Emptying the Spirit of the Union – Cameron’s Wishlist

Photo: Getty
Photo: Getty

British Prime Minister David Cameron finally sent his requests to the European Union in light of the upcoming referendum about the membership of the United Kingdom in the Union. In a letter addressed on November 10, 2015, to the President of the European Council, Donald Tusk, PM Cameron laid out the areas wherein the UK will be seeking for reforms in order to satisfy the British demands. In some ways, this letter is the first step in starting officially the discussion between the UK and the EU prior the referendum in 2017.

Reforming the Union – Cameron’s Demands

In a letter titled, “A new settlement for the United Kingdom in a Reformed European Union,” PM Cameron identified four main areas where the UK is seeking for reforms.

The first area is Economic Governance. In this section, PM Cameron addresses the problem of a two-speed Europe caused by the Euro. On the one hand, there are the Eurozone members, and on the other the non-Eurozone members. Britain is concerned about “the integrity of the Single Market, and the legitimate interests of non-Euro members.” In other words, Cameron wants to avoid a power grab by the Eurozone members over the others. Cameron wants to see a discussion among the 28 Member States on issues related to the Eurozone that affect the Union as a whole.

The second area is Competitiveness. The UK wants to scale back the number of regulations limiting trade and ultimately the competitiveness of European products. In addition, Cameron wants to initiate “massive trade deals with America, China, Japan and ASEAN.” Ultimately, Cameron wants to lower the number of existing regulations and their ‘burden’ in order to boost productivity and competitiveness.

The third area is Sovereignty. On this particular theme, highly cherished by extreme right and right parties accross the Union, Cameron wants to bring several proposals. The first one, Britain does not want to be part of ‘an ever-closer union.’ So no political union for Britain. Second, Cameron wants to empower national parliaments, which could stop ‘unwanted legislative proposals’ taken at the European level.

The fourth area, and the longest of all, is Immigration. On the point, Cameron wants to limit movement of people as it creates too much pressures on British public services. If Cameron mentions the mass movement of people from outside to inside, he underlines that “we need to be able to exert greater control on arrivals from inside the EU too.” In addition, Cameron is asking for a restriction on distributing social benefits to individuals leaving on British soil.

In order to feel comfortable, Cameron is asking for reaching “an agreement that would, of course, need to be legally-binding and irreversible.” Even if the 27 EU Member States were to agree of these point, they would have to go through national discussion in order to accept a treaty change. This could increase the pressure on each Member States.

Cherry-picking, and Removing the Essence of the Union

In his daily chronicle on France Inter, David Guetta, underlined that the initial response from Europe to Cameron should be ‘best of luck in your new adventure outside the Union.” The UK since his entrance in the Union has not always been a Member State pushing for the deepening and widening of the EU. But as Guetta expressed “irritation is not a policy.” The Financial Times reports that “One European minister involved in the talks described the ‘British question’ as not addressing what the UK or Europe needs, but what Cameron requires ‘to successfully campaign’.” The 28 heads of states and governments will be meeting in December in order to address the British case and see where to start. However, it is quite difficult to sideline some irritation.

The initial response from Brussels was that finally the UK has clarified its positions and demands. European diplomats feel that with this exhaustive wishlist “they will not be ambushed at the last moment with fresh UK demands.” Many experts are arguing that the only major point of contention may be the fourth point on ‘immigration.’ Eastern European members, like Poland, would undeniably reject such point. But it should be a redflag in Paris and Berlin as movement of people is one of the most fundamental freedoms offered and guaranteed by the EU to European citizens. Once citizens are confined to their national territories, the spirit of the Union disappears.

Cameron’s overall plan – which could be conscious or not – is to remove the human and ideational components of the European project in order to transform it into an advanced trade agreement. PM Cameron’s vision of the future of the EU and UK is quite dramatic. The fact that Cameron wants to maintain three freedoms (capital, goods and services) but wants to limit the fourth one (labor) is quite dramatic. The Common Market was set up around the respect of the four freedoms. Cameron political vision is directly aligned with the ultra conservative British view of the world and understanding of the UK.

