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France

If Mélenchon surges into unlikely runoff, it won’t come from last-minute leftist unity

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The hard-left candidate, Jean-Luc Mélenchon, is rising in the polls, but it may still prove difficult to make it to a runoff in May. (Jean-Paul Pelissier / Reuters)

With less than two weeks to go until the first round of the French presidential election, Jean-Luc Mélenchon is surging in the polls.

From a distant fifth place a month ago, Mélenchon’s strong debate performances and his appeal from outside the traditional political mainstream have catapulted him well beyond former education minister Benoît Hamon, the social democratic candidate of the Parti socialiste (PS, Socialist Party) — and in some polls, even leading former prime minister François Fillon, the center-right and scandal-dogged candidate of Les Républicains.

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RELATED: How Le Pen might win a runoff against Macron

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The latest IFOP poll gives Mélenchon 17%, just behind Fillon (19%), though still some trailing poll leaders Marine Le Pen (24.5%) and Emmanuel Macron (23.5%) — Hamon, who once led Mélenchon, now claims just 9.5%. Earlier this year, before Hamon’s nomination, I wrote about the nightmare scenario (for centrists and liberals) of a Le Pen-Mélenchon runoff.

But you should be skeptical about the Mélenchon surge, which might not be as large as polls currently show. Even so, Mélenchon will struggle to grow his support sufficiently to win the presidency.

Rise of the anti-elite left

Jean-Luc Mélenchon ran for the presidency in 2012 and, despite a last-minute poll surge, won just 11%.

Mélenchon is the candidate of the far-left Front de gauche (Left Front), an alliance of communists and other hard-left figures. Though Hamon won the Socialist Party nomination in January on a radically leftist agenda (e.g., a business tax on robots, a 32-hour workweek, a higher minimum wage and new spending on social welfare), Mélenchon would go farther. Charismatic and acerbic in equal measure, Mélenchon also favors the 32-hour workweek, greater social spending (in the form of a €100 billion stimulus) and a higher minimum wage (€1,300 per month). But he would also levy a 100% tax rate on anyone making over €33,000 a month. He would also dismantle France’s nuclear power program, which supplies over 76% of France’s power needs (more than for any other country worldwide). While Le Pen wants to leave the eurozone and hold a referendum on ‘Frexit,’ Mélenchon wants to leave the European Union and NATO entirely, slams German chancellor Angela Merkel on the campaign trail and vows that he’s the only candidate ‘for peace.’

Mélenchon may sound like the ‘French Bernie Sanders,’ but his policy positions makes Sanders seem like a centrist in comparison.

French politics has seen this show before. Mélenchon, who ran for president in 2012, also saw a mid-April polling surge in the last election. One mid-April 2012 IFOP poll gave him 14.5% in that race, but he ultimately finished far behind in fourth place with 11%, under-performing every significant French poll in the days leading to the vote.

Five years later, anti-establishment sentiment is certainly much higher. There’s no doubt that Mélenchon is as anti-elite as it comes, even more so than the hard-right, anti-immigrant Le Pen, who at least finds common cause in the Catholic Church and other institutions that she believes support her view of traditional French values. Though Macron remains the frontunner to win a runoff against Le Pen on May 7, Le Pen still leads most polls to win the first round of the election on April 23. It’s been taken for granted for so long that Le Pen would win the first-round vote, but it’s still a landmark achievement for her and the Front national. The two candidates of the traditional parties are now polling less than one-third of the vote in an election season that eliminated both former president François Sarkozy and Bordeaux mayor and former prime minister and foreign minister Alain Juppé in the center-right presidential primaries, as well as once-popular prime minister Manuel Valls in the center-left primaries. It also forced an unpopular incumbent François Hollande to skip a reelection bid altogether.

Mélenchon continues to splinter the left, not unite it

Socialist nominee Benoît Hamon has dropped in the polls to a distant fifth place. (Facebook)

Over the weekend, Hamon indicated that if Mélenchon does make the May runoff, his supporters should support Mélenchon. That’s the closest sign of any unity between the two campaigns. Just a few weeks ago, prominent Hamon supporters — including leftist economist Thomas Piketty — were hoping Mélenchon might drop out of the race in favor of a united candidacy around Hamon. Yannick Jadot, who had planned to run as the candidate of the Europe Écologie Les Verts (Europe Economy / Greens), dropped out in late February in deference to Hamon.

Now, many leftists are hoping Hamon will drop out. They add up the total support for Hamon and Mélenchon in polls, and believe that together, they would be a shoe-in for the runoff. But the reality is far more complicated.

That’s unlikely.

Hamon, ironically, is more maverick than the ‘independent’ Macron (a Hollande protégé), and his nomination made the chances of a coalition with Mélenchon far more likely than had Valls won the Socialist nomination.

But Hamon was always swimming upstream as the official nominee of the Socialist Party. After five years of Hollande, the Socialist brand is toxic; after the perceived decades-long failures of Hollande, Sarkozy and their predecessors (on everything from employment to wage growth to immigration), the establishment brand is even more toxic. Moreover, many centrists within the Socialist Party responded to Hamon’s nomination by distancing themselves from a nominee who (1) seemed like a sure loser and (2) is far too leftist for their tastes, and many of those Socialist centrists now support Macron, formally or informally. Hamon has been poorly served by the Socialist Party since January, and there is a chance — however slim — that he might drop out of the race in favor of Mélenchon. (It would be too far late, legally, for the Socialists to nominate a new candidate).

The Hamon-Mélenchon talks failed not only because the two candidates are so far apart on policy (such as EU and NATO positions), but from the fact that they come from very, very different traditions. Think about the difference between, say, longtime French communist leader Robert Hue and former Socialist president François Mitterrand. Even if Hamon dropped out (very unlikely) and endorsed Mélenchon, the Socialist Party would never endorse him — in part, because Macron is already the unofficial Socialist candidate. Moreover, the Socialists also have a tough parliamentary election in June to worry about.

