Commentaries

Should he stay or should he go? Miliband ponders

Should he stay or should he go?

British Foreign Secretary David Miliband could be Europe’s first foreign minister in all but name, with one of the most influential jobs in shaping the place of the 27-nation bloc on the world stage, if he is willing to risk leaving British politics for the next five years. That’s a big if.

Miliband is half of a “ticket” concocted by French and German diplomats to fill the two new top jobs created by the Lisbon treaty. The other half is Belgian Prime Minister Herman van Rompuy, the preferred candidate for president of the European Council. Officially, Miliband says he is ”not available” and is backing Tony Blair’s forlorn bid for the presidency. If he turns the role down, it could well to go to former Italian Prime Minister Massimo d’Alema.

The High Representative for foreign and security policy, with a big diplomatic staff, a multi-billion-euro budget and the additional position of senior vice-president of the European Commission, will arguably be more powerful than the European Council president, whose role is largely to prepare and chair quarterly summits. Miliband would bring dynamism, an incisive intellect and inspiring oratory to the job.

At 44, he is seen as the natural next leader of the Labour Party if, as expected, Gordon Brown loses the next general election. Given the average length of Britain’s political cycle since the 1980s, the centre-left party probably faces at least two parliamentary terms in opposition – roughly eight years. So Miliband would have time to burnish his international credentials in Brussels and return home before he turns 50, and before Labour has exited the political wilderness.

Another former Labour leader, Harold Wilson, famously said that a week is a long time in politics. Five years is an age. Other Labour politicians will fill the vacuum left by Miliband if he decamps to the continent. They may be less talented, but no one is likely to placidly keep the opposition leader’s seat warm until he is ready to make a triumphant comeback.

And don’t rule out smaller short-term considerations. A Miliband departure would cause an unwelcome by-election for Labour before the next general election.

Turkey’s EU bid fades with little drama

Turkey’s bid to join the European Union is fading away with surprisingly little drama because investors no longer see the prospect of accession as an essential policy anchor.

But EU leaders should keep Ankara’s entry negotiations alive on the back burner rather than trying to engage Ankara on alternatives to membership, as French President Nicolas Sarkozy would like to do.

In a version of the old Soviet workers’ joke, “they pretend to pay us and we pretend to work,” the buzz on Turkey in the European Commission’s enlargement department is, “they pretend they’re reforming and we pretend we want them”. (more…)

Third person spells trouble in politicians

Beware of politicians who speak about themselves in the third person. It doesn’t necessarily mean they are paranoid. But it is usually an indicator of some kind of trouble.

More than a decade before he was forced out of the White House for lying, destroying evidence, bugging his political opponents and covering up a crime in the Watergate affair, Richard Nixon (right) famously told journalists at what he said was his last press conference: “You won’t have Nixon to kick around any more.”

Now Italian Prime Minister Silvio Berlusconi (left) has taken to referring to himself in the third person as the victim of left-wing judges and the media (at least the parts of it that he doesn’t own or control). His response to the Italian Constitutional Court’s ruling on Wednesday overturning a law that granted the prime minister immunity from prosecution during his term in office was to declare:

Without Silvio, the country would be in the hands of the left and you all know what would happen. The trials that they are going to throw against me are a farce. Long live Italy! Long live Berlusconi! 

What do the two have in common? Clearly a belief that they are victims of persecution, and perhaps also a sense that power exists to be used implacably against enemies.

Berlusconi, a billionaire media magnate and soccer club owner, also has a lot in common with Bernard Tapie, a self-made French businessman who owned Olympique Marseille when they beat Berlusconi’s AC Milan to become European champions in 1993. Tapie was briefly made a minister under Socialist President Francois Mitterrand before being sent to prison for fraud and match-fixing. He too talked of himself frequently in the third person, making comments such as “They want to destroy Tapie”.