To some extent Cameron demonstrates that the British conservative political class has not evolved since the entry of the UK in the Union. Cameron’s vision of the European Union is simply a space of trade and transaction without any European identity. His vision and understanding of the European Union are too simplistic and dangerous to be left unanswered. European capitals will have to find the political courage to address London respectfully and highlight the added value of the UK in the Union. But European capitals should not play this dangerous game of emptying the essence of the Union.

(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).

It is Politics, Stupid!

CREDIT: ANADOLU AGENCY
CREDIT: ANADOLU AGENCY

“I really cannot remember, in all my time in European politics, whether I have come across a situation like this. This is really all about the European Union. If the EU is going to have any credible force, it is going to have to demonstrate it is capable of solving its own problems.” – President Martin Schulz on July 12th, 2015 during the Euro Summit Meeting

Forget about economics, finance, banking regulations, social welfare policies, debt forgiveness; the future of Greece solely depends on politics. “The answer [of endless negotiations on solving the Greek crisis these last five years] cannot be found in economics,” writes Yanis Varoufakis, the former Greek finance minister, “because it resides deep in Europe’s labyrinthine politics.” Greece’s destiny is a simple political question based on several concept: trust and confidence.

The Deal

After a week long of back and forth between Greece and the European capitals, Brussels is once again the siege of a Greek marathon. A meeting of the Eurogroup finance ministers started on Saturday, July 11th and ended the next day around 3pm. Ensuing it a general EU summit, with the 28 leaders, was supposed to take place, but was instead cancelled and transformed into a crisis summit of the 19 EU leaders of the Eurozone. The future of Greece as a member of the Eurozone was clearly on the line with a very reticent German team (Chancellor Merkel and her Finance Minister Wolfgang Schäuble proposing an eventual ‘temporary Grexit’).

As reported by the Financial Times, the finance minister negotiations, which were fruitless and tense, let the way to the EU leaders, whom could not do better considering Germany’s position. Until François Hollande, President of France, whom had been extremely active in advising, helping and defending Greece in the last mile, called for a meeting in Tusk’s office. Preisdent Tusk was reported saying “Sorry, but there is no way you are leaving this room” until a deal is reached.

Credit: Aris Messinis/Agence France-Presse — Getty Images
Credit: Aris Messinis/Agence France-Presse — Getty Images

Interestingly enough, Tsipras’ proposal prior the July 11th meeting included: 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 $59.6bn until 2018. Tsipras’ proposal was highly similar to the one offered by the international creditors. Even Jean-Claude Juncker during the meeting recognized the proposal brought by Tsipras as almost identical to the one put on the table by the creditors weeks earlier. And the President of European Parliament, Martin Schulz, called for avoiding a Grexit and find a solution.

Based on the deal reached on July 13th, 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. Clearly the terms of the bailout are in direct contradiction with Syriza’s policies, beliefs, and promises, as well as sidelining the results of the referendum. These contradictions could push even further the political crisis in Greece and lead to yet another election during the summer.

Chancellor Merkel, the Finish government and others are not convinced about the proposal and especially Greece’s commitment. The Greek drama is taking more than a simple economic/financial turn, it is purely political. It appears that some EU Member States, like Germany, Finland, Slovakia and others, are more inclined to go after Greece and its leftwing government led by Alexis Tsipras, than finding a real deal that would help in the long term the country.

One core reason is trust, or at least ‘lack of trust.’ Some experts have argued that Tsipras was now on Merkel’s black list after his political coup, the referendum. Merkel and others EU leaders do not trust any longer Tsipras and his government. Or even has argued by Yanis Varoufakis, “based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.”

Death of the European Project?

The Greek file should be considered as an overall failure for the European ethos. Many economists, like Joseph Stiglitz, have been very critical of the negotiation process and the agreed deal. One of the most virulent denunciation of the deal was Paul Krugman, writing that “it’s [the deal] a grotesque betrayal of everything the European project was supposed to stand for.” Even the International Monetary Fund, a global advocate for austerity measures and straightjacket policies, has been critical of the dealbroken_euro_fit calling instead for a huge debt relief for Greece.

