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European Union

‘La bataille des chiffres’: EU leaders agree new budget deal

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Guest post by Michael J. Geary

European Union leaders reached agreement Friday on the EU budget (the multi-annual financial framework or ‘MFF’) for the period from 2014 to 2020.European_Union  After months of bickering, the 27 member states signed off on a deal totaling €908.4 billion, and the European Parliament will vote on the budget in March.

The budget is geared towards two — some would say conflicting — goals and political constituencies.

On the one hand, politicians argued that spending should be mobilised to support growth, employment, competitiveness and convergence, in line with the Europe 2020 Strategy. At the same time, some EU leaders in the United Kingdom, Germany and in the Netherlands, made clear that ‘as fiscal discipline is reinforced in Europe, it is essential that the future MFF reflects the consolidation efforts being made by Member States to bring deficit and debt onto a more sustainable path.’  The result is a smaller budget than was agreed for the previous budgetary period (2007 to 2013), yet one that is expected to achieve greater results to help pull the EU out of its economic malaise. A ‘spend less, achieve more policy’ strategy in an era when one in four Spaniards are unemployed seems doomed to fail.

The result, however, is not wholly surprising. Over the last four years, austerity and cuts in public spending have become commonplace throughout the EU, so it should come as no shock that the EU institutions should also tighten their belts.

Speaking after the negotiations concluded, German chancellor Angela Merkel said, ‘The agreement is a good agreement as it gives predictability for investors to create growth and jobs.’  José Manuel Barroso, the European Commission president, no doubt privately disappointed with the outcome, publicly voiced support for the deal saying the budget was ‘an important catalyst for growth and jobs.’

UK prime minister David Cameron can also be very pleased with the result, given that the agreement marks the first time in the history of the EU that its budget has been scaled back.  Cameron had gone to Brussels threatening to use the veto if leaders failed to make savings in real terms. He singled out the exorbitant salaries paid to some of the EU’s top officials, some of whom earn close to €15,000 per month and are taxed at just 8%. During the last five years, national-level tax increases have been imposed in addition to freezes on public and private sector pay, while officials working in the EU institutions have escaped austerity.  Cameron was determined, during the talks on the budget, to cut administrative costs despite opposition from French and Polish leaders who feared any cuts to the EU budget would affect generous subsidies to farmers and structural and cohesion funds.

Cameron was clearly relieved that his call for budgetary reductions met with friendly ears at least among some EU colleagues.  Over the past twelve months, he had been busy building a coalition among the Dutch, German and Scandinavian member states (the EU’s main paymasters) to reduce the budget in real terms.

Although Cameron and Merkel may well find themselves at odds over the UK’s role in the EU over the next five years, with Cameron determined to ‘renegotiate’ its role and Merkel equally determined to forge ever closer fiscal and political union, budget politics may have been a useful vector to find common ground.  Indeed, Merkel and Dutch prime minister Mark Rutte ultimately became strong supporters of London’s push to force austerity on the EU itself.  The unlikely emergence of the Anglo-German alliance was perhaps the most intriguing element of the negotiations. Continue reading ‘La bataille des chiffres’: EU leaders agree new budget deal →

Spain

Can Spanish prime minister Mariano Rajoy survive the kickback scandal?

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It’s hard not to feel some compassion for Spanish prime minister Mariano Rajoy’s government, which limped to its one-year anniversary only in December 2012.Spain_Flag_Icon

In that time, Rajoy’s government has weathered all of the following:

  • the passage of four budget cut packages and painful tax increases — income tax rates have increased, tax breaks for home owners have been eliminated and the Spanish value-added tax increased from 18% to 21%;
  • a volatile bond market that saw Spanish 10-year rates peak at 7.50% briefly at the end of July 2012, and the constant specter of yet another sovereign debt crisis;
  • an increase in the Spanish unemployment rate to 26%, just narrowly below Greece’s 26.8% unemployment rate;
  • yet another contraction in 2012 to Spanish GDP (1.4%) with a 1.5% contraction forecast for 2013;
  • a European bailout in June 2012 of €40 billion for Bankia, a conglomerate of conglomerate of cajas (savings banks) with exposure to Spain’s sagging real estate market, despite Rajoy’s campaign promise not to seek or accept a bailout;
  • the avoidance of a full European bailout of Spanish sovereign debt, while cagily working to ensure that the terms of any eventually bailout are on terms as favorable as possible (in part by holding out until the last possible moment for any potential future bailout);
  • a separatist coalition, propped up by former leftist supporters of the Euskadi Ta Askatasuna (ETA), took control of the regional Basque government in October 2012;
  • a high-profile showdown with Catalan premier Artur Mas in advance of Catalunya’s regional elections in November 2012 that exacerbated federal-Catalan tensions and all but assured a showdown over holding an independence referendum in 2014.