Mélenchon would hardly welcome formal Socialist backing. Just as Macron perceived (and as Hamon is learning), the party’s imprint is akin to a poisoned chalice. Nothing Mélenchon could do or say would more taint him as a ‘sellout’ to his supporters than to accept Socialist endorsement.

Indeed, the best gift Hamon might be able to provide Mélenchon is to drop out and force the Socialists to endorse Macron instead, who already has his share of ‘Socialist’ problems. Though he’s leading a new movement called ‘En marche,’ Macron’s experience in French politics comes from a Socialist background. A graduate of the elite École nationale d’administration and a former investment banker, Macron owes his political career to Hollande. He served as a presidential deputy chief of staff before serving as Hollande’s economy minister from 2014 to 2016. Like it or not, Macron is the status quo candidate in the race, for all his populist bluster about change. Former Paris mayor Bertrand Delanoë now backs Macron, as does Valls. Unofficially, so does Ségolène Royal and many others, including perhaps Hollande himself.

The rupture of the French left into a centrist Macron faction, a progressive Hamon faction and a hard-left Mélenchon faction isn’t likely to change after April 23. Even if the personalities leading those factions change, the divides might widen as the focus shifts to parliamentary elections. If Macron loses the presidency to Le Pen, moreover, the left’s fragmentation could magnify Le Pen’s ability to co-opt economic nationalism and reframe French politics on a nationalist/globalist line instead of a traditional left/right line. Unfortunately for the Socialist Party, the stakes transcend just one election cycle, and the party’s hegemony, at least throughout much of the Fifth Republic, may be finished.

The problem for Mélenchon’s growth prospects

In order to gain support, Mélenchon might turn to Marine Le Pen, who emphasizes the same anti-elite, anti-EU and economic nationalism message as the far left. (Facebook)

Even while Mélenchon is shaking up the race, there’s a big difference between ‘shaking up’ and winning.

The question is where Mélenchon can go from here. A once-possible April 20 debate looks like it will no longer take place, denying Mélenchon one last chance to shine (ironically because he refused to join a debate just three days before the first-round vote). He led a well-attended rally in Marseilles over the weekend, but rallies are one thing — converting rallies to votes is another. Unlike Fillon, Hamon and even Le Pen, who have traditional party structures to help turn out the vote, and unlike Le Pen and even Macron, who has cultivated a large organization since last summer, Mélenchon is at a ground-game disadvantage. That’s perhaps one reason his 2012 showing was such a disappointment.

On the left, it’s hard to see where Mélenchon will pick up more voters. Hamon’s supporters must realize he’s a lost cause. But while Mélenchon’s polls began to rise after the first presidential debate on March 20, those Hamon voters are still not switching to Mélenchon, even though he has surged to a 2-to-1 advantage against Hamon in some polls. Maybe he could pick up voters from Macron, but it’s doubtful that the most pro-European centrist in the race would hemorrhage too many votes to an ardent eurosceptic communist. Even as the traditional parties weaken, a dwindling PS base still exists to support the Socialist nominee. Note the baseline support (at least 16% to 20%) that Fillon is still winning from center-right voters, even though police have essentially indicted him for paying public funds to his wife and children for fake jobs.

More fertile ground for Mélenchon might come from Le Pen’s supporters (one reason why he may have held his weekend rally in Marseilles, where Le Pen support runs strong). Like Mélenchon, Le Pen calls for radical change, is skeptical of Brussels and EU officials, and embraces the same economic protectionism as Mélenchon’s old-school leftism. So if he makes a breakthrough later this month, it could be at Le Pen’s expense, reclaiming votes in places like France’s de-industrialized northeast, where Le Pen won over disenchanted — and formerly Socialist — voters.

But another lesson from 2012 should cast doubt on that thesis. After the last presidential race, both Le Pen and Mélenchon ran for a legislative assembly seat in northeastern Hénin-Beaumont, an old coal-mining region. In the first round of that election, Le Pen won 42.4%, far ahead of second-placed Socialist Philippe Kemel (23.5%). Again, Mélenchon disappointed with just 21.5% of the vote. In the runoff (Mélenchon withdrew and endorsed Kemel), Le Pen only narrowly lost by a margin of 50.1% to 49.9%. Nevertheless, the lesson from that parliamentary race, at least five years ago, is Le Pen’s brand of hard-right protectionism was far more compelling than Mélenchon’s 21st century communism.

 

Le Pen’s support in the 2017 election, however, has universally been stronger than in 2012. So while there’s definitely a path for Mélenchon into the May runoff, it will be an incredibly difficult task.

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The 13 key EU players in the proposed Juncker Commission

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On Wednesday, the incoming president of the European Commission, Jean-Claude Juncker (pictured above), released full details on the proposed commissioners within his Commission, which will serve as the chief executive and administrative body of the European Union between 2014 and 2019.European_Union

The most important feature of the proposed Juncker Commission is that he’s introduced the greatest amount of hierarchy in an institution that used to be flat. It’s not a secret that some portfolios have always been more desirable than others, especially as the Commission has expanded to include all 28 member-states. But Juncker has introduced a first vice president and five vice presidents, who will also serve alongside Italy’s foreign minister Federica Mogherini, who was appointed two weeks ago to serve as Commission vice president and high representative for foreign affairs and security policy.

The delegation of so much power to five ‘super-commissioners’ with roving, supervisory briefs indicates that Juncker intends to be a much less hands-on Commission president that his predecessor, José Manuel Barroso. But it also reflects a Commission that, including Luxembourg’s Juncker, contains five former prime ministers (Finland, Slovenia, Latvia and Estonia).  It also contains four incumbents (Germany, Sweden, Bulgaria and Austria) who have served throughout the full second term of the Barroso Commission. That makes the Juncker Commission possibly the most distinguished in EU history.

