Rediscovering a Forgotten Past – State, Identities and Cohesion

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Credit Emilio Naranjo/European Pressphoto Agency

Politics in Europe are alive; Catalonia is the latest example. The financial crisis was the axiomatic moment in contemporary European politics fermenting domestic crises throughout and within the Union, occassionally bursting ever since. These crises have equally affected all EU Member States leading to the rise of nationalist forces (notably in France, the Netherlands, Austria, Germany, the UK, Poland, Czech Republic and so forth) shaping the national political rhetorics and policy-agenda.

The latest crisis is undeniably Sunday’s referendum in Catalonia, which exposes an absolute dilemma and threatens the integrity of Spain, one of the largest EU Member States and Eurozone members. In a European Union composed of 28 sovereign states wherein domestic politics remain in the realm of the sovereign states (unless under a policy-area of a European competence), one core commonality remains binding democratic values and principles. Catalonia is one of these cases wherein state sovereignty and regional call for self-dertmination meet and clash.

The Catalan Nightmare

The crisis in Catalonia has changed gear, and potentially seen a shift in legitimacy from Madrid to Barcelona, with the reprehensible response by the Mariano Rajoy’s government on October 1 ensuing the unilateral Catalan referendum. Prime Minister Rajoy had the law on his side as the Spanish constitutional courts have ruled on several occasions on the illegality of a referendum on the independence of Catalonia. But “Spanish Prime Minister Mariano Rajoy has transformed” argued Frederiga Bindi “what would have otherwise been a unilateral, unconstitutional, and useless referendum into a major victory for the separatists.”

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Cartoon: Chappatte

The legal baseline is Spain 1978’s constitution, which stipulates that Spain cannot be broken up as “the indissoluble unity of the Spanish nation” and “the common and indivisible homeland of all Spaniards.” Only the Spanish Parliament can changed the constitution.

Catalonia is a critical piece of Spain, which is the 14th largest world economy and the 4th largest in the EU (post-Brexit). Catalonia counts about 16 percent of Spain overall population Catalonia is one of the richest regions of Spain contributing almost 20 percent of the Spanish economy. One of the arguments in favor of the independence is the lack of proportionality between Catalan contributions to the overall budget and the return. From the 20 percent of contribution, Catalan residents receive 14 percent back for public expenses. Economically, Spain may certainly face serious internal trouble if Catalonia were to secede.

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Emilio Morenatti/Associated Press

Without going back to 16th century Spanish history, Catalonia has always considered itself unique and separate from Spain with its own history, language, culture and therefore nation. In contemporary Spanish history, 90 percent of Catalonia supported the 1978 constitution. But the separatist movement and feeling have always remained underneath. The recent financial crisis, shifting into the Eurozone crisis, leading to the near collapse of the PIIGS country counted Spain in the mix contributed to exacerbate the tensions between Madrid and Catalonia. Adding to the financial crisis, Spain’s constitutional court struck down parts of the new statue of autonomy for Catalonia in 2010. Since then, Madrid did not reach several opportunities in order to continue talks with the region.

Prior Sunday’s violence, polls were always consistent in proving that only 40-45 percent of Catalans have been in favour of independence. 2013 was the year with a peak in the support level at 49 percent. Prior the announced referendum on October 1, a majority of Catalans were in a difficult position between Catalan authorities to hold the referendum on independence and the strong-hold position by Madrid.

Mariano Rajoy of Spain called on the separatist leaders, behind Carles Puigdemont, President of the Generalitat of Catalonia, to stop the “disobedience” and the “escalation of radicalism.” In a rare televised speech on the evening of October 3, the King Felipe VI of Spain condemned the actions by the separatists framing them as illegal and infringing the legal structure of Spain. “They have tried to break the unity of Spain and national sovereignty” he went on to claim. Ensuing the banned referendum, Catalonia has announced that it will move forward and declare independence from Spain in the near future (after a parliamentary session on Monday). Legally, if a declaration of independence were to be made, the central government of Spain could suspend Catalan autonomy under Article 155 of the 1978 Constitution. Such option would bring the country in a major constitutional and political crisis.

And, the European project?

Where does the European Union fit in this complex political puzzle? The EU is indirectly the cause and the remedy. But it is as well, rightfully so, a reluctant actor. In the case of the Catalan crisis, the EU and its set of institutions have remained as distant as possible from this domestic crisis. For the EU, this is not only bad news, but a sign of major internal forces at play within Member States. “Separation and secession within a member state is very bad news for a block” argued Stephen Beard of Marketplace “that is striving to hold itself together and is currently doing its utmost to punish Britain for daring to break away from the EU.”

The Treaties of the EU are clear regarding the competencies of States and the EU. For instance, Article 4.2 of the TEU stipulates that, It [the Union] shall respect their essential State functions, including ensuring the territorial integrity of the State, maintaining law and order and safeguarding national security. In particular, national security remains the sole responsibility of each Member State.

Ensuing the use of force by Madrid on Sunday in Catalonia, the EU called out and condemned government violence against citizens. On October 2, the Commission released an official statement underlining the illegality of the referendum under Spanish law. Without directly targeting PM Rajoy, the Commission ended the statement by claiming that “Violence can never be an instrument in politics.” However, Spain may be one of the largest and Western EU Member State, the Commission must be as critical as it has been in Poland and Czech Republic. “It is the kind of violence the European Union” writes Steven Erlanger of the New York Times, “would ordinarily condemn in high moral terms and even consider punishing.”

On Wednesday, the Commission called for an open dialogue between the Catalan authorities and the Spanish government. Frans Timmermans, the Commission’s deputy head told before the European Parliament that “it’s time to talk.” Timmermans still maintained the official position of the Commission endorsing the legal position of Spanish Prime Minister Rajoy. During the European Parliament’s session, two leading MEPs, Bavarian Manfred Weber and Flemish Guy Verhofstadt emphasized on the fact “strong regional identity and autonomy did not mean breaking up existing nation states.” What is certain is that “if Catalonia were to leave Spain,” underlined Jonas Parello-Plesner of the Hudson Institute, “it would also leave the EU, only to start a cumbersome reentry process.”