In some cases, politicians may be indicating a loss of reality by referring to themselves in the third person. In his final months as president of the crumbling Soviet Union, as power ebbed from his office, Mikhail Gorbachev took to calling himself “Gorbachev” in interviews and speeches. Although he enjoyed international acclaim for loosening Moscow’s iron grip on eastern Europe and Soviet society, he too came to feel that he was a victim of enemies both among hardline Communists and nationalists who wanted to destroy him politically.

Sarkozy looks to stash some cash under the mattress

On the face of it, France’s 2010 budget is just what the G20 doctor ordered. No early withdrawal of economic stimulus spending. Allowing the welfare system’s ”automatic stabilisers” to absorb the shock of the economic crisis. No raising of taxes or slashing of public spending until growth returns. A small shift away from tax on business towards taxation of carbon.

Of course the headline numbers are horrible and under normal circumstances would prompt disciplinary action by the European Union. The 8.5 percent forecast public deficit will be the highest in French history. Public debt will rise from 77.1 percent of GDP this year to 91 percent in 2013. The EU ceilings are a deficit of 3 percent and debt of 60 percent of GDP. But compared to Britain, Spain or Ireland, France’s deficit will look almost modest.

French governments traditionally make rosy growth assumptions at budget time, enabling them to forecast a deficit which often turns out to be bigger than planned. The European Commission then queries the growth assumption, leading to months of haggling between Paris and Brussels.

The novelty this year is that President Nicolas Sarkozy’s government has assumed lower 2010 growth (0.75 percent) than most private economists forecast. The consensus of private forecasts submitted to the government with the budget is for 1.1 percent growth next year. Some expect as much as 1.5 percent growth. If the more optimistic figures are right, Sarkozy will have a stash of cash under the mattress which he could spend to help win next year’s regional elections, for example by helping out angry milk producers, or use to cushion the impact of inevitable deficit cuts in 2011 — the year before he seeks re-election.

That might not reassure European officials, who fear Sarkozy will make no serious deficit cuts until after the 2012 presidential election. But it would be smart politics.

SPD debacle shows agony of European centre-left

It was a black night for Germany’s Social Democrats. Their catastrophic general election score of just 23 percent was by far the worst since the creation of the Federal Republic in 1949. It was more than 11 points worse than their result in 2005, and nearly 6 points worse than their poorest post-war showing in 1953.(Picture shows party activists at SPD headquarters watching first exit polls on television)

Their shattering defeat was the latest in a series of debacles for the European centre-left since the onset of the financial crisis. Just when the social democratic outlook of a strong state to regulate and curb the excesses of the markets and protect workers from the rough edges of capitalism has made a comeback around the developed world, its original proponents are in disarray.

Why? Partly because the centre-left is blamed by its own voters for having embraced deregulation and globalisation without taking care of the losers of such policies. Partly because it lacks charismatic leaders of the calibre of Helmut Schmidt, Francois Mitterrand, Tony Blair or Barack Obama. And partly because new social and economic forces — the services sector and the knowledge economy — and new ideas — ecology and communitarianism — have moved the political goalposts.

France’s Socialist party has been consigned to opposition since 2002 and is deeply divided over personalities, policy and ideology. The British Labour Party, after a record 12 years in power, is deeply unpopular and looks doomed to lose a general election next year. The Italian left has not managed to mount a serious challenge to Prime Minister Silvio Berlusconi, despite scandals over the billionaire media tycoon’s sex life.

As in France, the SPD bled votes to the radical Left party, to the Greens, to the conservatives and to abstention. An estimated 2 million Social Democratic sympathisers stayed home. As many switched to the Left — a mixture of former East German communists and disenchanted former Social Democrats demanding red-blooded socialism and an exit from NATO and the European Union.

The SPD took the blame for unpopular curbs on unemployment benefits under former Chancellor Gerhard Schroeder, as well as raising the retirement age to 67 from 65 under the grand coalition with conservative Chancellor Angela Merkel. An election-day opinion poll showed 67 percent of SPD sympathisers believed the party had betrayed its principles on these issues.