Each commissioner must be approved by the European parliament and, while individual nominees have had troubles in the past, the parliament typically approves the vast majority of a Commission president’s appointments, all of whom were nominated by their respective national governments.

With nine women, it’s not as unbalanced as feared even a week or two ago, and with 14 members of the center-right European People’s Party (EPP), eight members of the center-left Party of European Socialists (PES) and five members of the Alliance of Liberals and Democrats for Europe (ALDE), it generally reflects the results of the May 25 European parliamentary elections, though some social democrats and socialists are grumbling that the left doesn’t have enough representation.

So what can we expect from this illustrious college of commissioners?

Here’s a look at the 13 most important players in the proposed Commission (aside from Juncker and Mogherini, of course). Continue reading The 13 key EU players in the proposed Juncker Commission →

Hungary

Orbán designs to transform Hungary into ‘illiberal’ state

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It sounds like a headline from the European version of The Onion, but Viktor Orbán, just months out from winning a landslide reelection in April, has announced his intentions to turn Hungary into an ‘illiberal state,’ modeled after China or Russia:Hungary Flag Icon

The global financial crisis in 2008 showed that “liberal democratic states can’t remain globally competitive,” Orban said on July 26 at a retreat of ethnic Hungarian leaders in Baile Tusnad,Romania.

“I don’t think that our European Union membership precludes us from building an illiberal new state based on national foundations,” Orban said, according to the video of his speech on the government’s website. He listed Russia, Turkey and China as examples of “successful” nations, “none of which is liberal and some of which aren’t even democracies.”

It’s hard to know just how seriously to take Orbán’s latest comments.

If his first government, over a decade ago, was traditionally liberal conservative, Orbán’s most recent term was marked by more nationalist, illiberal and authoritarian tendencies. It’s not hard to believe that, with a two-thirds majority behind him, Orbán could turn fully away from liberal democracy and toward illiberal authoritarianism in his third term.

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RELATED: Hungarian election results : A historic win for Orbán

RELATED: Lessons from Hungary’s election —
and challenges for its future

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Other Hungarian commentators argue that Orbán’s emphasis was on the liberal market system and its failures during the 2008-09 global financial crisis. In that sense, Orbán may have been calling merely for a shift from a European social welfare state to a more state capitalist model. Though Orbán came to power as a liberal market proponent, his 2010-14 government engaged in healthy spending on public works programs,  nationalized Hungary’s private pensions system and introduced the highest VAT rate in the European Union (27%) in a bid to end Hungary’s  €20 billion post-crisis loan program with the International Monetary Fund. Nonetheless, even significant moves in that direction could spook global markets, send the Hungarian forint plummeting or dampen growth and investment.

viktorvlad

Orbán’s weekend speech came as he, like Russian president Vladimir Putin (pictured above, right, with Orbán), has called for restrictions on international NGOs throughout the country. Though Hungarians revolted in 1956 against Soviet rule and in favor of freedom and democracy in one of the most dramatic Iron Curtain revolutions of the Cold War, Hungarian relations with Russia today are arguably better than Hungary’s relations with leading EU member-states. Orbán, who burst onto Hungary’s political scene a quarter-century ago as an anti-communist activist, signed a $14 billion lending deal with Russia in January in pursuit of greater nuclear energy.

If Orbán goes through with plans to eliminate liberal democracy in Hungary, which has been a member of the European Union for a decade, it would cause an immediate crisis for the incoming European Commission president Jean-Claude Juncker.  Continue reading Orbán designs to transform Hungary into ‘illiberal’ state →

European Union, United States

The US perspective on the European parliamentary elections

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I sat down with Brian Beary from Europolitics late Sunday night to discuss the results of the European parliamentary elections, with a particular focus on the US perspective. USflagEuropean_Union

The link is here (unfortunately, subscription only), but here’s one excerpt:

Is there a US equivalent to the Eurosceptics that did so well in the European elections?

In a formal sense, it is a peculiarly European thing. There are no parties in the US that are saying ‘we need to pull out of the United States’. The one thing they do share is that politicians in the US, for at least two generations now, in every election run against Washington. And in Europe, whether it is the hard Euroscepticism of groups like UKIP or Front National, or the soft Euroscepticism of certain members of the British Labour Party, or Silvio Berlusconi, there is an anti-Brussels-ness that reminds me of the way US politicians campaign against Washington.

Though many commentators and academics like to refer to the European Union today as a kind of ‘United States of Europe,’ especially during the EU’s ill-fated constitutional debate in 2004 and 2005, I argued that the European Union today more closely resembles the confederation of US states that existed under the 1781 Articles of Confederation.

Most US headlines in the lead-up to the European elections have concerned Ukraine and the ongoing security crisis and showdown with Russia that’s caused a regeneration of interest in transatlantic security, NATO’s role and additional follow-on issues,  such as the potential US export of liquified natural gas to Europe. In the aftermath of the European elections, US headlines are focusing on the rise of eurosceptic parties like Nigel Farage’s UK Independence Party and Marine Le Pen’s Front national in France.

In both cases, that’s understandable — and both topics are incredibly important. The real issues where the European Parliament will have the most impact in the next fiver years, however, are somewhat less sexy, but they should be on the radar of US policymakers and investors in the years ahead: Continue reading The US perspective on the European parliamentary elections →

European Union

In Depth: European Parliament

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(43) EU parliamentary chamber

On the last full weekend of May, European voters in 28 member-states with a population of over 500 million will determine all 751 members of the European Parliament.European_Union

The political context of the 2014 parliamentary elections

Since the last elections in June 2009, the European Union has been through a lot of ups and downs, though mostly just downs. After the 2008-09 financial crisis, the eurozone went through its own financial crisis, as bond yields spiked in troubled Mediterranean countries like Greece, Spain, Italy and Portugal with outsized public debt, sclerotic government sectors and economies operating near zero-growth. Eastern European countries, facing sharp downturns themselves, and a corresponding drop in revenues, implemented tough budget cuts and tax increases to mollify bond markets. Ireland, which nationalized its banking sector, faced similar austerity measures. European Central Bank president Mario Draghi’s promise in the summer of 2012 to do ‘whatever it takes’ to maintain the eurozone marked the turning point, ending over two years of speculation that Greece and other countries might have to exit the eurozone. Many countries, however, are still mired in high unemployment and sluggish growth prospects.