EU Member States, all sovereign states, are not usually in favor of secessionist movements, especially within the Union. In the current context of the Brexit negotiation, the EU and the 27 Member States are quite reticent to see a region of a Member State calling for self-determination and seeking independence. “Throughout my life,” wrote Javier Solana, a former Spanish minister, former NATO Secretary General, and the first EU High Representative, prior the Sunday violence, “I have witnessed the fragmentation of many countries, and I cannot conceive of that happening in the European Union of today.” Despite the reprehensible past action and poor tactic by PM Rajoy, it is difficult at this time to foresee any support from the 27 European capitals for Catalonia’s independence.

Lastly, the Catalonia case brings home a reality, which seems to have been forgotten in 220px-2012_Catalan_independence_protest_1021.jpgone of the richest regions of the world: history tells us that states will use force to maintain their integrity and unity. In his address to the nation, King Felipe VI, “Today Catalan society is fractured and in conflict,” he said. “They (the Catalan leaders) have infringed the system of legally approved rules with their decisions, showing an unacceptable disloyalty towards the powers of the state.” The message is direct, the state shall remain and fight any types of fragmentation.

For decades, Europeans have watched separatist efforts in Iraq-Turkey (Kurdistan), Sudan (South and North), Serbia (Kosovo), Chechnya (Russia), Nepal (China) with a certain distance condemning state violence and believing in some sort of European exceptionalism, that it would not happen here inside the Union. Well Spain demonstrated a forgotten reality.

“As it forms the basis for an experience of freedom, the history of democracy,” Pierre Rosanvallon, Professor at the Collège de France noted, “is therefore not simply a history of frustrations or betrayed utopias: it has become a deeply intertwined history of disenchantment and indeterminacy.” The Catalan case opens the European Pandora box of a forgotten past forcing European citizens and leaders to reflect on the questions thought buried under the rumbles of World War two, but briefly emerging since with the reunification of Germany and the wars in the Balkans, of identity, democracy, power, oppression, nation-state, region-state and cohesion. The fraught between Madrid and Catalonia is serious and could have considerable ripple effects if a thoughtful and open dialogue is soon implemented.

(COPYRIGHT 2017 BY POLITIPOND. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED WITHOUT PERMISSION).

 

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2015 in the Rear-view Mirror …

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Should 2015 be identified as the year of multilateralism? Despite the multitude of crises facing the West throughout 2015, the signature of three major multilateral agreements was not only meaningful, but will contribute to the shaping of world politics well beyond 2016.

2015, or the Year of Multilateralism

Could 2015 be seen as the year of multilateralism? Even if this question seems quite absurd considering the succession of negative news from terrorism, to economic slowdown, racism, populism, so on and so forth. But looking back, 2015 was to some extent the most promising year in recent years in getting regional and global leaders around the table and having them signed important documents. Three highly impactful agreements ought to be reviewed.

World-Climate-Summit-bannerFirst, the Paris Agreement of December 12, 2015 ought to be number one on the list. Yes, climate change is a reality. Yes environmental destruction is the greatest threat facing humanity. If polls, like the recent one produced by the Pew, show that Euro-Atlantic citizens feel that terrorism is the greatest threat to their security, they are certainly looking at it from a narrow angle. If ISIS has demonstrated to be effective at slaughtering unarmed civilians drinking coffee and listening to music, it does not represent the existential threat that climate change presents.

Source: Source: Carle, Jill. 2015. "Climate Change Seen as Top Global Threat Americans, Europeans, Middle Easterners Focus on ISIS as Greatest Danger." Pew Research Center. July 14. Online: http://www.pewglobal.org/files/2015/07/Pew-Research-Center-Global-Threats-Report-FINAL-July-14-2015.pdf [Accessed on September 15, 2015]
Source: Source: Carle, Jill. 2015. “Climate Change Seen as Top Global Threat Americans, Europeans, Middle Easterners Focus on ISIS as Greatest Danger.” Pew Research Center. July 14. Online: http://www.pewglobal.org/files/2015/07/Pew-Research-Center-Global-Threats-Report-FINAL-July-14-2015.pdf [Accessed on September 15, 2015]

The Paris Agreement (which will only come into force once signed by the Parties on April 22, 2016 and ratified by 55 Parties) is more a political victory than a great climate deal. The political victory comes as the developed and developing nations have finally been able to agree on a global agreement. For instance, the World Trade Organization (WTO) is unable to get its Doha Round anywhere and most of the global initiatives are going nowhere. But in Paris, world leaders were able to show unity for a cause. However, the document falls short as there are no enforcement mechanisms in place in order to penalize states that do not comply. The European Union wanted a binding treaty with serious teeth and got instead an Agreement pledging to limit GHG emissions in order to maintain global warming below the 1.5 degrees Celsius target and a 5-year review of national progress and target readjustments. More work needs to be done domestically in order to transform current models of production and ways of living, especially in the US, India, China and the EU, but it is a good starting point.

The second major success for multilateralism is the Nuclear deal with Iran. After almost a GTY_iran_world_leaders_ml_150402_16x9_992decade of negotiations initiated by the EU (remember the EU3+1?), the US under the leadership of its Secretary of State, John Kerry, was able to come to an agreement on the nuclear negotiations with Iran. If the US and European nations were quick on framing it as a political victory, such deal would not have been possible without China and Russia. Both nations were central in order to have Iran signed the deal.  If the Europeans were on the side of the Americans, it was quite uncertain throughout the process to count the Russians and Chinese in. But Russia has appeared as an important partner. For instance, on December 29, Iran shipped more than 11 tonnes of low-enriched uranium to Russia. But the deal came through and is, as the Paris Agreement, imperfect. At least, it permits to relaunch diplomatic relations with Tehran and re-includes Iran as a member of the international community. Some of the sanctions will be lifted, permitting Iran to sale its crude oil starting next year, in exchange for a discontinuation of the nuclear program.