Last but not least, Nicolas Gros-Verheyde of Bruxelles2 wonders about a core question: “Is Europe becoming the sum of its egos?” The Greek file embodies more than solving an economic problem, it has become a vicious fight between powerful EU Member States. These egos are affecting their global visions and understandings of the core principles and values of the European endeavor. But right now, the EU is failing at this important crossroad. The EU cannot find a real solution on any major crisis from counterterrorism in Mali, to migration crisis in the Mediterranean, to Ukraine/Crimea, to the domestic rise of nationalism, and naturally Greece. Are politics killing the EU? It certainly looks like it.

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

HR Mogherini – A Foreign Policy Leader à la Clinton?

Photograph: Chatham House
Photograph: Chatham House

Even with an absent United Kingdom in European foreign and security policy, the excellent British think tank Chatham House has been the center of the euro-atlantic foreign policy world. Candidates for the 2016 US Presidential race are passing by as well as some high-level EU officials. If Scott Walker, Republican Governor of Wisconsin, did not want to talk foreign policy in a foreign policy think tank (read here the Q&A focusing on cheese and Wisconsin), the High Representative Federica Mogherini did not shy away from such exercise with a solid speech (read her speech here).

HR/VP Mogherini took office in November 2014 (read here a previous analysis on the transition of power from Ashton to Mogherini) and has taken full control of her role and position. The transition between her predecessor, Catherine Ashton, has been immediate and flawless. Both HR have their own strategy, personality, and leadership style. Ashton was much more of a bureaucrat and a shy foreign policy leader, while Mogherini is clearly at the forefront of the EU by always being present and visible, a little bit like former US Secretary of State, Hillary Clinton. It seems that the EU has its chief foreign policy following the steps of Clinton. As Hillary Clinton, HR Mogherini has been using her voyages to put the EU on the map as a global power, launched reflections for an overarching strategy, and addressed each crisis facing the bloc. Both foreign ministers have been relentless in their missions.

Pressing Issues Confronting the EU

As expected, HR Mogherini highlighted during her speech at the Chatham House the most pressing issues threatening the stability of the Union and its Member States. “I [Mogherini] believe that there is no better way for the EU to have a global influence than to be a responsible power in our immediate neighborhood.” As she argued the challenges and threats at the doors of Europe affect directly the “vital national interests of our member states.” All of them are surrounding the EU on every front, East, South, and South-East. Eastern Europe is on the verge of a war, as reports continue to demonstrate that Russia continues to send heavy-weapons and soldiers, and the Mediterranean periphery is in flame (read here the very informative Q&A led by Quentin Peel of the Financial Times tackling additional topics like Turkey, UK declining foreign policy, and eurozone crisis).

  • Ukraine – Mogherini argues that the EU deeply believes that Russia should be a partner rather than a foe. But the evolution of the conflict in Ukraine does not allow such belief, but instead calls for European actions in order to assure the transition towards a peaceful resolution of the conflict. The EU is concerned about the consequences of the war in Ukraine on the stability of the continent.
  • Libya – the instability in Libya, Southern border of the EU, represents a similar challenge to the security of the EU and its Member States. The challenges in Libya are serious, complex and intertwined counting issues such as appearance of the Islamic State (IS), human trafficking, exit point for massive illegal migration in direction to Europe, and no state-authority over the territory. The power vacuum in Libya ought to be addressed.
  • Syria – the war in Syria has lasted long enough for seeing the rise of IS, many international failures to solving the crisis, a serious humanitarian crisis and a complex sectarian war with no end in sight. Without solving Syria, the threat of IS will only continue to grow.
  • Tensions in the Middle-East – seeking for a lasting peace process between the Palestinian authorities and Israel.
  • Iran – the nuclear negotiations with Iran are an important piece of the Middle-East puzzle. As argued by Mogherini, “for too long we thought of the Iranian issue as a zero-sum game.” In fact, she claims that “a comprehensive agreement would be hugely beneficial for both sides.” In the case of the negotiations, the EU is the leader in the negotiations.

HR Mogherini concentrated her analyses on the neighborhoods. But other issues and crises are affecting the stability of the Union, especially with the rise of instabilities in Africa and the region of the Sahel.

