginning?

Written by Uri Friedman.
Read the original article on The Atlantic.

Image credit: The Atlantic

Emmanuel Macron, the next president of France, campaigned on a slogan of “Together, France!” And why not? He is a sunny centrist who attracted votes from the left and the right to decisively defeat the far-right nationalist Marine Le Pen on Sunday. The center seems not only to have held, but to have swelled.

But Macron’s victory could further fracture French politics rather than bridge the country’s political divisions, illustrating a challenge confronting many democracies at the moment, especially in Europe: A disenchanted public has blown up the political establishment, but it’s difficult to then fashion a well-functioning government out of the pieces. This can produce more disillusionment with politics, not less.

For signs of trouble ahead, consider the fact that a full quarter of the French electorate didn’t cast a ballot in this weekend’s runoff presidential election—one of the highest abstention rates in the history of France’s Fifth Republic, which was established by Charles de Gaulle in 1958. French voters are so disillusioned with their political leaders that, for the first time in the history of the Fifth Republic, the runoff didn’t feature a representative from the main parties of the left and right. Whether that’s a response to the government’s failure to boost a stagnant economy, secure the nation from ISIS-inspired terrorism, or assimilate immigrants and address the downsides of globalization, the French consistentlyexpress low levels of trust in government. In the run-up to Sunday’s vote, a survey found that French voters are more polarized than the citizens of other European countries, with 20 percent describing themselves as politically extreme (compared with 7 percent in the EU as a whole) and 36 percent identifying as centrist (compared with 62 percent in the EU). So much for togetherness.

This protest against politics-as-usual is what catapulted Macron, a former government official who has never held elected office, into the Elysee Palace. He doesn’t belong to a party and only founded his “On the Move” movement a year ago. But the political independence that proved an asset during the presidential campaign could become a liability during parliamentary elections in June.

Macron has promised to field On the Move candidates in every French electoral district, and polls suggest the movement could win more seats in France’s National Assembly than any other party—maybe even enough to achieve a majority in the 577-seat lower house, which would be astonishing for an organization that has only just burst onto the political scene.

If, however, Macron falls short of a majority, he will need to form a governing coalition with other parties. And if another party wins a majority, he will need to deal with that rival party, in a scenario the French refer to rather euphemistically as “cohabitation.”

In France, presidents have for the last several decades generally been drawn from the major center-left or center-right party. Their victory in presidential elections has typically paved the way for their party to win a majority in parliament, allowing the president to appoint a prime minister from his party who will run the government according to the president’s wishes. This hasn’t always occurred; the Fifth Republic has experienced cohabitation three times. But the system has been running smoothly for a while: France hasn’t endured divided government since a constitutional amendment in the early 2000s that made both presidential and parliamentary terms five years, and scheduled parliamentary elections shortly after presidential elections to reduce the likelihood of cohabitation.

“During cohabitation periods, the presidency diminished in stature, and the premier tended to exercise the main executive policymaking authority,” writes John Carey, a comparative-politics professor at Dartmouth College. “For example, in the late 1980s, [Jacques] Chirac as premier engineered a major tax cut and privatized state-owned enterprises while the Socialist [President Francois] Mitterand could only watch. But when Chirac was president, Socialist Party Premier [Lionel] Jospin pushed through legislation to shorten the workweek from 39 hours to 35.”

Now, however, France’s traditional party system has imploded—and the risks of cohabitation and political dysfunction have returned. If an opposition party ends up controlling the National Assembly, Macron will likely be blocked from carrying out his ambitious policy agenda, which includes cutting government spending and giving employers more flexibility to hire, fire, and negotiate with employees. If he has to cobble together a coalition of diverse factions, he will have to painstakingly build support for each vote on each piece of legislation. As Francois Fillon, the Republican candidate who lost in the first round of the presidential election, memorably put it, Macron might have to again and again “cook up parliamentary dishes of impotence and compromises”—the very worst kind of French cuisine.

In these scenarios, the election of Macron would have the opposite effect of what his supporters intend: A man elected to finally get things done would struggle to get things done; a man elected to break with the traditional parties would have to work closely with them. Desires for political change and disillusionment with government might only grow.

This vicious circle is playing out across Europe, where frustration with establishment politics is hollowing out center-right and center-left parties, splintering the political landscape into an array of small- and medium-sized parties competing for influence. “The more fragmentation occurs, the more difficult it’s going to be [for fragile, unstable coalition governments] to pass any type of coherent policy program,” the political scientist Robin Best told me after the Dutch election. “And voters are probably going to end up being even more dissatisfied” and inclined toward protest votes and politicians on the political extremes.

If, on the other hand, On the Move secures a parliamentary majority, or if Republican and Socialist lawmakers decide to be uncommonly cooperative, Macron’s presidency could go swimmingly. As the historian Aline-Florence Manent has pointed out, De Gaulle designed the Fifth Republic so that it wouldn’t be dependent on political parties, which he viewed as sources of gridlock and instability. The founder of modern France “designed the Fifth Republic as a hybrid regime, combining the institutions of a parliamentary system with a powerful presidential office so that a crisis in the party system might not necessarily provoke a crisis of government,” Manent notes.

Macron’s presidency will “be a true test of the Fifth Republic as De Gaulle envisioned it,” she added. “So far, this has never really been tested, because the system developed into a de facto two party system.”