The third major agreement is the signature of the Trans-Pacific Partnership (TPP). Since the collapse of the financial markets in 2008, which have caused an economic decline of the US and its allies and seen the rise of China, the US has initiated two major trade agreements: one with its Pacific partners (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam), the TPP, and one with its European allies, the Transatlantic Trade and Investmenttpp eng Partnership (TTIP). If the negotiations with European partners on the TTIP are still ongoing (read here a book on the topic), a result for TPP was finally reached in October 2015. In a document released by the Office of US Trade Representative, it is argued that “The result is a high-standard, ambitious, comprehensive, and balanced agreement that will promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance, and enhanced labor and environmental protections.” Regardless of the supports for such trade agreement, the TPP will have undeniably major impacts on regional and global economic and political relations. The US is solidifying its position in Asia and diplomacy is playing a big role in promoting cooperation. However, one question clearly remains: should have China been included in such deal?

Notable European Leaders in 2015

A paragraph could have been written on each of the 28 European leaders. But this piece focuses only on three EU leaders.

François Hollande, President of France, could very well be at the top of European leadership by the way he has maintained his position at the helm of France under such 98cebbe6a5319916285991f0e66baa545b8bf9bddegree of threats and instabilities. Economically, the French economy is not picking up. The French GDP growth is of 0.3% in the last quarter of 2015 with an unemployment rate of 10.6% illustrating a situation of stagnation and difficulties to draft and implement meaningful structural reforms. In addition, his approval rating in 2014 and early 2015 was around 13%, the lowest for all Presidents of the Fifth Republic. In the middle of these domestic turmoils and failed reforms, Paris was struck twice by terrorist attacks, once in January targeting Charlie Hebdo, and nine months later against civilians in a hipster arrondissement of the capital. Despite all these crises, François Hollande has been able to see an increase of his approval rating, avoid the take-over of regions by the Front National at the regional elections, and host one of the most welcomed global summits in Paris. 2015 was quite a year for François Hollande, whom has demonstrated serious skills of leadership against adversity. However, this is coming at a cost as he has taken a securitarian approach and is now passing laws, like the removal of citizenship, that are in complete opposition with the philosophical roots of his party (and arguably his own).

Angela Merkel, or the Emotional Leader of Europe. If François Hollande is shifting towards the right in order to make the homeland more secure undermining French

Generated by IJG JPEG Library
Generated by IJG JPEG Library

republican values, Angela Merkel has managed to maintain Germany in a sound economic direction (even though German economy is showing some signs of weakness), while becoming the emotional leader of Europe. Germany’s friendly policy of welcoming refugees was in some degree one of the most positive policies of 2015 in Europe. If EU Member States were calling for the construction of walls, use of army and other aberrations (Denmark planning to confiscate refugees’ jewelry) in order to stop the flow of refugees, Germany instead welcomed them. Angela Merkel’s decision to go against her political allies and political foundation illustrates one of the most human moves in Europe (read a recent piece here published in the New York Times). Chancellor Merkel may very well paying the cost of her actions if Germany is the target of a terrorist attack later on and struggle in integrating all these refugees.

David Cameron – The British Prime Minister was reelected in late Spring 2016 on an ultra-David-Cameron-Europenationalist and anti-european platform. Since his reelection, he has now identified himself as the British leader fighting for Britain’s national interests and integrity against the European Union. The publication of his demands to Brussels initiating negotiations in light of a future referendum about the membership of the UK solely responded to a national agenda without any clear vision for Britain’s future. Cameron is another European head of government with no long-term vision for his country and the Union. He embodies the shift of the past rights moving to the extreme without a clear political philosophy. Cameron’s polices have proven to be more based on ideology than facts.

Voices from Brussels?

What about HR Mogherini, President Tusk, President Schulz, and President Juncker? The heads of the largest EU institutions – EEAS, Commission, Parliament, and European Council – have not been that vocal at the exception of President Juncker at the ‘beginning’ of the migration crisis. The European leadership was pretty quiet throughout the year (at the exception of Commissionner Vestager going after the largest global corporations one after the other). Eventually 2016 could be the year for Federica Mogherini, whom is scheduled to release the new European Security Strategy in mid-Spring (read here an analysis on the current strategic thinking). 2016 could be as well the year for Donald Tusk, President of the European Council, as Warsaw will be hosting the 2016 NATO Summit. Such meeting in Poland will be important for two reasons: first, promote European principles and values in a country moving away from Europe’s ideals; second, it should address the ongoing regional crises from Ukraine, to Syria, to Iraq, Afghanistan and think seriously on how to engage with President Putin.

(Copyright 2016 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Tsipras, a Political Master

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Europe and the world should be taking a moment and reflect on the political mastery of Alexis Tsipras of Greece. In less than a year, Mr. Tsipras won two general elections, won a referendum and implemented contradictory policies, all this by changing his political standing and under terrible domestic and economic conditions. Aside from political ideology, Alexis Tsipras is undeniably one of the most talented European politicians. However has his mastery of politics translated into sound governing skills?

Early 2015, most Europeans, including a some Greek citizens, had never heard of Alexis Tsipras. The 41 year old tieless politician finds his political ideology in extreme left affiliated at first to the Communist Party. His political house is centered in the extreme left side of the political spectrum. After years of internal evolution in the Greek lefts, he then became the leader of the exteme-left wing party, Syriza (which means Coalition of the Radical Left) and was elected at the helm of Greece in February 2015. This was the beginning of his true political exposition.

Chapter 1: His election in February 2015 marked the end of the decade long transfer of power between the two leading parties. Tsipras was elected based on a program of anti-austerity policies, fight for Greek interests before the Troika (ECB, IMF, and Commission), increase of minimum wages, restauration of state employees and increase of pensions. If European media were deeply skeptical about his rise and thought that he would not last a year, they have appeared to be wrong. Ensuing his election, Tspiras disappeared from European minds until the looming of the deadlines for debt repayments of the IMF and ECB.