But now Rajoy’s government — and Rajoy personally — is facing perhaps its biggest crisis yet, in the form of an entirely self-inflicted scandal over slush funds, when it was reported last week that Luis Bárcenas, the former treasurer of Rajoy’s Partido Popular (PP, People’s Party), had been keeping unofficial books that provided expense payments for party leaders, including Rajoy, who received payments of up to €25,000 annually from 1997 to 2008.

The accusations come in addition to an ongoing investigation into the prior PP government of José María Aznar, the so-called Gürtel scandal involving kickbacks for contracts.  The most recent allegations involve slush funds, whereby proceeds came to Bárcenas from private construction companies and went out as payments to top party officials.  So the latest allegations could now also become a major focus of a judicial inquiry into the Gürtel corruption matter, endangering Rajoy’s government.

Alfredo Pérez Rubalcaba, leader of the center-left opposition Partido Socialista Obrero Español (PSOE, Spanish Socialist Workers’ Party), called on Rajoy to resign as prime minister last Sunday, and 10-year bond rates are already creeping back up once again.

Rajoy’s resignation could open a further Pandora’s box of adverse outcomes for Spain, including the appointment of an even more right-wing prime minister (ahem, Esperanza Aguirre) and early elections result in strengthening more radical leftists, in the same way that Greece’s 2012 parliamentary elections strengthened SYRIZA, a coalition of the radical left, in the Hellenic parliament.

Rajoy didn’t help matters much on Monday, when he perplexingly explained that reports are all ‘untrue — except for some things.’

That’s certainly not a great reassurance for Spain or for Europe — the last thing the European Union wants, with a Cyprus bailout now on the horizon, is for a political scandal to launch Spain into even more turmoil or cause financial panic anew.  German chancellor Angela Merkel, of course, is widely seen as hoping to wait through her reelection campaign later this year before pursuing any dramatic action on a new European treaty or more decisive action in the eurozone.  Continue reading Can Spanish prime minister Mariano Rajoy survive the kickback scandal? →

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 →

European Union, United Kingdom

From Heath to Wilson to Thatcher to Cameron: continuity in EU-UK relations

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My friend and colleague, Dr. Michael J. Geary, and I, are in The National Interest today with a even-further revised piece on the history of relations between the United Kingdom and the European Union (pictured above are former prime ministers Edward Heath and Margaret Thatcher).United Kingdom Flag IconEuropean_Union

In particular, we continue to argue that British participation in the EU — including UK prime minister David Cameron’s latest speech demanding a renegotiation of the UK’s position in the EU and a straightforward in/out referendum by 2017 — must be viewed within the long context of the tumultuous 40-year history of UK-EU relations:

But even as the Eurozone accepts that deeper union is necessary to make the single currency workable, it’s unclear that in the reality of today’s “multi-speed Europe,” Cameron would need to renegotiate anything in order to retain the fiscal prerogative at home—just 22 days ago, the “fiscal compact” took effect through much of the rest of the EU, despite Cameron’s refusal to ratify it.

That’s why Europe should view Cameron’s speech not only in the narrow context of right-wing domestic politics or fiscal sovereignty, but within the wider scope of Britain’s troubled relationship with European integration. Ideally, Britain wants a European-wide free-trade area without the supranational institutional apparatus, something it proposed during the 1950s. Yet unless the euro implodes, that’s not the future of the EU.

Photo credit to Paul Grover.

European Union, United Kingdom

Taking a deeper look at Cameron’s EU speech and UK relations with Europe

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Over at EurActiv, Dr. Michael J. Geary, a friend and colleague at the Woodrow Wilson International Center for Scholars, and I have written a piece placing UK prime minister David Cameron’s speech from Wednesday in greater context in respect of existing European Union structures and the longstanding 40-year history of the United Kingdom’s tumultuous relationship with the EU and its predecessor, the European Economic Community.
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You can read it here.

We note, among other things, that Cameron’s latest gambit is well-placed within the UK’s long-standing discomfort as a member of Europe:

In fact, if Cameron’s latest gambit has a sense of déjà vu to it, it’s because it comes almost directly out of the political playbook of former Labour prime minister Harold Wilson.

Just one year after [Edward] Heath secured British membership in the EU’s predecessor, the European Economic Community, Wilson sought to renegotiate the original deal and, in 1975 held a referendum on whether Britain would remain in the Community.