“It may have taken 60 years,” Manent writes, “but De Gaulle’s vision of the Fifth Republic could well be coming to a point of crisis.”

Jean-Claude Juncker’s next big thing

Harry Cooper

Harry Cooper

The European Commission is quietly preparing to unleash a flood of policy initiatives to boost workers’ rights across the EU, rebooting plans by Jean-Claude Juncker that were kept mostly out of sight during the Brexit debate. 

With the U.K. preparing to leave, Juncker wants to give a new push to the “European pillar of social rights” — a proposal he first mentioned nearly a year ago. The measures, aimed primarily at the eurozone but with non-euro countries able to opt-in if they wish, include rules on the minimum wage and to protect gender equality — policies long considered out-of-bounds for Brussels.

As he fights for free trade deals and measures to boost economic growth and competitiveness, the Commission president also wants to add a “social” dimension to EU policy. Introducing the idea in his State of the Union address to the European Parliament last September, Juncker said he wanted to build a new EU social policythat “takes account of the changing realities of the world of work.” 

Juncker backed Belgium’s Marianne Thyssen, the European commissioner in charge of employment, social affairs and labor mobility, to push the initiative, and she’s spent the past few months gauging support for the possible changes in EU countries with NGOs, business groups and trade unions.

One door closes, another opens

The idea of boosting social protections got a mention in a 2015 report from the “Five Presidents” of the EU institutions on the future of the eurozone, with the leaders calling for the Union to aim for a “social triple A” rating in parallel with efforts to boost economic growth. The largest center-left and center-right political groups in the European Parliament also back elements of the initiative. 

But apart from that, little has been done on the plan since Juncker first raised it. During the months-long debate ahead of the U.K. referendum on June 23, the idea was kept under wraps for fear it would be seen as EU regulatory meddling in Britain. Meanwhile, European trade unions grew increasingly frustrated at the lack of action. 

Oliver Roethig, regional secretary of the service workers’ union UNI Europa, said some have wondered “to what extent this is all just talk.” As for the idea that Europe could earn “a social triple A” rating, Roethig said that right now “it is probably junk status.” 

The U.K. has long led opposition to attempts to introduce new social rights or employment legislation, such as on remuneration, parental leave, anti-discrimination and pension reform.

Peter Scherrer, deputy secretary-general of the European Trade Union Confederation, said that while Juncker is “personally committed to a social Europe,” the Commission has “so far … not delivered.”

While some may dismiss Juncker and Thyssen’s plans as a pipe dream, others say Brexit offers proponents of more EU action on social policy a unique political opening. The U.K. has long led opposition to attempts by the Commission to introduce new social rights or employment legislation, such as on remuneration, parental leave, anti-discrimination and pension reform. British Conservatives in particular have argued that the EU is not allowed to dictate to its member countries how they should run their social welfare systems.

Thyssen persevered anyway. In March, the Commission released a “preliminary outline” of the plan, proposing initiatives that include the introduction of eurozone rules on the minimum wage, new rights on “quality education and training” and measures to ensure gender quality and protection from discrimination. 

The outline argued that much of the legislation would be justified not only by provisions in the EU’s Lisbon Treaty, but also in the European Charter of Fundamental Rights. Although that charter has been anathema to British Conservatives, who say it would make U.K. judges subservient to a court in Strasbourg, other countries are less concerned.

With discussion of the topic taboo ahead of the referendum vote, the Commission did almost nothing to push it. But now Thyssen has seen her chance, telling a Cypriot newspaper in a July interview that she will put forward a “revision of the current rules on social security coordination in the coming months.”

Wage war

There’s a risk the Commission could push too far. It is seeking a role for itself on sensitive policy areas such as wages, pensions and unemployment benefits. Although the EU’s governing treaty expressly limits the ability of the Commission to act in these areas, it can “assist” governments should they wish to align social policy. Whether governments will take the Commission up on this offer remains to be seen. 

A Commission spokesperson suggested that a key aim of Thyssen’s consultation process, which will close at the end of the year, is to identify the appropriate legal form for any EU action. The official pointed out that rules on the minimum wage, for example, could be introduced via a so-called Council decision, whereby governments agree on a policy action without the Commission taking the central role that it does on most other legislation. In some ways, such an agreement is easier to reach, given that it keeps the European Parliament out of the equation, but on controversial areas such as social security, the likelihood of finding consensus is in doubt.

Proponents of the social pillar saw a positive sign that the political climate may be shifting in their favor after an agreement was signed in the days immediately following the U.K. referendum by business organizations, trade unions and, crucially, governments themselves. The statement called for “the promotion of dialogue between management and labor,” as well as “a strengthened involvement of social partners in EU policy and lawmaking.” 

Scherrer from the ETUC described the agreement as a “historic moment,” given that never before had governments recognized the role of “social dialogue” so clearly.

More importantly, it was seen as a departure for the Commission and for many European governments, whose dominant narrative for years had focused on boosting growth and competitiveness of EU businesses — what Scherrer calls “dangerous austerity.” 

Coupled with a Continent-wide decline in the fortunes of left-wing parties, the time for centralized wage bargaining, stronger protections for workers and guarantees for access to public services seemed to many to have passed.

But this fails to take into account broader political trends in Europe. Populist parties across the Continent (on the Left and Right) are adopting economic and social policies that seem more at home in mainstream social democratic parties. 