The party now has a chance to regenerate itself in opposition. But it will share the hard benches with the more outspoken Left party, which scored a record 12.5 percent on Sunday, and the environmentalist Greens, who draw a lot of young and educated voters. The SPD’s electorate is shrinking or dying out — pensioners, trade unionists, manufacturing and public sector workers. Whichever way the party goes in opposition, it stands to lose as many voters as it wins back.

West raises stakes over Iran nuclear programme

President Obama and the leaders of France and Britain have deliberately raised the stakes in the confrontation over Iran’s nuclear programme by dramatising the disclosure that it is building a second uranium enrichment plant. Their shoulder-to-shoulder statements of resolve, less than a week before Iran opens talks with six major powers in Geneva, raised more questions than they answer.

It turns out that the United States has known for a long time (how long?) that Iran had been building the still incomplete plant near Qom. Did it share that intelligence with the U.N. nuclear watchdog, and if not, why not? Why did it wait until now, in the middle of a G20 summit in Pittsburgh, to make the announcement — after Iran had notified the International Atomic Energy Authority of the plant’s existence on Monday, after Iranian President Mahmoud Ahmadinejad had delivered a defiant speech to the U.N. General Assembly on Wednesday and after the Security Council had adopted a unanimous resolution calling for an end to the spread of nuclear weapons on Thursday?

Is this all part of Obama’s choreography to  build international pressure on Iran by getting Russia, in return for the dropping of plans to put a U.S. missile shield in Poland the Czech Republic, to threaten more sanctions against Tehran? A U.S. official says Obama shared the intelligence with Russian President Dimitry Medvedev at the United Nations this week and China had only just been informed. Did Obama try and fail to get Medvedev and Chinese President Hu Jintao — both in Pittsburgh — to join the three Western leaders on the podium? Or was his hand forced on timing by the fact that the New York Times had got wind of the Iranian nuclear plant and was set to publish the news on Friday?

The division of labour between Obama, Sarkozy and Brown was striking. The U.S. president sounded stern but his tone was measured. He stressed his commitment to dialogue and negotiation with Iran and to Tehran’s right to peaceful nuclear energy. He did not mention sanctions, let alone the possibility of military action. It fell to the Europeans to inject a tone of menace.

Sarkozy accused Iran of defying the international community and taking the world on a dangerous path, and said that unless Tehran changed course by December, there would be tougher sanctions. Brown charged the Islamic Republic with deception and said the international community had no choice but “to draw a line in the sand”, and that he did not rule out anything although sanctions were the preferred route. 

Will the latest disclosure on what Iran insists is a peaceful nuclear programme persuade Russia to renounce the sale of advanced S-300 anti-aircraft missiles to Tehran? Will it persuade China, which reaffirmed its scepticism about more sanctions this week and has begun supplying gasoline to Iran, to change its mind? The West sees Iran’s dependency on imported fuel as a key vulnerability.

Friday’s dramatic announcement was a clear effort to appeal to the world court of public opinion and maximise pressure on Tehran before the Oct. 1 talks, but there is no sign that the Islamic Republic’s leaders are even considering yielding on their nuclear ambitions. On the contrary, they seem convinced that the nuclear standoff will enable them to patch over deep internal divisions over the disputed June presidential election by playing the patriotic card.

“Tobin tax” gaining ground in Europe

No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe.

European Union leaders could not agree to put it on the agenda of this week’s G20 summit on reforming the financial system in Pittsburgh, but the leaders of France, Germany and the European Commission endorsed the concept. (more…)

Forget about bankers’ bonuses

Bank bonuses have been a red herring of the financial crisis, repeatedly deflecting attention from deeper problems. So it is disappointing that the leaders of the G20 nations propose to squander yet more time on the subject in Pittsburgh.

While the French may have recently watered down their proposed curbs on bonuses, their voter-pleasing plans still look likely to be at the heart of the meeting. Worse, they seem to be pushing aside the United States’ sensible proposals for tougher capital rules for banks.