One new member-state joined the European Union, Croatia, in July 2013, bringing the total number to 28, though Iceland, Serbia and Montenegro all became official candidates for future EU membership:

eu-members-2013

Politically speaking, since the 2009 elections, only two of the leaders in the six largest EU countries are still in power (Polish prime minister Donald Tusk, a centrist, and German chancellor Angela Merkel, a Christian democrat) reflecting a climate that’s been tough on incumbent governments. Spain and the United Kingdom took turns to the political right, and France and Italy took turns to the political left, but none of those governments seems especially popular today — and each of them will face a tough battle in the voting later this month.

Of course, that’s only if voters even bother to turn out. Since the European Parliament’s first elections in 1979, turnout has declined in each subsequent election — to just 43.23% in the latest 2009 elections:

EU turnoutAt the European level, the Treaty of Lisbon, a successor to the ill-fated attempt to legislate a European constitution in the mid-2000s, took effect in December 2009, scrambling the relationships among the seven institutions.

 The elections, which will unfold over four days between May 22 and May 25, are actually about much, much more than just electing the legislators of the European Union’s parliamentary body, which comprises just one of three lawmaking bodies within the European Union. Continue reading In Depth: European Parliament →

Madagascar

Madagascar holds long-awaited election, prepares for December runoff

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Though the main actors in Malagasy politics have all been barred from running in Madagascar’s presidential election, they still found a way to overshadow the actual candidates in the country’s October 25 election.madagascar-flag

Results are still trickling in four days after the vote, but with just over 25% of all votes counted, it seems almost certain that the race will head to a December 20 runoff between the top two candidates.

That the vote actually went forward four years after a political coup marks significant progress for Madagascar, which has been trapped in a political and economic crisis since 2009.  With a new constitution in place, however, the new president will hopefully close the door on the turmoil that began with the March 2009 coup that brought opposition leader Andry Rajoelina, then the mayor of Madagascar’s capital of Antananarivo, to power.  Rajoelina replaced Marc Ravalomanana, first elected president in 2002 and reelected overwhelmingly in 2006, following widespread riots over economic conditions, sparking concern from throughout the world, including donor countries like France and the United States.

The country has been essentially transitioning toward last weekend’s presidential election ever since.  Finally scheduled for July 24, the election was postponed to August 23 and, again, to October after repeated delays and clashes among Madagascar’s constitutional court, the electoral commission and the Rajoelina administration.

Last year, the European Union and the African Union brokered a deal whereby both Rajoelina and Ravalomanana agreed not to recontest the presidency, which appeared to clear the way for 2013 elections.  But when former first lady Lalao Ravalomanana declared her own candidacy, Rajoelina declared his candidacy as well, arguing that Ravalomanana’s wife was a sly stand-in for the former president.  For good measure, former president Didier Ratsiraka, who brings an additional set of baggage to Malagasy politics, threw his hat in the ring as well.

Over the summer, however, Madagascar’s electoral court banned all three candidates — Rajoelina, Ravalomanana and Ratsiraka — thereby clearing the way for an entirely new administration relatively untainted by the personal failures of the three men who have governed Madagascar for all but five of the past 38 years.

Among the 33 candidates in the first round, two candidates seem poised to face off in the runoff, and unsurprisingly, they are the two candidates who are supported by both Rajoelina and Ravalomanana.

The first is Jean Louis Robinson (pictured above with Lalao Ravalomanana), a physician who previously served as Ravalomanana’s health minister, who leads with 26.32% of the current vote total.  He has benefitted from the full support of both Ravalomanana and his spouse during the campaign, and his campaign platform involves returning to an updated Madagascar Action Plan (MAP) that Ravalomanana tried to implement in the mid-2000s.

The second is Hery Rajaonarimampianina, Rajoelina’s finance minister between 2009 and 2013, who is in second place with 15.16%.  Though Rajoelina, as sitting president, remains neutral in the race, it’s clear that he is supporting Rajaonarimampianina.  Rajaonarimampianina received a masters’ degree in finance and accounting in Québec in the 1980s, served as director of the National Business Institute in the early 1990s, and worked in the private sector in the 2000s as an auditor and accountant.

Both candidates have promised to take action to boost employment and reduce poverty.   Madagascar, a former French colony with a population of around 22 million, suffers from low growth after years of a relatively planned, socialist economy that flatlined after the 2009 coup, despite Rajoelina’s pledge four years ago to restore democracy.  While the eventual winner of Madagascar’s presidency can look forward to a boost from the resumption of international aid from the European Union and the United States, he will face the need to implement serious and fundamental structural reforms if the Malagasy economy is to become truly competitive globally.

No other candidate is currently polling more than 10% of the vote, but the next five candidates include a who’s who of Malagasy political figures, including other politicians who have held roles in Rajoelina’s government over the past four years:

Continue reading Madagascar holds long-awaited election, prepares for December runoff →

Madagascar

Disqualifications of current, former presidents give Madagascar chance for fresh start (eventually)

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In the latest twist of Madagascar’s long-running electoral saga, the African island country’s electoral court earlier this week decided to disqualify the three leading candidates in the election, which had been scheduled for August 23.madagascar-flag

That means neither current president Andry Rajoelina nor former first lady Lalao Ravalomanana (a stand-in for exiled former president Lalao Ravalomanana) nor former president Didier Ratsiraka will be in the running for the first presidential vote in seven years.