Supporters say that with the U.K. no longer able to block it, the EU is about to start legislating far more extensively in social policy than ever before.

One example is wages. In July, Thyssen batted away criticism from East European parliaments that her reform of EU rules on cross-border workers interfered too much with national wage policy. Her proposals seek to limit “social dumping” — the shipping of temporary, cheap East European labor westwards — on the grounds that this undercuts wage levels in the host country.

But the same countries who reacted so angrily to the proposal, such as Slovakia, Poland and the Czech Republic, are simultaneously demanding that Germany change its new minimum wage law, which they argue is destroying their trucking businesses.

That’s why the Commission is optimistic about its broader social agenda, with a spokesperson confirming that governments both in and outside the eurozone have signaled their support for the initiative. Supporters say that with the U.K. no longer able to block it, and a renewed commitment to the “social dialogue” between employers and trade unions, the EU is about to start legislating far more extensively in social policy than ever before.

Think the Brexit shock is over? Think again.

Vicky Pryce

It is just four weeks after the shock referendum vote and many analysts are arguing that it is too soon to tell what the impact of Brexit has been. But is it? It is true that some of the official statistics for the current quarter won’t be fully known until the early autumn. The new chancellor, Philip Hammond, has ruled out an emergency budget and will spend the summer looking at the evidence before deciding what to do. He expects to deliver a November autumn statement to “reset” the economy, whatever that may mean.

But there isn’t much time to wait. Prime Minister Theresa May’s phrase: “Brexit means Brexit,” rather than removing uncertainty, in fact makes things worse. No-one knows what it means—and clearly Boris Johnson, David Davis and Liam Fox, who run the government departments that will make it happen appear to disagree about the way forward. Everyone that may have worked in trade before or has some vague knowledge of Europe is being drafted back in to assist as Whitehall seems to be desperately short of “experts,” now once again considered worth listening to. Business organisations have been summoned in to give their views but there is no clarity about the government’s intentions, particularly with regard to access to the EU single market.

So far the only game in town has been the Bank of England with its much-maligned governor, Mark Carney, stepping in to calm markets on the morning of the referendum result. He has given access to £250 billion ($327 billion) of extra liquidity to the banking system, hinted at even lower interest rates and has also now cancelled the countercyclical capital buffer the banks would have needed to raise next year. Another £150 billion ($196 billion) is therefore in theory available for loans to businesses. All this helped the equity markets recover. Big international firms with foreign earnings will also benefit from sterling’s sharp fall, now at a 30-year low against the dollar.

That does not seem to be happening since the vote to leave. Surveys after the referendum suggest a further loss of confidence because of the Brexit vote. The uncertainty matters but businesses also fear that whatever deal is struck, it will be worse than the one that Britain had before and will take time.

Yes, of course, other trade deals can be concluded but geographical proximity matters a lot in trade decisions. Currency swings, especially violent ones, are destabilising for big business. Rolls Royce has just announced that the sterling fall has contributed to a £2 billion ($2.6 billion) loss in the first half of the year, partly through losses in foreign exchange hedging contracts—and Ryanair has  hinted that its growth in the future will be centred in expanding European hubs rather than the current U.K. locations because of Brexit.

Moreover the pound’s fall brings other problems with it.  The U.K. tends to import many of the parts it uses in its manufacturing production processes, so costs will rise. It also imports many of its consumer goods. Prices are beginning to rise as a result—holidays, petrol, food, soon clothing also if the cost is passed to consumers by retailers who are already facing very tight profit margins.

Retail sales, though some 4 percent up year-on-year, fell by 0.9 percent month to month in June.  New house sales, already down 34 percent in the second quarter are under threat. Not surprisingly housebuilders’ shares have been under pressure since the vote. London house prices are forecast to fall by 5 percent in 2016 Q3 from Q2 and continue to decline through to 2017.

The flash Markit/CIPS Purchasing Managers’ survey for July suggested activity in the economy declined to a level not seen in the U.K. since the spring of 2009, indicating a recession, particularly felt in services. Economists are predicting a technical recession—possibly zero or negative growth for at least the two quarters. Consensus forecast for 2017 are down from 2.1 percent to just 0.4 percent. The City is nervous, worrying about continuation of current “passporting” arrangements that allow UK registered financial firms to sell freely across the EU.

The people warning of a short-term shock to the economy were right. But the medium to long term looks worrying too. The consultancy EY expects unemployment to go up to over 7 percent over the next three years from 4.9 percent now.  Disposable incomes will be hit.  The government will need to act now and to combine fiscal and monetary stimulus, as was done in 2008. This, though, is not a get-out-of-jail-free card. There are costs, in terms of lower bank profitability, lower incomes for pensioners and savers and tougher measures that will be needed in the future to tackle a rising deficit and debt. Welcome to Brexit Britain.

Making peace with the West, country by country


Maxim Trudolyubov

Maxim Trudolyubov

Russia has taken a number of cautious steps aimed at normalizing its relationship with the West; both Moscow and Washington seem to be ready for  military cooperation in Syria; Moscow and Ankara are busy patching up their relationship; and Moscow and Helsinki have just discussed mutual security. One important feature of these recent hints at normalization in Russia-West relations is that Russia is emphasizing its dialogue with specific countries, not with blocs like the European Union or NATO.