Chapter 2: The second chapter of his reign started several weeks prior the eventual default 478861728of Greece for the repayment of a  €1.5 billion to the IMF on June 30th, and a second one to the ECB mid-2015. These negotiations at EU finance ministers level and EU leaders level were extremely tense as neither Tsipras nor his finance minister, Yanis Varoufakis, wanted to accept the deal put on the table by the Troika and Germany. At the last minute, PM Tsipras called for a referendum on July 5th asking Greeks to decide on their fate: voting yes to the deal implied more austerity measures; a no vote was a rejection of the deal and could lead to a Greek default and leaving the Eurozone, known as a Grexit. Not only did Tsipras organized the referendum without noticing his European partners, but he campaigned for the no vote.

Chapter 3: The no camp, or Oxi, won the referendum with 61.3% and Europe was expecting a progressive departure of Greece from the Eurozone. Even President Juncker of the European Commission asked for a report on how to accompany Greece outside the Euro area. Instead of using his domestic mandate, Tsipras fired his finance minister (officially he resigned desipte winning) and went back to the negotiation table

ATHENS, GREECE - 2015/06/29: The word 'OXI' (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a 'NO' vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE – 2015/06/29: The word ‘OXI’ (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a ‘NO’ vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)

requesting the initial deal. Germany refused and France played an important role of holding together the parties and the negotiations alive. Ultimately, Greece agreed on a worst deal than previously offered and Tsipras implemented additional austerity measures and required reforms. The deal entailed the following aspects: raising the age for retirement; a VAT hike at 23% across sectors; privatization of key sectors of Greek economy; and removal of tax breaks for some Greek islands. These reforms would permit to unlock a third loan package of €86 billion until 2018.

Chapter 4: Tsipras agreed on the second deal, agreed at EU level on July 13th, which was worst than the initial offer, and brought it back home for a vote. The Greek Parliament voted and agreed on July 15th, on the bailout deal, which was approved with a 229-64 majority. However, Tsipras’ party, Syriza, seems to have lost some unity with 32 Syriza MPs defying their leader’s pleas and rejected the deal. Throughout July and August, Tsipras was facing serious political criticism and opposition by the members of his own party. Syriza was divided between a radical branch, led by Mr. Lafazanis, and a more centrist one counting Tsipras. The radical branch of Syriza had not accepted the political move by Tsipras to go against the popular vote of the referendum. “Mr Lafazanis’s supporters speak of an ‘ideological betrayal’ and ‘treachery’ by Mr Tsipras’s faction.”

Chapter 5: On August 20th, PM Tsipras announced his resignation and his candidacy for the next general election that would take place mid-September. His rationale was to get reelected without the radical branch of Syriza. His political gamble worked as he was reelected with 35.5% of the vote and was able to drop the hard-liners from his party. Syriza won 145 seats out of the 300 seats of the parliament, only four fewer than after the January elections. In order to assure a majority, Tsipras agreed on a coalition with right-wing party Independent Greeks (ANEL) with its leader Panos Kammenos. ANEL is an ultra-nationalist anti-immigrant party, often compared to UKIP in the United Kingdom. With this alliance, the Syriza-ANEL coalition offer the majority with 155 seats in the Parliament to Tsipras. Even President of the European Parliament, Martin Schulz, expressed his concerns directly to PM Tsipras about this political alliance.

Political Talent over Governing Skills?

In less than a year, PM Tsipras has demonstrated his political talent in remaining alive and electable despite party, domestic and European pressures all this under dire economic conditions and an unemployment level around 25%. If Tsipras proved to the world that he cannot lose an election, he needs to now tackle the true problems of Greece: crony capitalism, clientelism, systemic corruption, and implementing structural reforms of the economy and state. The country has been on life line for over 5 years, its intellectuals are fleeing away, higher education is barely financed and Greece cannot even protect its borders. Winning elections is one thing, implementing reforms and governing are another.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

VW-Google – Forget about Ethics and Think Transatlantic Retaliations

Credit: AP
Credit: AP

The recent allegations against Volkswagen (VW) for installing a devise allowing the company to have its 1.6 and 2.0 liters diesel models cheat test are scandalous. The VW case is nothing new in an highly competitive sector with extreme global competition. However, the turn of the debate in the United States about VW and its violations of the Environmental Protection Agency (EPA) testing these last five years do not tell the whole story about transatlantic trade competition. Interestingly enough, diesel cars only represent less than 1% of passenger vehicles in US, when it is more than 50% in Europe, and the EPA is the enemy number one of the Republicans and a large segment of American population distrust the agency. So based on the fact that all three elements, corporate ethics, environmental concerns, and small market share, rank low in the US, why would the US be so offended about VW cheating of EPA tests?

Without falling into conspiracy theory, could the US attacks against VW to be more a case of transatlantic warfare and retaliation against one of the biggest and symbolic European corporation? Could it be a retaliation for the European Commission’s cases against Microsoft and more recently Google?

VW Cheating and Systemic Failure

The VW scandal is based on the fact that VW has repetitively cheated on diesel car emission tests conducted by the EPA in the US and other agencies around the world. The company was selling its diesel models based on the claims that they were cleaner, more reliable, quicker, and greener than its competitions (one of the best discussions on the VWscreen shot 2015-09-18 at 4.55.17 pm case was done on the Diane Rehm’s Show, listen to it here).

The cheating did not only occur in the US. VW executives are saying that “vehicles in Europe with 1.6 and 2.0 litre diesel engines were also affected by the manipulations”. This could affect over 11 millions cars around the world on models of Jetta, Passat, Audi A3, Golf.

The VW group is one of the largest world carmaker counting brands like Volkswagen, Porsche, Audi and Lamborghini. In July the group overtook Toyota for the number one global carmaker. The cheating allegations have already costed the head of its chief executive, Martin Winterkorn, and the VW shares dropped by almost 35% on Monday and Tuesday.