Even so, there is a way of turning the tables on the French. Obama should make a powerful case for capital rules as a tool of social justice, which would moderate princely bank pay while shielding the taxpayer.

Curbs on bank bonuses are intended to serve two purposes. The first is to remove incentives for traders to take reckless risks in expectation of a lavish year-end payout. The second aim is social catharsis — to reduce overall compensation to more acceptable levels. The French plan would achieve neither.

If regulators give banks enough slack to take large risks, they will find a way of doing so. Even if bonuses were eliminated altogether, ambitious bankers could be encouraged by executives to bet the farm in expectation of a large bump up in basic pay.

It is also doubtful that rules on bonuses would really work: Financial institutions are masters at navigating their way around all kinds of regulations.

By contrast, America’s bank capital plan promises to get at the root cause. One of the chief reasons that bankers are overpaid is their bets are backed by an implicit government guarantee.

Gifts for all on Barroso’s Christmas tree

Jose Manuel Barroso’s pitch to the European Parliament for a confirmation vote on Wednesday was like a Christmas tree, with gifts for everyone.

Bidding for a second term with a wider majority than his own centre-right political family, Barroso produced last-minute peace offerings for the centrist liberals, the centre-left socialists, the environmentalist greens, women, trade unionists, the French and the scientific community.

To the left, he promised early regulation to clarify the status of workers posted from low-wage countries to higher-paying regions following a series of EU court rulings that infuriated trade unions. He also promised a “quality framework for services of general interest” (whatever that means). And he pledged to draft a ”women’s charter” to close the gender pay gap. 

But he fell short of the Socialists’ demands for a legal guarantee of “equal pay for equal work in the same place, regardless of gender”, and for a directive shielding public services from the rigours of EU competition and state aid policy.

For the liberals, he vowed to create a European commissioner for justice, fundamental rights and civil liberties, a separate portfolio for the one in charge of home affairs, security and migration.

For environmentalists, he promised to establish a commissioner for climate action to send a signal of the EU’s ambition to lead the world in fighting global warming. But did not make clear whether that job, currently part of the wider environment portfolio, would also be in charge of the EU’s energy and transport policies.

For the scientific community, he promised to appoint a chief scientific adviser to give pro-active policy advice and promote research and innovation, areas in which the EU is lagging behind the United States.

German Opel aid tests EU rules

The credibility of the European Union’s single market and state aid rules is at stake over Germany’s selective offer of taxpayers’ money to preserve Opel factories and jobs on its soil.

On the face of things, it looks like an open-and-shut breach of state aid rules. General Motors agreed last week to sell 55 percent of its European arm to a consortium of Magna and Russia’s Sberbank under massive pressure from Berlin.

German leaders have said publicly that they promised 4.5 billion euros in loan guarantees for the Magna-led bid — but not for rival bidder RHJ International — because it would preserve all four production sites and as many jobs as possible in Germany. The European Commission says:

state aid cannot be subject to additional non-commercial conditions concerning the location of investments and/or the geographic distribution of restructuring measures.

QED? Well, not quite.

The German authorities are unlikely to have been naive enough to put any such linkage in writing. And without such formal evidence, the EU competition regulator may find it hard to deny approval for the rescue. After all, didn’t French President Nicolas Sarkozy get away with a 6-billion-euro rescue loan to French car makers Renault and Peugeot in March on the unwritten (but loudly proclaimed) understanding that they preserve production sites in France?

European Competition Commissioner Neelie Kroes says she will scrutinise closely whether Germany set “de jure or de facto” conditions for helping Opel, whether aid was offered to only one bidder, and why its business plan was considered preferable. Kroes has a second possible line of attack, since Brussels must be convinced that a rescued Opel will be viable in the long run. She should talk to the German government’s own trustee, who voted against the Magna sale, questioning its chance of survival due to its small size and chronic overcapacity in the sector.