In a sense, it may have been a better solution to let all of the candidates run — why not let them have at it in a free-for-all to determine who should lead Madagascar?  In a free and fair election, the winner would have that much more of a mandate for his (or her) government.  This way, all three can now credibly claim that, but for the judicial intervention, he (or she) would have been elected, which will inevitably weaken the person who is ultimately chosen in the election.

But in a world where the election court is going to start disqualifying candidates, it’s better that all three heavyweights are excluded rather than just one or two.  Moreover, the European Union, the African Union and the Southern African Development Community had all pushed for their disqualification, and EU high representative for foreign policy Catherine Ashton had set a sharp deadline for Madagascan elections to be held by the end of the year in order to avoid further sanctions.

The immediate roots of Madagascar’s current political crisis lie in the early days of 2009, when Rajoelina, then the major of Antananarivo, Madagascar’s capital and largest city, led sustained protests against Ravalomanana’s government.  When a pro-Rajoelina crowd marched on the presidential palace, Ravalomanana ordered his guard to fire on the crowd, killing 30 protesters and leading to a military coup that essentially deposed Ravalomanana in March 2009 and installed Rajoelina in his place — illegitimately, in the eyes of the rest of the world.  Rajoelina, only 34 years old at the time, was supposed to serve as president of a semi-transitional government — the ‘High Transitional Authority of Madagascar’ — that was supposed to pass a new constitution and hold new presidential elections as soon as 2010.

But Rajoelina has now served almost as long as he would have if elected to a full term as president — four years.  Although the country passed a new constitution into effect in November 2010 with the support of the international community, Madagascar’s presidential election was postponed six times from an initial date in May 2011 until the August 2013 date, which now too looks like it will be postponed.  Much of the problem has had to do with who’s running — Rajoelina and Marc Ravalomanana, who remains in exile in South Africa, had struck an agreement in January that neither would stand in the election.  But when Lalao Ravalomanana decided to enter the race in lieu of her husband in May, Rajoelina argued that Ravalomanana broke their agreement and accordingly, Rajoelina declared his own candidacy.   Continue reading Disqualifications of current, former presidents give Madagascar chance for fresh start (eventually) →

European Union, Iceland

Iceland ends its short-lived quest to join the European Union

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It should have come as no surprise to observers of Iceland, but its new center-right government has firmly closed the door to membership in the European Union anytime soon, with an announcement from Icelandic foreign minister Gunnar Bragi Sveinsson (pictured above, left) last week.Iceland Flag IconEuropean_Union

It was virtually certain that Iceland would take a step back from EU membership, given that both governing parties — the Framsóknarflokkurinn (Progressive Party) and the Sjálfstæðisflokkurinn (Independence Party) — campaigned against EU membership in Iceland’s April parliamentary elections.

Former social democratic prime minister Jóhanna Sigurðardóttir launched membership talks with the European Union in July 2009, when Iceland was still reeling from the effects of a financial crisis that bankrupted its three major banks and left Iceland in economic meltdown.  In the immediate aftermath of the September 2008 crisis, some Icelanders even seriously considered joining the euro after the Icelandic krónur tanked in value.  As Iceland’s economy has recovered to some degree, despite difficult loan burdens and continued currency controls, and as the eurozone has come to appear more like a monetary straitjacket than an economic life raft, Icelandic voters have increasingly soured on the benefits of EU membership.

Though prime minister Sigmundur Davíð Gunnlaugsson’s Progressive Party was seen as originally more open to continuing the talks, Gunnlaugsson seems to have taken aboard the more hardline views of the Independence Party — no one quite expected the government to end negotiations with such resolute finality in only its first month in office.

So while Iceland will continue to be a part of Europe, it will do so, like Norway and Switzerland, outside of a formal membership of the European Union.

As I wrote in the immediate aftermath of the election, however, the line between membership and Iceland’s current status is not as bright as you might expect: Continue reading Iceland ends its short-lived quest to join the European Union →

Iceland

Gunnlaugsson now unexpectedly in line to form Icelandic government

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Despite the fact that Iceland’s long-ruling Sjálfstæðisflokkurinn (Independence Party) won about 2% more in voter support in Saturday’s parliamentary elections, it looks like Sigmundur Davíð Gunnlaugsson, the leader of the second-place Framsóknarflokkurinn (Progressive Party), will have the first shot at forming a government.Iceland Flag Icon

That’s because both parties ultimately won 19 seats each in the Alþingi, Iceland’s parliament, and Iceland’s president, Ólafur Ragnar Grímsson, surprisingly decided to give Gunnlaugsson the first shot at forming the next Icelandic government.

The decision shines a spotlight on the fact that in many countries, the head of state has quite an influential role in determining who will be the next head of government — in this case, it seems like Gunnlaugsson will nonetheless be on track to become the next prime minister, not the leader of the Independence Party, Bjarni Benediktsson.

It makes some intuitive sense — the Progressives have by far the most momentum, having garnered nearly an additional 10% of the vote in the 2013 election, and although the Independence Party won the vote in Reykjavík and the small southwestern region of Iceland surrounding Reykjavík, the Progressives won more votes in all of the other regions of the country (though they are more sparsely populated).

Although all signals from both Gunnlaugsson and Benediktsson are that they’ll form a center-right coalition, one possibility that I hadn’t considered is that Gunnlaugsson might join forces with other parties, leaving the Independence Party outside of government.

That seems unlikely, of course, but it’s an avenue that’s more open to the Progressives than the Independence Party, given that the Progressives can make a marginally better argument that they represent a rupture from both the Independence Party that dominated Icelandic government in the decades prior to 2009 and the more recent government led by Jóhanna Sigurðardóttir and the Samfylkingin (Social Democratic Alliance) and their coalition partners, the Vinstrihreyfingin – grænt framboð (Left-Green Movement).

Mathematically, a government needs 32 seats for a majority in the 63-member Alþingi.