Historically, the United States has not been a large buyer of diesel cars as opposed to its European counterparts. In the US, diesel is more expensive than traditional gasoline because of higher federal tax. However, in Europe it is the opposite for the simple reason that European countries have imposed less taxes on diesel than traditional gasoline. Less than 1% of passenger vehicles in the US are diesel engines, as opposed to over 50% in Europe.

European against the US – Google It…

Credit: Linda Henriksen/European Pressphoto Agency
Credit: Linda Henriksen/European Pressphoto Agency

In a matter of weeks in the month of April, the European Commission went after two global giants, Google and Gazprom, both with antitrust charges. Both cases are being headed by Margrethe Vestager, the E.U. commissioner in charge of competition. She has taken over the question of competition from a different angle than her predecessor Joaquin Almunia by tackling the perceived violators with antitrust charges. Both corporations are very important for the European market. Google controls over 92% of the Search Market Share in Europe, while Russia, through in part Gazprom, provides one third of the gas imported in Europe.

In the case of Google, Vestager is accusing the company of using its dominance in the European market with its search engine in order to advance its interests.

Source: Business Insider. 2015.
Source: Business Insider. 2015.

The accusation claims that Google, through its search engine, can artificially skew results favor its own shopping service at the expense of competitors. This is a direct violation of the core principle of the Single Market and fair competition. “Dominant companies” said Vestager “have a responsibility not to abuse their powerful market position by restricting competition either in the market where they are dominant or in neighboring markets.”

The antitrust case against Google, starting in 2008, illustrates the challenges of guaranteeing fair competition in the new age of the internet era. The case against Google was brought before the Commission by British price comparison site, Foundem. As reported by the Financial Times, “almost 20 complainants against Google want the search engine to abide by strict rules that ensure its formula treats its own services — providing results for travel, shopping and maps — no differently from rivals.”

An added dimension to the Google case is the gap between Europeans and Americans’ concerns and respect about privacy and data protection. The broad American surveillance program, revealed by Edward Snowden, created a serious transatlantic crisis. Interestingly enough, the European case against Google is the only one to stick, even though Google faced charges on three continents. In case of wrongdoing, the Commission has the power to levy fines of up to 10 per cent of Google’s global turnover.

Transatlantic Retaliation or Fair Game?

For the US to go after VW is to go after the powerful ‘Made in Germany’ and German engineering savoir-faire. It is about tackling the competition where it hurts. The US have been tough on foreign competitions with cases against KIA and Hyundai, for lying on fuel efficiency, as well as its own manufacturers with Ford, whom had put defeat devises on its minivans in the late 1990s, and against GM for mechanical defaults costing the lives of more than two dozens individuals.

Ultimately, this piece does not try to lower or even reject the accusations against VW, or even defend VW from any ethical wrongdoing. At the opposite, VW has been caught for cheating by putting a product on the market, which could qualify as an environmental crime. If legally, it will be difficult to trace back the environmental consequences of these cars, it has legal grounds for lying to the costumers on car efficiency and cheating on official tests. But aside blaming one company from wrongdoing, it is interesting to try to put a rational economic look into trade retaliation between two global giants, the EU and the US. Both economic powerhouses are competing on promoting their brands on the global car market, with Ford and GM for the US, and Daimler AG, VW group, BMW AG, PSA Peugeot Citroën, and Renault for the Europeans.

downloadThe Google/VW cases should be analyzed altogether, as there are cases of transatlantic competitions and retaliation. From Europe, the Europeans are demonstrating the lack of willingness and incentives by the US government to go after Google, one of the premium American companies, even though it has used its supremacy in order to promote its interests on the American market. Europeans are claiming that they have to do the job in order to guarantee fairness of competition on the internet market. From the US, the Americans are advancing themselves as the ones that have identified the cheating thanks to the EPA and the Californian authorities, and are denouncing the lack of supervision at the European level. The Americans are talking of environmental wrongdoing and systemic failure within the most powerful auto group in the world.

Interestingly enough, when Commissioner Vestager brought the case against Google in April 2015, she then travelled to Washington D.C. meeting her American counterparts. At the time of the meeting, other American companies were backing the European claims of Google’s violations. These American companies allowed “to head off accusations the action was inspired by German-led anti-Americanism.” In Germany, the VW scandal is shaking up the population and the FT reported in a recent piece that “People will ask why the Americans, who don’t really care about the environment, are attacking a German institution.”

Germany has been the European engine for the last decade and the strongest economic pillar of Europe since the collapse of the world market. Germany economic model is directly based on an export driven economy. The automobile sector represents 2.7% of German GDP. Most car sales are made by the VW group, 70% of them are sold outside of Germany, and the group employs nearly 600,000 people around the world, and more than a third of the 775,000 people who work in the auto industry in Germany (these numbers come from CNN money’s website). Attacking the VW group will have some impact on the German economy and ultimately European economy. “If nobody else has done it, the damage would be limited. If it looks like it’s more companies, not just Volkswagen, it would be a major problem for the German car industry, and the German economy overall,” said Theo Vermaelen, a finance professor at INSEAD.

Are VW/Google cases in order to protect the consumers, data privacy, morality, ethics, and competition? It is difficult to believe it. They seem to simply be transatlantic retaliation in an more than ever-competitive global market.

(Copyright 2014 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Providing Leadership – Juncker’s Call for ‘Collective Courage’

Photo: Euranet Plus/Flickr
Photo: Euranet Plus/Flickr

The current context in Europe over the migration crisis is not going to stop any time soon (for more contextual and analytical information read previous pieces published by Politipond, here, here, here, here, and take a short survey here). If migrants are not dying at sea, national authorities like the ones in Macedonia, are using force against migrants seeking to cross the country to access Western European countries (see here several pictures showing the situation in Macedonia). The situation is clearly worsening on daily basis.