Ahead of the NATO summit that opened in Warsaw on Friday, Russia intensified its contacts with specific capitals rather than collective bodies. Moscow put forth a set of proposals for Washington aimed at preventing confrontation in the case of a close encounter at sea or in the sky, according to Russia’s permanent representative to NATO Alexander Grushko. “We are talking about minimal distances between ships and aircraft, about what frequencies to use to establish contact, and other measures that help us understand each other’s maneuvers,” Grushko said.

Media reports suggest that the U.S. and Russia are discussing the possible coordination of military efforts in Syria. The U.S. would help Moscow with its targeting of militant jihadist groups as long as Moscow makes sure the Assad regime grounds its air force. Washington put forth this proposal last week and is waiting for a response. However, Russia is expecting the Syrian army to take Aleppo and the proposal is thus unlikely to yield an immediate result or a substantive response for many days or even weeks, a U.S. official told The Wall Street Journal.

In another bilateral story, Russian president Vladimir Putin and his Finnish counterpart Sauli Niinisto discussed mutual security during Putin’s recent visit to Finland. Following up on a debate in Finland and Sweden about the prospects of both countries joining NATO, Putin noted that Russia would respond forcefully to such a development. If Finnish armed forces become part of NATO’s military infrastructure, Putin said, “NATO would be at the borders of the Russian Federation. Do you think we will keep it as it is: our troops at 1,500 (kilometers, 900 miles) away?”

On the other hand, Putin agreed to work to build trust in the region and specifically promised to address the issue of military planes flying over the Baltic with identification devices switched off. The next day, Russian Defense Minister Sergey Shoygu gave an order to develop a system of trust-building measures to make flying over the Baltic safer, the defense ministry said last Saturday.

Russian-Turkish relations are changing from freezing cold to moderately warm at breakneck speed. As soon as Turkish President Recep Tayyip Erdogan expressed his regrets over the downing of a Russian warplane, his Russian counterpart rushed to rebuild broken ties. Russian and Turkish Foreign Ministers met early this week to discuss the coordination of each country’s anti-terrorist operations in Syria. Russia and Turkey are far from agreeing on which specific groups to call terrorists, but Russia does need Turkish support to ensure the success of the expected assault on Aleppo by Assad’s forces. And there is no question that Russia and Turkey both need each other’s business. Russian tourists are eagerly waiting for charter flights to Turkey to resume and Turkish farmers and exporters are expecting their fruits and vegetables to return to Russian supermarket shelves.

Moscow seems to be working hard to rebuild its ties with its immediate neighbors and the U.S., but the main direction is bilateral, not multilateral.

Underlying these reassuring stories is the reality of Russia’s deepening economic crisis. As we pointed out earlier in this blog, Russia’s defense spending, which had been increasing for the past 15 years, will not grow. It remains at 3.8 percent of the gross domestic product this year, just like in 2015, but it is declining in real terms.  Early this week, the Russian government proposed to freeze the overall federal public expenditure, in nominal terms, at the level of 15.78 trillion rubles a year (246 billion U.S. dollars). A spending freeze that could not have happened without a Kremlin go-ahead will mean that 36 of 43 state programs, (roughly half of the budget) will decline in nominal value. The Kremlin prioritizes retirement costs, management of public finances, and other social expenditure over any further military expansion.

Moscow seems to be working hard to rebuild its ties with its immediate neighbors and the U.S., but the main direction is bilateral, not multilateral. The European Union is seen in Moscow as a bloc in decline, an entity permanently weakened by Brexit and previous acts of defiance by separate members. The relationship with NATO is yet to be redefined and currently stands at a freezing point. “We do not see NATO as a partner in solving the problems that concern both us and Europeans. We use other formats, like the Normandy Four or the International Syria Support Group, for resolving conflicts and countering mutually relevant challenges,” Ambassador Grushko said in the interview cited above.

Russia is economically weak and there is no sign of any new sources of growth emerging. Russia is militarily weak in relation to NATO and there is no way this disparity will be bridged any time soon. But Russia has clear strengths on each of the bilateral vectors it emphasizes. Russia is now aiming to demonstrate to the West that it can be a partner in building mutual trust, but with an important caveat: separate deals are welcome with specific countries, rather than with the Transatlantic Alliance as a whole.

The opinions expressed here are solely those of the author.

Just the Start of Brexit’s economic disaster

Phillipe Legrain

Phillipe Legrain

A few weeks before Britons voted on whether to remain part of the European Union, Michael Gove, one of the leaders of the Leave campaign, was asked why he should be trusted over the overwhelming number of economists and international authorities who opposed Brexit. “People in this country have had enough of experts,” he replied.

Experts are, of course, known to make mistakes. But in this case, the people who voted for Brexit will pay a big price for ignoring economic expertise. The harmful effects of this vote are both immediate and lasting.

Britons are already worse off. The pound has — so far — plunged by nearly 9 percent against the dollar, slashing the value of British assets, with higher import prices likely to follow. The stock market has also taken a hit. The prices of property, most British people’s main asset, are almost certain to fall, too. While Mark Carney, the governor of the Bank of England, has already pledged 250 billion pounds (about $345 billion) to support the financial system and has said he could offer more if necessary, central bankers cannot protect against an enduring economic shock.