Conceivably, and this is now in the realm of pure speculation, that means that Gunnlaugsson could team up with the Social Democratic Alliance and the Left-Green Movement for a 35-seat majority, though that seems nearly suicidal, given that the two parties suffered the heaviest losses in the recent election.  It seems even more unlikely given the Social Democratic Alliance’s support for joining the European Union, a position that both the Independence Party and the Progressives — and even the Left-Green Movement — oppose.

But another path might include a Progressive-led government that draws on support from the anti-EU membership Left-Green Movement and the most successful of the two newest parties in the Alþingi, Björt framtíð (Bright Future) — that would bring exactly 32 seats.  Bright Future was founded both by former Social Democrats and Progressives, which means that, despite its pro-EU membership views, Bright Future could be an easier coalition partner for the Progressives.

What’s clear is that, for now, Gunnlaugsson would appear to have the greatest number of options, including several novel paths to a government that could shake up Icelandic politics more than we thought even over the weekend.

European Union, Iceland

Iceland’s election spells the end for its EU accession hopes

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(110) Tides pushes out at Vik

With capital controls still in place, a massively devalued krónur and galloping inflation, Iceland’s economy is not back to normal.European_Union Iceland Flag Icon

But it’s enough back to normal so that the window for Iceland’s accession to the European Union — or even, as was assumed during the worst days of its 2008 banking crisis, accession to the eurozone — is now very unlikely to happen.

Regardless of whether Sigmundur Davíð Gunnlaugsson and the Framsóknarflokkurinn (Progressive Party) or Bjarni Benediktsson and the Sjálfstæðisflokkurinn (Independence Party) come out on top in Saturday’s election, they are likely to form a center-right coalition that will look to reverse many of the initiatives of the social democratic / leftist government of Jóhanna Sigurðardóttir over the past four years.

Above all, none of the Sigurðardóttir government’s priorities is more endangered than the project of Iceland’s EU accession.  Most news stories note that both a Progressive-led or Independence-led government would slow accession talks, but it seems likelier that Iceland’s next government would essentially end the talks indefinitely — they might not formally withdraw Iceland’s EU application, but they certainly won’t take any action to further discussions.

While Gunnlaugsson has called for a referendum on the eventual result of talks, his party  virtually alone among Iceland’s parties argues that the country should not reimburse the British, Dutch and other governments who reimbursed non-Icelandic depositors who put their savings in Icesave prior to its collapse in 2008.  Benediktsson is hardly any more pro-Europe — he’s argued that Iceland should break off talks altogether and focus on deeper global ties, such as Iceland’s recent free trade agreement with the People’s Republic of China — the first such free trade pact between a Chinese and a European country, likely due to Chinese eagerness to enhance its role in the Arctic north.

If for some reason a Progressive/Independence government does complete the accession talks, the result would be put to a referendum of Icelandic voters who remain highly skeptical of Brussels’s pernicious influence.

Sigurðardóttir’s government formally applied for membership in July 2009 and negotiations began a year later, but with her party likely to return to opposition, the window for Iceland’s EU membership seems likely to end with her government, as Alda Sigmundsdóttir writes today in The Guardian:

So, what makes the Progressive party so popular?

They are vehemently opposed to joining the European Union…. Indeed, many of the Progressives’ policies and declarations lean precipitously towards a new nationalism, with mildly xenophobic stances on issues such as immigration and asylum seekers, and party symbols that are vaguely reminiscent of fascism. The Progressive party was also the party that was most fiercely opposed to Iceland repaying the UK and Holland for the failure of the Icesave online bank.

If [Gunnlaugsson] wins, it will be because Icelanders fear abuse and exploitation by outside forces more than they do a return to the corrupt days of old.

Those are some fairly strong accusations, but I have to wonder if Icelandic voters aren’t simply being rational with respect to EU accession — they already have the benefits of free movement of goods and free borders with Europe, as well as much of the legal harmonization that typically comes with membership and a robust economic relationship with Europe that developed without Icelandic membership.  Why formalize the deal when they already have so many of the benefits of membership without any potential for considerable drawbacks that could harm Iceland’s cherished (and highly protected) fishing industry or the fierce national pride of a uniquely compelling nation that won its own independence from Denmark in 1944? Continue reading Iceland’s election spells the end for its EU accession hopes →

Scotland, United Kingdom

Scotland sets a referendum date: September 18, 2014

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Scotland’s first minister, Alex Salmond, has set September 18, 2014 as the date for the referendum on potential Scottish independence.United Kingdom Flag Iconscotland

Polls have been relatively consistent, with support for independence at around 30% to 35% and with support for continued union with England at around 50% to 55%.

But the up-or-down vote will come in 18 months, and a lot can obviously change in 18 months, including the popularity of Salmond (pictured above) and his Scottish National Party, which won in 2011 the first majority government since devolution in the late 1990s.

Three quick things to keep an eye on:

Shetland and Orkney.  Shetland and Orkney, the groups of islands to the northeast of Scotland, could well stay within the United Kingdom if Scotland leaves.  That would complicate the Scottish economic rationale for independence, dependent as it is upon North Sea oil revenues.  It’s no surprise then, to see Liberal Democrats encouraging Shetland and Orkney to think of themselves as a unit within the United Kingdom than as just an appendage of Scotland.

Tory incentives. As Liberal Democratic deputy prime minister Nick Clegg has sharply noted, Conservatives do not have an incredible incentive to fight hard to keep Scotland in the United Kingdom, given that they hold one seat.  It’s fair to worry that Tories actually have an electoral incentive to see an independent Scotland — though, because the Scots are just 8.5% of the UK population, it’s not as much as you might think.  Labour prime minister Tony Blair’s massive 12-point 1997 landslide was still a massive 10-point landslide within England proper.  In the 2010 general election, Labour won 28.1% in England and 29.0% nationwide, while the Tories won 39.6% in England and just 36.1% nationwide.  So it’s a boost, but not a gigantic one.