The French President and his German counterpart are meeting today in order to discuss the migration crisis and the situation in Ukraine. Germany has been the EU Member States, with Sweden, taking the largest share of refugees, but it cannot do it alone any longer. According to the Financial Times, Germany is expected to receive 800,000 asylum seekers this year, which is more than what the entire EU welcomed in 2014. Based on Frontex’s data, in the first eight months of 2015, 340,000 migrants have crossed EU borders, which is already 60,000 more that the overall number for 2014.

If the EU Member States are working, or not, on solving the migration crisis by either welcoming migrants (Germany and Sweden) or trying to chase them away (Hungary and the

Photo: AP
Photo: AP

United Kingdom), the European Union has contributed to solving the issue, but without a clear leadership and strategy. For instance, Frontex has seen its role quickly increasing with more funding of its two naval missions in Italy and Greece, Europol has worked more on assisting national authorities, the EEAS has provided a platform in order to coordinate, and the Commission has been the voice of the EU and brought up some projects. For instance, Jean-Claude Juncker, the President of the Commission, brought in June and July some proposals on quotas, redistributions, reform of asylum policy and so forth. His recent op-ed in NewEurope, posted below, offers the leadership that is missing and is highly needed at the European level.

Naturally, EU Member States are working on protecting their interests and national borders, the EU is a central actor in recalling that migratory flux go beyond national borders and the current crisis can only be solved through European cooperation, coordination and solidarity. In short, President Junker is calling for “Collective Courage.” The word courage is more powerful than solidarity for two reasons: first, despite many calls, solidarity has not brought Europeans together; second, courage implies that each European head of state and government (and even each European citizen) will have to make the ‘right’ decision and go against short-termist nationalist rhetorics. This position by Juncker to work on a common European solution reflects in many ways to his original call, once appointed last summer, for a more human and social Europe (read here an analysis soon after his appointment last summer).

Juncker’s op-ed, which should be understood as a call for action, comes at a crucial time and should be read in one piece without further comments. For such reason, Politipond copied it in its entirety below (or it can be read on NewEurope’s website here):

The European Commission President, Jean-Claude Juncker, writes on the challenge of the migration issue. By Jean-Claude Juncker

Europe for me is and always has been a community of values. This is something we should be and yet are too seldom proud of. We have the highest asylum standards in the world. We will never turn people away when they come to us in need of protection. These principles are inscribed in our laws and our Treaties but I am worried that they are increasingly absent from our hearts.

When we talk about migration we are talking about people. People like you or I, except they are not like you or I because they did not have the good fortune to be born in one of the richest and most stable regions of the world. We are talking about people who have had to flee from war in Syria, the ISIS terror in Libya and dictatorship in Eritrea.

And what worries me is to see the resentment, the rejection, the fear directed against these people by some parts of the population. Setting fire to refugee camps, pushing back boats from piers, physical violence inflicted upon asylum seekers or turning a blind eye to poor and helpless people: that is not Europe.

What worries me is to hear politicians from left to right nourishing a populism that brings only anger and not solutions. Hate speech and rash statements that threaten one of our very greatest achievements – the Schengen area and the absence of internal borders: that is not Europe.

Europe is the pensioners in Calais who play music and charge the phones of migrants wanting to call home. Europe is the students in Siegen who open up their campus to accommodate asylum seekers who have no roof over their head. Europe is the baker in Kos who gives away his bread to hungry and weary souls. This is the Europe I want to live in.

Of course, there is no simple, nor single, answer to the challenges posed by migration. And it is no more realistic to think that we could simply open our borders to all our neighbours anymore than it is to think we just cordon ourselves off all distress, fear and misery. But what is clear is that there are no national solutions. No EU Member State can effectively address migration alone. We need a strong, European approach. And we need it now.

That is why in May, the European Commission, under my leadership, presented detailed proposals for a common asylum and refugee policy. We have tripled our presence in the Mediterranean sea, helping to save lives and intercept smugglers. We are assisting Member States the most affected, sending teams from the EU border agency (Frontex), the EU asylum office (EASO) and the EU police network (Europol) to help the often overburdened national authorities identify, register and fingerprint incoming migrants, speed up the processing of asylum seekers and coordinate the return of irregular migrants. We are clamping down on smuggler networks and dismantling their cruel business models. We are showing solidarity with our neighbours like Turkey, Jordan and Lebanon by resettling 20,000 refugees from outside of Europe. We are working with third countries of origin and transit to open up legal channels of migration and to conclude readmission agreements to facilitate returns of people who do not have a right to stay in Europe. And we are putting a renewed focus on enforcing the recently adopted EU rules on asylum, from reception conditions, asylum procedures to the obligation to take fingerprints.

In May, we proposed to establish a relocation mechanism to assist Member States by relocating a small portion of the high numbers of people in genuine need of international protection arriving in Italy and Greece. The Commission proposed to relocate 40 000 to other EU Member States – national governments were prepared to accept just over 32 000. We want to go much further, establishing a permanent mechanism that could be automatically triggered in emergency situations – for whichever EU Member State needs it. When we have common external borders, we cannot leave frontline Member States alone. We have to show solidarity in our migration policy.

Some of the measures proposed by the Commission have already found support. All the others now urgently need to be taken up by the EU’s 28 Member States – even those who have until now remained reluctant to do so. The dramatic events of the summer have shown that we urgently need to put this common European asylum and refugee policy into practice.

We do not need another extraordinary summit of heads of state and government. We have had many summits, and we will meet again in November in Malta. What we need is to ensure that all EU Member States adopt the European measures now and implement them on the ground. The Commission already proposed, nine years ago, to have a common EU list of ‘safe countries of origin’, making it possible to fast track asylum procedures for specific nationalities. At the time, Member States rejected the idea as interfering with national prerogatives. And yet it does not make sense that on the one hand, Member States have decided to make Western Balkan countries candidates for EU accession and, on the other, nationals of these countries are applying for asylum in the EU. In September, the Commission will thus submit a common list of safe countries of origin to the Member States.

What we need, and what we are sadly still lacking, is the collective courage to follow through on our commitments – even when they are not easy; even when they are not popular.