Mogherini’s Call for a New European Security Strategy

By the end of her speech, HR Mogherini finally introduced the fact that she initiated a work to reflect on a new European Security Strategy. “Our European Security Strategy, on which Javier Solana did a wonderful work, is also 11 years old. At that time, no one could imagine how fast the world and our neighbourhood would change in the coming years.” The 2003 version was an important document in identifying the European way for global actions and addressing the threats facing the Union as a whole. But in over a decade, the EU only produced one additional document the 2008 Report on the Implementation of the ESS simply adjusting the 2003 version, without any deep strategic changes and rethinking. The world in 2003 was certainly very different to the one facing the EU in 2015. Global politics shifted from a unipolar to a multipolar system. “Everything is changed,” argued Mogherini “we have changed.”

Soon after taking office, HR Mogherini initiated a process of strategic reflection to ‘reform’ EU foreign and security policy. A new strategy ought to be designed and implemented in order to address the new regional and global realities. ‘Effective multilateralism,’ the core of the EU strategy in 2003, may not be as effective in 2015 as it was in 2003 (thus, Mogherini does not have to seek for building unity among the Member States as it was required by Javier Solana in the aftermath of the 2003 war in Iraq causing great disunity at the time). The 2015 version will require to address the new global environment (multipolar world order and the rise of new powers), new security challenges (traditional ones: territorial security in the neighborhoods, nuclear proliferation; new ones: domestic and international terrorism (IS and Boko Haram), environmental threats, cyber threats), and the instruments required for the best response (hard power: through the use of the CSDP, NATO, CSDP/NATO, or by the Member States like France has done in Africa; soft power: institutions, partnerships, cooperation, negotiations, and diplomacy).

“But our foreign policy can sometimes be disconnected” argued HR Mogherini. “We need to connect the dots. And we need a true sense of ownership. A common vision. A common European interest. Our identity in the world. That’s why I’m starting from member states.” HR Mogherini responded to the criticism that there is no common EU foreign policy if one takes in consideration the latest actions by France and Germany to solve the Ukrainian crisis during the Minsk Protocol II. She claims that “a European common foreign policy does not call for Member States to give up their own foreign policies. On the contrary, each country can reinforce our common action with its own strength and expertise. But we see Europe at its best only when all the Twenty-eight push in the same direction.”

HR Mogherini is correct in seeking for the development of a comprehensive European Security Strategy. “There is no contradiction between an eastward looking and a southward looking EU. Only a comprehensive approach to our foreign policy can protect our values and interests in the long run. Events in North Africa, the Middle East and Eastern Europe affect the whole of us. No one can expect to close their eyes.” The new Security Strategy will permit the EU and the EU-28 to reflect on the threats the EU should address, the type of power the EU wants to be and play, and the way the EU should conduct itself in its neighborhoods and global arena.

Mogherini’s 100 Days in Office

With Mogherini at the helm of European foreign policy, the difference between her and her predecessor, Catherine Ashton, is undeniable. Ashton seemed uncomfortable, where HR Mogherini is being over-present and very much at her ease in facing the media. She travels the world from meeting to meeting. She understands the need to be present, even if it is for a 30 minutes handshake, in order to build relationship and put the EEAS and the EU on the map. If Ashton was not as visible as her predecessor, she was respected in closed-meeting with her foreign counterparts. It is not surprising that HR Mogherini kept her at the helm of the European negotiations with Iran.

In her first 100 days, HR Mogherini has done quite a lot as illustrated by the infographic created by the EEAS (see below).

Source: EEAS
Source: EEAS

Considering her relentless rhythm, some diplomats wonder about her longevity, but as well the type of foreign policy being shaped by HR Mogherini. As analyzed in an excellent article by Bruxelles 2, an experienced European diplomat confides that leaders do not have the time anymore to reflect as they constantly runs from one place to another. One of the core problems faced by current political leaders is their dependence on the agenda and the need to constantly respond immediately to new issues. Foreign policy in some ways has been hijacked by the immediacy of information, when in fact reflection and thinking are core requirements.

Last but not least, HR Mogherini argued when discussing the threats facing the EU that “this is why I believe any narrative of a clash among national interests and European interests is flawed. We hold a ‘joint place in the world’, and it very much depends on the unity and the effectiveness of the European Union’s international projection. It should be clear to everyone that we, the Europeans, are much better when we are together. It is a matter not of European interest but of national interest, for all.” The consolidation of a common vision by merging national and European interests under a common umbrella could be Mogherini’s landmark.

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