Europe.  Also, there’s some dicey choreography with the European Union too, because as the United Kingdom approaches prime minister David Cameron’s promised 2017 referendum on potentially leaving the EU, the more it could have a negative effect on the Scotland effort.  In fact, even with sluggish growth in the next 18 months, I think the anti-Europe tone in England is the biggest threat to the anti-independent forces in very much pro-Europe Scotland.  If Nigel Farage’s United Kingdom Independence Party (UKIP) continues to make further gains in advance of the 2015 general election, it could well scare some of the pro-union, pro-European Scots toward the independence camp.

Despite what anyone in Brussels or Berlin or London or Edinburgh says, no one thinks that Scottish independence would leave it outside the EU for long.  Given that the Scots have implemented as much of the acquis communautaire as England has, it’s certain that the Scots would align independence with simultaneous Scottish accession to the EU.  That’s a non-issue.

Cyprus, European Union

Cypriot parliament overwhelmingly rejects EU bailout terms, turns to Plan B

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Protesters take part in an anti-bailout rally outside the parliament in Nicosia

This was not surprising.

After a couple of delays, Cyprus’s 56-member House of Representatives (Βουλή των Αντιπροσώπων) has rejected the European Union-led bailout of Cyprus’s banks by a vote of 0 to 36, with 19 abstaining and one not present.European_Unioncyprus_world_flag

As I wrote yesterday, the parliamentary rejection became increasingly likely as the vote became delayed.

So where do things stand now?

The crisis continues to unfold in real time — although the bailout terms ( €10 billion loan to Cyprus, with an additional €5.8 billion to be raised by means of a haircut on all Cypriot depositors) were announced Friday night, Cypriot banks are now closed through at least Thursday while everyone scrambles for a Plan B.

The European Central Bank has, for now, agreed to continue ‘its commitment to provide liquidity as needed within the existing rules,’ but who know what that means?  The current crisis started over the weekend when the ECB threatened to pull that support.

Obviously, EU leaders and the International Monetary Fund will probably go back to the negotiating table with newly inaugurated Cypriot president Nicos Anastasiades to determine a new approach — the EU position now seems to be that they don’t care how Cyprus raises the €5.8 billion, so long as they raise it.  Essentially, that means some kind of rebalancing of the burden to be shared by depositors in Cyprus — that means perhaps raising the 9.9% levy on deposits over €100,000 and lowering the 6.75% levy on deposits under €100,000.

Meanwhile, there’s word that Cyprus and Russia are now in talks over, potentially, either a solution that involves Russia or Gazprom — Cypriot finance minister Michael Sarris actually flew to Moscow Tuesday, which indicates that the Cypriots and the Russians are extremely serious.

In this regard, today’s vote probably bought some crucial time to come up with a credible counter-offer from Moscow.  Russian president Vladimir Putin is, in particular, upset about the approach because around 22% of deposits in Cypriot banks are held by Russian citizens.  That, in fact, is one of the reasons why the EU was so wary of providing a full bailout to Cyprus over the weekend.  Russia has designs on future exploration of natural gas deposits in Cyprus, and it could also well have designs on a greater military presence in Cyprus as well.  All of this has profound geopolitical security implications — for the EU and Greek Cypriots, but also for Turkish Cypriots, the United States, and its NATO allies, including Turkey.

Whether Anastasiades is serious or not about the Russian alternative, it certainly gives him more negotiation leverage with the EU and the IMF, which could conceivably revert back to a full  €17 billion bailout, via the ‘troika’ or through the European Stability Mechanism, as Open Europe notes in a great post.

We’re also in such uncharted territory that if ‘EU Plan B’ or ‘Russia Plan B’ don’t work, then Plan C is pretty much a disorderly default that finds Cyprus tumbling out of the eurozone, with even greater pain for Cypriot savers, Russians depositors, and all of the holders of private and public Cypriot debt, to say nothing of the costs to the eurozone — now that EU minds from Brussels to Berlin to Helsinki have escalated the bailout into an international crisis, it could catalyze an entirely self-inflicted domino effect that would pretty rapidly bring the eurozone to 2008-crisis levels.

So let’s hope we don’t get to that, though with the United Kingdom airlifting €1 million in cash to Cyprus to cover military personnel unable to access their own funds and with Russian ultranationalist Vladimir Zhirinovsky mock-eulogizing private property in the EU, the Cypriot situation has already reached a pretty high crisis mode.

One question that I haven’t heard asked in the past 72 hours, and one I wish I had an answer: why hasn’t Moscow been involved in the Cypriot bailout talks from last June onward? It’s clear that there’s a Russian interest in an orderly bailout (or even selective default) for Cyprus and its debt-bloated banks.

Russia has already extended a €2.5 billion loan to Cyprus, and Cyprus and the EU are dependent on Russia’s rolling over than loan soon if the current EU-led bailout to have any chance of working.

Are the channels of communication between Brussels and Moscow really so poor?

All of this was predictable nine months ago.

Even if the EU ultimately blinks, it’s already done a lot of damage that it can’t well undo — it’s still the case that the EU has undermined Anastasiades just days into his administration, pretty much destroyed the short-term future of the Cypriot finance sector, undermined the concept of deposit insurance throughout the eurozone, given every euroskeptic on the continent a prime example of the anti-democratic nature of the EU project.

Above all, the Cypriot crisis has undermined global confidence in EU leaders at a time when most everyone was certain that the worst of the eurozone crisis was behind us.

The good news? No word of significant bank runs in Italy or Spain, though I’d love to see how much capital quietly leaves those two countries electronically in the two weeks following March 15.

Photo credit to Yorgos Karahalis of Reuters.

European Union, United Kingdom

Clarke’s pro-Europe tone highlights referendum risk to UK Tories from the center

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Longtime senior Conservative Party grandee — and former chancellor of the exchequer — Kenneth Clarke (pictured above) in no uncertain terms yesterday said that a British exit from the European Union would be a disaster.United Kingdom Flag IconEuropean_Union

That Clarke is pro-Europe is certainly not a surprise.