Rarely have businesses faced such uncertainty. Britain’s economy had already slowed as they put investment decisions on hold ahead of the referendum. Now, a country renowned for its political and legal stability is descending into chaos. The future prime minister is unknown, as is the direction his or her policies will take. The favorite to replace David Cameron, Boris Johnson, the former mayor of London who opportunistically campaigned for Brexit, styles himself as pro-market and pro-globalization, but in the lead-up to the vote he said he supports curbs on European Union migration, tariffs on Chinese steel and higher public spending. The future terms on which Britain will trade with both the European Union and all the countries with which it has negotiated trade deals on Britain’s behalf are uncertain. Domestic regulations on everything from finance to environmental protection may change.

All that uncertainty is amplified by the prospect of a second referendum on Scottish independence, which may this time be won. In Northern Ireland, the political party Sinn Fein has already called for a referendum on a united Ireland.

Faced with such uncertainty, businesses are likely to continue to put investments on hold. Consumers may pull back, too. The resulting downturn will cause the government’s budget deficit, already large, to swell. The pound’s depreciation, which might have been expected to boost exports, is unlikely to do much to cushion the blow. Its huge decline in 2008 failed to boost exports and Brexit will dent them.

This unpredictable situation will not be brief. Once triggered, the formal process of leaving the European Union is supposed to take two years. But extricating the union’s second-biggest economy from 43 years of European Union legislation is a daunting task.

Negotiating a new trade relationship with the European Union is equally tricky. Britain seems certain to lose access to the single market — with which it does nearly half its trade — because this is conditional on accepting the free movement of people and contributing to the European Union’s budget. (These were key issues for pro-Brexit voters.) That will jeopardize the foreign investment and good jobs predicated on single-market membership. Britain-based financial institutions will lose their rights to operate freely across the European Union.

Brexit’s supporters are deluded when they argue that Britain could cherry pick what it likes about the European Union and discard the rest. Since exports to the European Union (13 percent of G.D.P. in 2014) matter much more to Britain than exports to Britain (3 percent of G.D.P. in 2014) do to the European Union, the European Union will call the shots. Other governments have every incentive to be tough, both to steal a competitive advantage and to deter others from following Britain out the door.

A fallback position is trading with Europe on the basis of World Trade Organization rules, as the United States does. But that entails tariffs on good exports — up to 10 percent on car exports, for example, most of which go to the European Union — as well as non-tariff barriers that gum up trade. It offers little access to Europe’s markets in services, in which Britain specializes. Less open markets will stunt competition, crimping productivity growth and living standards.

Brexit’s supporters claim that a deregulated Britain that trades with the rest of the world would prosper once unshackled from Brussels’s overregulation and protectionism. But Britain has the least regulated labor markets in the European Union and the second-least regulated product markets, so any potential benefits from deregulation are likely to be meager. Moreover, Britain is likely to end up with worse access to markets in the rest of the world. While it won’t be hamstrung by protectionist interests in the European Union, its relatively smaller economy, largely open markets and desperation for new deals will weaken its clout in trade negotiations.

The young, the higher educated and city dwellers, the most dynamic members of Britain’s economy, voted to Remain. They were outvoted by the old, the less educated and non-urban English, who often rely on taxpayer largess. With economic opportunities stunted, everyone will suffer for Leave voters wrongly blaming hard-working, taxpaying European migrants for everything they dislike about modern Britain and wrongly trusting economic charlatans like Mr. Gove.

Berlin calls Erdogan’s bluff on refugees




Angela Merkel’s top adviser on Europe dismissed threats by Turkish leader Recep Tayyip Erdoğan to pull out of the EU’s refugee deal with Ankara as “bluster,” according to leaked British diplomatic cables.

Erdoğan, who has vowed to upend the refugee pact if the EU doesn’t make good on its promise to grant Turks visa-free travel, has a greater interest in keeping the deal alive than allowing it to collapse, Merkel adviser Uwe Corsepius told a senior British diplomat in Berlin, according to the diplomatic cables seen by POLITICO.

“Uwe Corsepius told me today that the EU should remain calm,” the British diplomat reported back to London on May 13. “While Erdoğan still had the ability, in theory, to generate a surge in the refugee flow, his threats were just bluster. It was in Erdoğan’s strategic interest to keep the relationship with the EU working.”

The Corsepius cable was signed WOOD, suggesting it was written by Sebastian Wood, the British ambassador to Berlin.

Europe cut a deal with Ankara in March to provide billions of euros in aid, and grant Turkish citizens a visa waiver as early as this summer, in exchange for Turkey’s commitment to reduce the flow of refugees heading to Europe.

Since then, Turkey has signaled it wouldn’t accept a European requirement to reform its controversial anti-terror laws, sparking a heated back-and-forth between Ankara and European capitals.

Though little known outside of official circles, Corsepius — who previously served the senior-most civil servant at the Council of the European Union in Brussels — plays a key role in shaping Merkel’s European policies and has been deeply involved in negotiations with Turkey.

The Corsepius cable was written before recent tensions emerged this month between Berlin and Ankara over the German parliament’s decision to declare the Ottoman Empire’s 1915 massacre of Armenians a genocide.

Nonetheless, the communication helps explain Merkel’s tempered response to Ankara’s persistent taunts. The cable suggests Berlin has concluded that Erdoğan needs Europe just as much as Europe needs Turkey.

“EU accession and visa liberalization remained strategic goals for Turkey,” the diplomat paraphrases Corsepius as saying.

Berlin’s strategy is to draw the process out, in part to allow the tempers on both sides to calm. “We can keep this under control,” Corsepius adds, according to the cable.