Instead what I see is finger pointing – a tired blame game which might win publicity, maybe even votes, but which is not actually solving any problems.

Europe fails when fear prevails. Europe fails when egos prevail.

Europe will succeed if we work together, pragmatically and efficiently.

I hope together we, Member States, Institutions, Agencies, International Organisations, Third Countries, can prove we are equal to the challenge before us. I am convinced we are able.

Europe’s history if nothing else proves that we are a resilient continent, able to unite in face of that which seeks to divide us. This should give us courage for the weeks and months to come.

Juncker’s op-ed was initially published on NewEurope’s website.
(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Will Tsipras 2.0 be better than Tsipras 1.0?

Photo: AFP
Photo: AFP

Alexis Tsipras resigns after seven months in power, but is seeking for reelection in elections in late September. His time at the helm of Greece was marked by a impossible conundrum: defend Greek interests against powerful European and international forces, ending the austerity while finding growth, and dealing with an ideological split within his party.

Prime Minister Tsipras is calling for a new round of elections, most likely scheduled for September 20th, and he will lead the Syriza party. “I believe we haven’t yet seen our best days” announced the Prime Minister on television “and I’m going to ask for the people’s vote to govern this country – with more experience, with my feet more firmly on the ground.” With a disastrous economic and fiscal situation, Greece is now facing even deeper political uncertainties. With his resignation the country will be governed by an interim-government until the next snap elections in September 20th. Tsipras is leaving office for a better comeback and freeing himself from the rebels of his party. He is looking to “return to power with a more manageable coalition.”

Reflection on Tsipras’ First Tenure

Several points need to be reflected upon his time in office. First, PM Tsipras came into power based on an anti-establishment campaign. His extreme-left party, Syriza, took the power based on many promises: defending Greek interests by ending the international and european austerity measures; and an anti-establishment campaign.

Second, his time in office was quite smooth until the looming of the deadlines for repayment of the IMF and ECB loans. Even though he remains one of the most popular politicians in Greece, the summer has created serious political tensions within his party Syriza. The fight between Greece and the Troika (ECB, Commission, and IMF) over an agreement after missing the initial deadline forced the Tsipras’ government to close Greek banks for almost three weeks. Tsipras was obliged to agree to the terms requiring tax hikes and further spending cuts under the threat of complete collapse of the Greek banking system (read here a past analysis). The deal with European creditors infuriated members his party Syriza, but Tsipras managed to get it approve through the Parliament with the help of the opposition.

Third, the resignation of Alexis Tsipras, which should be seen as a two-step process – first the referendum, and second the agreement to the terms of the bailout – marks in some ways a complex existence and survival of socialism in Europe. To many, Alexis Tsipras was the last embodiment of socialism in Europe. Now the question is: was the international market seeking to make a point in going after Tsipras? With Tsipras’ departures, it seems that austerity measures have become the European landmark in solving deep structural economic crisis. But if reelected, Tsipras would be a much more centrist politician than seven month ago. Tsipras had to move towards the middle creating a split with the radical core of his party.

Referendum, Bailout and Political Tension

When did it go all wrong for Tsipras? And, did it go wrong for Tsipras? For many Europeans, PM Tsipras lost the battle after calling for a referendum and advocating for the no vote (remember the oxi?). In retrospective, the results of the referendum actually did not matter, aside for many Greeks feeling that Tsipras tried to defend them. The referendum was perceived by European partners, especially the Germans, as an act of treason. Greece was already on the thin line with his Eurozone partners since the collapse of its economy and the first bailout five years ago. Greece had mis-behaved and lied to its partners (read here a previous interview on the topic). The referendum was another act of treason for European partners. Once Greeks had voted in favor of the no

ATHENS, GREECE - 2014/10/13: MP with the SYRIZA political party, Mr Panagiotis Lafazanis, talks with a megaphone to the demonstrators expressing SYRIZA support. Kurdish people that live in Athens organised a demonstration in support of the Kurdish fighters that defend the Kobani town in Iraq from ISIS insurgents. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
Photo: George Panagakis/Pacific Press/LightRocket via Getty Images

vote, and a week later PM Tsipras agreed to the new terms of a third bailout, his time was counted. His vocal lieutenant, finance minister Yanis Varoufakis, announced his resignation days after the victory of the no vote. Once Varoufakis was gone, and Tsipras agreed with the terms (criticized by the IMF) and started his transition towards the center. But in some ways, Tsipras’ fate was sealed, or not? In addition, it created a real ideological split within Syriza. Tsipras is undeniable moving towards the center, while the old guard of Syriza, led by the former Energy and Environment Minister, Mr. Lafazanis, have not changed their position. On the referendum, The Financial Times reported that “Mr Lafazanis’s supporters speak of an ‘ideological betrayal’ and ‘treachery’ by Mr Tsipras’s faction.” The paradox between calling for the referendum opposing the bailout and then accepting the terms of the bailout created an unsustainable political condition for Tsipras.

Some experts and media are comparing Greece to a European protectorate (at least in the leftist literature) after the agreement on the third bailout’s terms. But aside from asking for the approval of his policies, does Greece need another election in such dire times? Tsipras is gambling on a new election in order to get rid of rebels, or what The Economist calls the ‘wild ones,’ build on its domestic legitimacy, and try to govern and reform Greece with a fresh flow of money. Let see if Tsipras can win another election, and how different will Tsipras 2.0 be from the Tsipras 1.0? Can Tsipras 2.0 bring Greece to reform and become a growing and sustainable country under the current conditions? This remains to be seen.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Greece votes Oxi, Europe says Grexit

ATHENS, GREECE - 2015/06/29: The word 'OXI' (NO) written on a banner in front of the Greek parliament.  Greeks demonstrate in Syntagma square in support to a 'NO' vote in the referendum that will take place on the 5th of July, whether to accept the  new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE – 2015/06/29: The word ‘OXI’ (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a ‘NO’ vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)

“All of us are responsible for the crisis and all of us have a responsibility to resolve it.” – President Donald Tusk, July 7th, 2015

Greek citizens voted in majority Oxi to the July 5th referendum. The question asked by the Tsipras government, which was campaigning for a ‘no’ vote, was yes or no to accepting a continuation of the bailout program with all the austerity measures coming with it (read here a previous analysis). The results were very clear throughout the country with 61.31% for the no vote and 38.69% for the yes vote (see here the map produced by the Gr20150711_woc001_0eek Ministry of Interior showing that the no vote won in each Greek region). Greek citizens felt that the best option – out of two bad – was to reject the terms of the bailout on the table. If for a day the discussion was about the meaning of the ‘no’ vote (is it against the EU, the Euro, or simply a desire to remain a member of the Eurozone), today’s reality is about the future of Greece as a member of the Eurozone. So where do Greece and the EU go from now on?