As former prime minister John Major’s chancellor from 1993 until the fall of the Tory government in the 1997 Labour electoral landslide, Clarke was the most prominent pro-European in Major’s government — at one point, Clarke was even in favor of the United Kingdom joining the eurozone.  When Major’s government irreparably fractured over divisons on the UK’s role with respect to Europe, Clarke was most certainly the top general of the pro-European faction.

So it’s not a shock to see Clarke joining forces with Peter Mandelson, the former Labour veteran, and others for a cross-party effort to boost the United Kingdom’s continued presence in the European Union:

“There’s a broad range of opinion inside the [Conservative] party. The number of people who actually want to leave the European Union; it’s quite tiny. They get a disproportionate amount of attention. My guess is that there are about 30 who want to leave and when we first joined the European Community I think there was slightly more than that.”

He warned that it would be “pretty catastrophic” if Britain left the EU and said he was now resigned to fighting a referendum on the issue if the Conservatives win the next election.

“The background climate in this county has become … unremittingly hostile. I think somebody has got to make the positive case again. The climate of public opinion just needs to be reminded how essential it is if we really want the UK to play a part in the modern world,” he said.

But it’s another headache for UK prime minister David Cameron, who announced in a widely anticipated speech last week that he would seek to renegotiate the United Kingdom’s role in the EU and, thereupon, call a referendum on the UK’s continued membership by 2017 (obviously depending on the reelection of the Tories in the 2015 general election).

Clarke’s outspoken support shows just how difficult Cameron’s balancing act on Europe has become — and it will only be more difficult as a potential referendum approaches. Continue reading Clarke’s pro-Europe tone highlights referendum risk to UK Tories from the center →

Catalunya, Scotland, Spain, United Kingdom

Three lessons from the Calatan experience for Scottish separatists

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Artur Mas, the president of Catalunya, played the sovereignty card in calling early elections on November 25 and, thereupon, campaigned hard for Catalan sovereignty and against the federal Spanish government — it felt like, at times, he was running more against Spanish prime minister Mariano Rajoy than against any particular regional adversary.cataloniaSpain_Flag_IconUnited Kingdom Flag Iconscotland

His reward? Mas’s center-right party, Convergència i Unió (CiU, Convergence and Union), lost 12 seats.

That’s not the whole story, of course — sovereigntist parties hold an overwhelming majority with 87 seats in the 135-member Catalan parliament (the Parlament de Catalunya).  Catalan voters found a way to express their discontent with the austerity measures of Rajoy’s federal government and Mas’s regional government by shifting support to the more leftist, pro-independence Esquerra Republicana de Catalunya (ERC, Republican Left of Catalunya).

Furthermore, it’s not been an absolutely disastrous six weeks for Mas — the ERC truculently joined a governing coalition with the CiU, thereby stabilizing Mas’s government.  Just last week, the CiU and the ERC agreed upon a framework to push a vote for Catalan independence sometime in 2014, with or without the federal Spanish government’s acquiescence, setting him on a collision course with not only Mas, but much of the federal Spanish government and probably a majority of the other Spanish regions.

Meanwhile, in Scotland, the Scottish National Party, headed by first minister Alex Salmond (pictured above) has taken a vastly different course — United Kingdom prime minister David Cameron has agreed to the 2014 independence referendum in Scotland, and polls show independence trailing the status quo by about a 50% to 32% margin there.  Unlike in Catalunya, the Scottish aren’t coming out in waves of thousands in protest for independence, and despite the unpopularity of former Conservative UK prime minister Margaret Thatcher’s implementation of the poll tax in Scotland, the Scots can’t point to systemic — and recent — violations of civil liberties like the Catalans can, namely the suppression of Catalan language and culture under the regime of fascist Spanish strongman Francisco Franco from 1937 to 1975.

Catalan independence would likely be a greater disruption to Spain than Scottish independence would be to the United Kingdom — by the numbers at least.  With 7.5 million people, Catalunya comprises nearly 16% of the Spanish population.  Although Scotland comprises nearly a third of the United Kingdom by area, its population of 5.3 million people is just a little under 8.5% of the total UK population.

So what can the Catalan Sturm und Drang (or, tempesta i estrès, perhaps?) of the past few months, including the November regional elections, teach Scotland as it prepares for its own 2014 referendum?

Here are three lessons that pro-independence Scots should take to heart from the recent Catalan experience. Continue reading Three lessons from the Calatan experience for Scottish separatists →

Greece

Greek government, troika reach agreement on Greek bailout

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It seems all but done — Greece’s government and the ‘troika’ of the International Monetary Fund, the European Central Bank and the European Commission have reached an agreement on the latest disbursement of funds that Greece needs to finance government operations, in exchange for a series of budget cuts and labor market reforms. 

In an additional twist, there are quasi-official reports from both Germany and Greece that the bailout program will be extended from the end of 2014 to the end of 2016, which will give Greece until at least 2016 to whittle down its budget deficit to the 3% required under EU rules, though it seems unlikely that Greece’s budget will be anywhere near to closing in on that target by even 2016.

The details are essentially as described over the past four months — €13.5 billion in budget cuts over the next two years, €9 billion of which will take effect in 2013.  The bottom line for Greek finances is that a Greek exit from the eurozone, which seemed virtually inevitable through much of 2012, has now been delayed, and delayed for a significant amount of time (Citi, for example, lowered its odds of a ‘Grexit’ to 60%, and predict it could still happen, but only in the first half of 2014).

That’s a significant victory for Greece’s prime minister, in office for barely four months, Antonis Samaris (pictured above, right, with Euro Group president and Luxembourg prime minister Jean–Claude Juncker), and it will now give him some breathing space to turn to Greece’s economic depression.

For me, there are three notable political aspects to the deal worth noting:  Continue reading Greek government, troika reach agreement on Greek bailout →