Georg Streiter, a spokesperson for the German government, told POLITICO that he was not familiar with the cables in question.

Refugee numbers down

“Absolutely nothing has changed regarding the German position,” Streiter said, referring to the EU-Turkey deal.

Indeed, despite the heated rhetoric, Turkey has continued to honor its end of the bargain. The number of refugees crossing the Aegean to Greece has declined sharply in recent months.

To keep the deal alive, Berlin would likely be willing to grant Turkey further concessions, the British diplomatic cable concludes.

“Despite the tough public line, there are straws in the wind to suggest that in extremis the Germans would compromise further to preserve the EU/Turkey deal,” the cable says. “Officials have shown some interest, behind the scenes, in thinking about possible compromise formulations on the anti-terror law.”

The batch of cables, which include a detailed analysis of how the U.K. should position itself on the Turkey question, offer a rare, unfiltered glimpse of the behind-the-scenes diplomatic maneuverings between Europe’s capitals. A spokesman for the U.K. foreign office said the telegrams were “reports from our diplomatic posts, not statements of British government policy.”

One of the cables, sent from the British embassy in Ankara on May 5, sparked controversy in the U.K. after being leaked to the Sunday Times.

The telegram suggested that to keep Erdoğan on-side, the U.K. government should consider setting up its own visa-free scheme, dropping travel restrictions for Turkish “special passport” holders. About 1.5 million Turks currently have such passports, which are supposed to be for officials, civil servants, teachers and their families, the paper said.

The suggestion was jumped on by the Brexit campaign as evidence of secret negotiations to open the U.K.’s borders to Turks — an allegation furiously rejected by Downing Street.

Karnitschnig reported from Berlin and McTague from London. Janosch Delcker contributed to this article.

The Conservative Case Against Brexit

Foreign Affairs Magazine

Dalibor Rohac


It is now up to British voters to decide whether the United Kingdom should leave the European Union—not to foreign leaders, including U.S. President Barack Obama and IMF head Christine Lagarde, who have offered their advice on what the right choice might be. The voters, however, would do well not to automatically dismiss what Obama and Lagarde have said. Rather, they should reflect on their substantive merits.

The truth is that the case for “Brexit” does not hold water. Although there is much to criticize about the EU, its existence is an important achievement, which would be put in peril by the United Kingdom’s departure from the bloc. Conservatives, classical liberals, and advocates of free markets should be particularly wary of becoming cheerleaders for the EU’s demise. Instead, they ought to be at the forefront of efforts to reform and improve the bloc.

Free-marketeers and small-c conservatives might see Euroskepticism as a natural extension of free-market convictions. For fervent believers in the strength of competition, including between different currencies and regulatory and tax systems, European integration might look like a misguided attempt at integrating markets via the unnecessary centralization of political decision-making. And so it seems logical for the president of the Czech Republic, Václav Klaus, to compare the EU to the former Soviet Union, and for free-market think tanks to criticize the EU’s populist overregulation, common currency, and common agricultural policy, among other things.

But Euroskepticism is not an inevitable corollary of free-market conservative thought—something that the iconic voices of the free-market movement well understood. Friedrich von Hayek wanted a European federation. He called “the abrogation of national sovereignties” that it would entail a “logical consummation of the liberal [i.e. free-market] programme.” Hayek, who later received the Nobel Prize for Economics, recognized that the efforts to liberalize trade in the nineteenth century had ultimately failed because European countries lacked a joint system of governance that would keep domestic protectionism and nationalism at bay.

Illustration picture of postal ballot papers June 1, 2016 ahead of the June 23 BREXIT referendum when voters will decide whether Britain will remain in the European Union.

Illustration picture of postal ballot papers June 1, 2016 ahead of the June 23 BREXIT referendum when voters will decide whether Britain will remain in the European Union.

Hayek’s thinking on international federalism developed alongside that of Wilhelm Röpke, a German free-market economist who argued that Europe‘s postwar reconstruction should involve a scaling up of the Swiss model of governance to the international realm, since that would allow the creation of a system of governance that would be simultaneously decentralized and allow for the joint provision of fundamental, pan-European public goods—especially economic openness and security.

Even Hayek’s mentor, Ludwig von Mises, who was generally seen as a much more radical free-marketeer than his protegé, wrote in 1944 that for Western European countries, “the alternative to incorporation into a new democratic supernational system is not unrestricted sovereignty but ultimate subjugation by the totalitarian powers.” And, when British Prime Minister Margaret Thatcher campaigned for the United Kingdom’s membership in the European Economic Community in 1975, she recognized that “almost every major nation has been obliged…to pool significant areas of sovereignty so as to create more effective political units.”

Today’s world is very different from that of the 1940s or the 1970s. But that does not make the European project irrelevant. Quite the contrary. Even the seemingly economic components of European integration, such as the single market, require a significant pooling of political sovereignty, a bureaucracy, and courts to enforce the rules. In part, this is because a single market goes far beyond the question of the tariffs that, until 1968, separated markets in the countries of the European Economic Area. It has sought to curb regulatory protectionism and other, more subtle barriers to trade, including distortionary state aid spending directed at national champions.

The single market did not arise overnight. It took decades of political and legislative effort, most notably in the form of the Single European Act, spearheaded by Thatcher and Conservative politician and eventual European Commissioner Arthur Cockfield, to reach the degree of economic openness existing in the EU today. The single market is perhaps the most striking example of what the EU does best—namely, that it serves as a commitment device.