Negotiations and Survival

In less than two days, a succession of events has taken place. For over five years, it seems that the Greek file was dragging, it has certainly taken an all new meaning and urgency. Prior to the results, Chancellor Merkel of Germany was meeting her counterpart, President Hollande, in Paris in order to find a common ground. The day ensuing the political victory of the Tsipras government, the infamous Greek finance minister, Yanis Varoufakis, announced his resignation. Many advanced that Tsipras had to go in order to demonstrate to his European counterparts that Greece was serious in seeking for a viable option. Varoufakis had gone too far and had lost some of his support within the Eurogroup of finance ministers.

Then on Tuesday, an emergency summit meeting took place with no substantial results.

Credit: Yves Herman/Reuters
Credit: Yves Herman/Reuters

Tsipras was supposed to bring, as highly recommended by the French government, a new proposal. But the summit meeting failed as Athens did not provide an acceptable option. Tsipras has now until Thursday (as requested by Merkel) in order to present a new proposal to his creditors. A failure in finding an agreement could lead to “the bankruptcy of Greece” warned Donald Tusk, the president of the European Council, “and the insolvency of its banking system.” Tusk added that “tonight I [Donald Tusk] have to say it loud and clear — the final deadline ends this week.” On Sunday, as announced by the 19 eurozone countries on tuesday, the 28 EU leaders will be deciding on the future of Greece.

In addition, the New York Times reported that for the first time – at least publicly – the President of the Commission, Jean-Claude Juncker, has announced that he has “a Grexit scenario prepared in detail.” If a Grexit scenario is now on the table, Tsipras will be defending his case before the European Parliament on Wednesday morning.

Consequences of Staying in the Eurozone, or Leaving It?

In the middle of the negotiations and in finding a solution, a key player is the European Central Bank (ECB). Currently the ECB is the institution that is keeping the Greek banks alive by providing liquidity. Because today Greece is unable to borrow money on the international market and the Europeans are the one providing money to Greece in order to have its economy and banking systems going. The ECB will continue to do so if a deal is agreed. However, in the case of a break-up, the ECB will remain a central player as it will stop providing liquidity to Greece. In addition, even if Greece missed its first payment of July 1st to the International Monetary Fund of $1.8bn, the second deadline of July 20th to the ECB of $3.8bn will be key for Greece and the EU.

If Greece wants to stay in the Eurozone, they will have to implement a set of policy measures that will require: tax reforms; fixing the pension program, which will affect early retirement program; labor market practices. Once these are ongoing the international and european creditors will have to give meaningful debt relief.

In the case Greece decides to leave, or is expelled from the Eurozone, then it will have to introduce a new currency. The country will ultimately default on their debts, and will have to create its own economic agenda in order to lay down the foundation for future economic growth. This scenario will naturally require serious structural reforms.

If Size does not matter, Precedent does

The Greek case is not about the size of the Greek economy. In fact the Greek economy only represents 2% of the Eurozone GDP. So far it does not appear that a Greek default could take with it the whole Eurozone and send a massive shockwave throughout the global markets. No, the case of Greece is a matter, for the EU and its Member States, of establishing a precedent. Germany and other wealthy Eurozone members want to avoid such precedent, where a member state refuses to pay its debts and call for a national referendum in order to provide such country leverage at the European level. Chancellor Merkel was correct in claiming that Greece is a sovereign state and has the right to organize such a referendum, however what type of legitimacy does that provide the Tsipras government in coming back at the bargaining table?

The Greek referendum is national decision on a complex financial question. But the Greek referendum does not affect the decision of Greece’s creditors. If the vote empowers Tsipras domestically, it does not at the European level. Now, Tsipras has to navigate in these tumultuous waters of a domestic electorate, opposed to additional austerity, while providing a proposal acceptable to his creditors, most of them highly in favor of additional austerity measures. Tsipras seems to be facing a conundrum, either remaining in the Eurozone and what it entails, or leaving the Eurozone, and dealing with the consequences of a default.

In the mid-term, there are many technicalities that need to be figured out if Greece decided to leave the common currency. The legal baseline is the 1992 Maastricht Treaty,

Photograph by Federico Gambarini — picture-alliance/dpa/AP
Photograph by Federico Gambarini — picture-alliance/dpa/AP

which does not provide any information in order to leave the common currency. In the contemporary European history (aside from the collapse of Habsburg empire), there are no precedents, no rules and no plans in order to leave a common currency. But with a return of the Drachma, the real question for the Greek government will be about the exchange rate between the Drachma and the Euro as all Greek accounts are in Euros. At the end of the day, the Greek savings will be severely devaluated causing massive financial losses.

The Greek drama illustrates the complexity of the unfinished European construction. Since the Treaty of Maastricht of 1992 laying out the current foundations of the European Union, the Member States have avoided any decisions for furthering/deepening the integration process or completely loosening it. Today, if Greece is in such trouble, is certainly because of its domestic problems (high level of corruption and lack of structural reforms), but as well because of an integration à la carte of the Eurozone. At the end of the day, a Grexit or not is only a technicality. The real question is: will the Eurozone members be working once and for all on finalizing a fully integrated and functional Eurozone?

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).