When Euroskeptics complain of the constraints that European integration imposes on national sovereignty, they are thus missing the point. European treaties, the entire body of EU law, and the decision-making authorities disentangled from national politics exist for a good reason—to allow politicians in member states to get around the problem of credible commitment, which is pervasive in democracies, and which involves the omnipresent temptation of policymakers to renege on their promises.

The United Kingdom benefits greatly from the “financial passport” that allows its banks and other financial businesses to operate anywhere in the EU. To see how, look to Eastern European reformers in places such as Slovakia or Poland who used the prospect of EU accession as a sweetener for domestic reforms that would have otherwise been unpalatable. For countries such as France or Italy, EU policy is often the only thing that keeps their leaders from returning to their countries’ historic traditions of providing state aid to national champions. It was, after all, the European Commission that forced Italy to dismantle its state-owned steel industry in the 1990s and pushed France toward the opening of its electricity market in 1999. Without the United Kingdom’s voice at the table, the EU would inevitably become a much weaker force for economic liberalization, and some of prior achievements could even be reversed.

Euroskeptics have a point when they say that there is a flipside to the single market—namely, the existence of a large and burdensome system of regulation at the European level. It would be much better, they argue, if member states simply recognized each other’s regulations and technical standards without imposing a one-size-fits-all solution on everyone. But unconditional mutual recognition is not realistic—largely because governments are unable to commit credibly to such a policy. Hence, although common EU directives certainly impose a burden on the European economy, that burden needs to be compared against the burden of 28 different and potentially incompatible regulatory systems, hindering free movement of goods, services, capital, and people.

The United Kingdom, with its sizeable sector of financial services, benefits greatly from the “financial passport” that allows its banks and other financial businesses to operate anywhere in the EU. The City of London is also home to the European Banking Authority, an EU-wide financial regulator, over which the United Kingdom has had a significant influence. A departure from the EU could jeopardize these arrangements and raise doubts about the future of the city as the world’s financial capital.

A car sticker with a logo encouraging people to leave the EU is seen on a car, in Llandudno, Wales, February 27, 2016.

A car sticker with a logo encouraging people to leave the EU is seen on a car, in Llandudno, Wales, February 27, 2016.

The complaint about EU regulation is just one example of the nirvana fallacy of Euroskepticism. No one would deny that the European Union is a highly flawed organization. However, it makes no sense to compare it to impossible alternatives. The relevant counterfactual to today’s European Union is the Europe of protectionist, nationalist states that was long the baseline of the continent’s history.

Even the late nineteenth century, sometimes called the First Age of Globalization, was the period of German Chancellor Otto von Bismarck’s “iron and rye” tariff, France’s Méline tariff, and a continent-wide drift toward protectionism. In 1913, tariffs on manufactured goods averaged 18 percent in Austria-Hungary, 13 percent in Germany, 20 percent in France, 41 percent in Spain, and a staggering 84 percent in Russia. At that time, the United Kingdom appeared a free-trading nation in comparison, with no tariffs on manufactured goods and an average applied tariff of around 5 percent on all imports. Yet, throughout much of the nineteenth century, until the late 1870s, the UK was highly protectionist, with average tariffs exceeding those in France.

With the advent of World War I, followed by the Great Depression and then by the bloodiest conflict in human history, international trade essentially collapsed, greatly exacerbating the human misery that characterized the first half of the twentieth century. By that token, the past 70 years of European history, during which Europe has become more economically open, democratic, and peaceful than ever before, are a complete historical anomaly. Whether one believes that the EU deserves any credit for this outcome, one should think twice before trying to tinker with the system of international political architecture existing in Europe.

A British vote to leave the E.U. could shatter the United Kingdom

Washington Post

Griff Witte – May 30th
[Original Article]

 When Scotland voted in an independence referendum in September 2014, nationalist leaders pitched it as a once-in-a-generation chance to break a three-
century-old bond.

But less than two years after Scots opted to remain in the United Kingdom, the specter of secession again looms over the lush green expanse of the British isles. The trigger this time is another referendum with existential impact: next month’s vote on whether to leave the European Union.

If Britain chooses to ditch the E.U. despite a vote to stay from the Euro-friendly Scots, nationalist leaders here say they will revive the push for an independent nation in order to keep Scotland inside Europe. And they think that the second time around, they would win.

“Pulling Scotland out of the European Union against our will would be a change in material circumstances,” said Alex Sal­mond, who led the campaign for independence in 2014 and now represents Scotland in the British Parliament.

In Peterborough, 45-minutes north of London, anti-E.U. sentiment runs strong. A large part of the discontent is the mass influx of Eastern European immigrants that residents say has transformed the ancient market town. 

In that scenario, he said, there will be “a referendum on Scottish independence within the next two years. And this time, the result would be ‘yes.’ ”

The potential for a British breakup as fallout from the June 23 referendum underscores just how much is at stake when the country decides whether to become the first nation to withdraw from the 28-member E.U.

A shock to the global economy, a rupture in the Western alliance and a change in occupancy at 10 Downing Street are all possible consequences of a British vote to leave — popularly known as “Brexit.”

The very existence of Great Britain could also be on the line.

British Prime Minister David Cameron reluctantly offered the public a direct say over the country’s E.U. membership for much the same reason he acceded to the Scottish call for an independence vote in 2014: He thought it was the only way to settle the fundamental questions at the heart of British identity. Is the United Kingdom part of Europe or not? Is it one nation or more?

But the potential for a British exit from the E.U. to reawaken the push for Scottish independence reflects just how much Cameron’s strategy may have backfired. Instead of laying the issues to rest, critics say, he may have unleashed the age of the “neverendum” — a prolonged period of turbulence that does not stop until the public votes to take Britain out of Europe and split Scotland from the United Kingdom.

“In order to put these questions to bed for a generation, you need a vote of 60-40,” said Menzies Campbell, a veteran Scottish member of Parliament who supports keeping Scotland in Britain and Britain in the E.U. “If the losing side gets 45 [percent], they’re not going to give up.”

That was what pro-independence Scots won in the 2014 vote. Since then, their side has delivered a pair of electoral thumpings: The Scottish National Party won by huge margins in both the 2015 British parliamentary elections and in the Scottish parliamentary contests this month, suggesting that the appetite for independence has hardly ebbed. Opinion polls show that Scotland would be about evenly divided if the independence vote were re-run today.

If Britain chooses to leave the E.U. next month — despite Scottish objections — that could tilt the balance in the nationalists’ favor, reinforcing divisions between north and south.

The visceral anti-E.U. sentiment that runs through English politics can hardly be found north of Hadrian’s Wall, the ancient stone fortification that bisected Britain during Roman times. Polls show a decisive advantage for the “in” campaign in Scotland, while England flirts with “out.”

The reasons for the difference are both historical and contemporary. Scotland has long had a close affiliation with continental Europe, going so far as to side with the French in wars against the English. As citizens of a small nation, Scots see membership in a broader European community as a comfort; the English are more likely to see rival power centers on the continent as a threat.

“There’s an emotional connection between Scotland and Europe,” Campbell said. “We’ve never had the residual antagonism toward Europe that has been maintained in England.”

But perhaps the most important reason for the split in opinion is immigration.

In crowded England — which makes up nearly 85 percent of the U.K. population but only about half the land — many people regard arrivals from elsewhere in Europe under the E.U.’s free-movement rules as an unwelcome burden. In sparsely populated Scotland — the entire population of 5 million is roughly equal to the inner boroughs of London — there is plenty of room for newcomers.

“Scotland is not full up,” Salmond said. “We’re much more like America of 100 years ago than the England of today.”

Scotland is not the only place in the United Kingdom where next month’s referendum threatens to bring politically destabilizing consequences. Welsh leaders, who tend to be pro-E.U., have said a British vote to abandon the union could spark a constitutional crisis. In Northern Ireland, where a tenuous peace has held for nearly two decades, a vote to leave would add a new line of partition to the Emerald Isle, with the Republic of Ireland inside the E.U. and the counties of Northern Ireland outside it.

Analysts have warned that such division could hinder the economy, prompt renewed border controls and revive dangerous levels of sectarianism.

In an echo of the nationalist push in Scotland, Catholic leaders in the generally pro-European north say that if Britain opts to leave the E.U., there should be a referendum on the reunification of Ireland.

Surveys suggest that Protestant voters would block any such move and keep Northern Ireland inside the United Kingdom. The polls in Scotland are far less clear, but the determination of nationalists to hold another referendum is not.

“The nationalists will use any justification to call another vote,” said Ross Thomson, a Conservative member of the Scottish Parliament who is among the few elected officials in Scotland campaigning for Brexit. “It doesn’t have to be the E.U. They’ll just do it when the polls look good.”

Other Brexit advocates who favor keeping Scotland inside the U.K. say they do not think the E.U. matters enough to Scottish voters to make a difference in an independence vote.

“It’s very soft support,” said Robert Malyn, a pro-Brexit campaigner who was handing out fliers one recent afternoon at the central train station in Glasgow, Scotland’s largest city. “The E.U. is not loved enough to be a red line.”

The lack of enthusiasm is reflected in the difference between this campaign and the one in 2014. During the run-up to the independence vote, all of Scotland — from the Gothic back alleys of Edinburgh to the remote valleys of the Highlands — seemed bathed in the dueling paraphernalia of the “no” and “yes” camps. Signs hung from storefronts, buttons peeked out from jacket lapels, and fierce debates erupted nightly in pubs and across dinner tables.

This time, there is virtually no visible evidence that in less than a month, Scotland — and the United Kingdom — will be making such a consequential choice.

“The E.U. is such a big institution, and it seems far away from everybody. It’s a hard thing to get your head around,” said Jonny Ross-Tatam, president of the students association at the University of Edinburgh.

Still, Ross-Tatam has been making the case among his fellow students for why it matters to stay in the E.U. If Britain leaves, he said, research funding would be jeopardized and students could lose their ability to live, work and study across the continent.

“We can go to Sweden, Germany or France and not pay anything in tuition,” he said. “This vote is one of the biggest decisions that our generation is going to have to make.”

That is what campaigners on both sides told Scots in the lead-up to the 2014 referendum. But these days, such monumental decisions are coming often — and there could be another one looming.

Indeed, Salmond said that a second independence referendum will be held sooner or later, regardless of which way Britain votes next month.

“Independence is inevitable,” he said. “We’re just debating time scale now.”

Karla Adam in London contributed to this report.


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