But British-EU relations have always been troubled, and even the British accession to the EEC is poised with original sin. Denied membership to the EEC twice during the 1960s by French president Charles de Gaulle, Britain finally gained entry in 1973 after months of protracted negotiations between pro-European Conservative prime minister Edward Heath and de Gaulle’s successor, Georges Pompidou….

In some ways, British truculence goes back well beyond the era of European Union – in 1931, the United Kingdom was the first major European power to ditch the gold standard, goosing its own economic recovery while leaving the economies of Germany and France clamped to 24-carat chains.

We also place the speech in the context of what are likely to be negotiations, initiated by German chancellor Angela Merkel, for a new EU treaty that attempts to locate greater fiscal policymaker power with Brussels, at least among the eurozone nations:

[Merkel], who wants a new EU treaty granting greater fiscal control to Brussels (and to Berlin, in no small part), may be willing to trade more opt-outs to Cameron in exchange for green-lighting further integration for the core eurozone countries.

Cameron may also be hoping that he can use negotiations on the still uncertain EU budget for 2014 to 2020 as a bargaining chip.

Negotiations wouldn’t begin in earnest until after Cameron’s reelection in 2015 (still a questionable proposition) and after German federal elections expected in September 2013, so it’s impossible to know whether the 2014 budget or a new Merkel-led treaty effort would even come into play.

After all, it’s not clear if the eurozone will exist in its current form through the next five months, let alone five years. But if Merkel and French president François Hollande balk at Cameron’s push, will it be enough for him if he manages to, say, renegotiate an opt-out from the EU’s working time directive, or perhaps repatriate additional justice policymaker powers from Brussels?

Greece

Tsipras predicts Greek debt haircut after German elections

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The great thing about Washington, D.C. is the flow of visitors we see from throughout the world and the relative access to top officials through top-notch organizations such as the Brookings Institution, which hosted Greek opposition leader Alexis Tsipras for a 90-minute session Tuesday.Greece Flag Icon

The beleaguered Greek economy has receded from headlines somewhat since the razor-close election in June 2012 (itself a rerun of an earlier inconclusive vote in May 2012) and since the conclusion of the latest agreement, reached in October 2012, between Greece’s government and the ‘troika’ of the International Monetary Fund, the European Commission and the European Central Bank for the disbursement of cash to the nearly bankrupt Greek government in exchange for €13.5 billion in budget cuts.

Tsipras leads SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς), which finished a very narrow second place to the center-right New Democracy (Νέα Δημοκρατία), whose leader Antonis Samaras, now prime minister, leads a broad pro-bailout coalition.  Although SYRIZA lost the election, it’s the largest anti-austerity force in Greece, and it either leads or ties New Democracy in most polls.

Given that Greece’s unemployment rate keeps increasing (it’s currently around 27%) and it’s entering its sixth consecutive year of economic contraction, even as the government’s been forced into adopting increasingly harsh austerity measures, it’s hard not to see Tsipras as a future prime minister.

Tsipras, who’s made several international trips since last June, has been on somewhat of a campaign to convince the world that he’s not a crazy socialist to be feared, but rather well-placed within the Keynesian macroeconomic tradition of the social democratic left, whose European leaders believe that austerity alone cannot deliver the kind of boost to the economy that will result in greater GDP growth and more employment.   Continue reading Tsipras predicts Greek debt haircut after German elections →

Germany, Lower Saxony

Merkel shouldn’t despair over center-right’s Lower Saxony loss

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Voters in Germany’s fourth-most populous state, Niedersachsen (Lower Saxony), have elected popular Hannover mayor Stephan Weil (pictured above) its new minister-president after an incredibly narrow victory for the center-left coalition, according to official provisional results.
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The predicted victory would mean that the center-right coalition headed by minister-president David McAllister, a high-profile (and half-Scottish!) politician within the ruling Christlich Demokratische Union (Christian Democratic Union) of German chancellor Angela Merkel would lose power for the first time in a decade.

As such, the German media is already reporting that the election is a setback for Merkel in advance of expected federal elections later in September or October 2013.  While the election is somewhat of a barometer for federal politics, generally (it’s where former chancellor Gerhard Schröder got his political start — he served as the state’s minister-president from 1990 to 1998), there’s actually a lot of positive news for Merkel in the Lower Saxony result.

Provisional results give the center-right CDU around 36.0% of the vote, a small lead over the center-left Sozialdemokratische Partei Deutschlands (SPD, the Social Democratic Party), with just 32.9%.  Unfortunately, however, that represents around a 6.5% drop in support from the previous regional elections in 2008:

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Although the CDU’s traditional coalition partner, the Freie Demokratische Partei (FDP, Free Democrats), will have increased their share of the vote to around 9.9% (despite polls showing the FDP with support running at around 5%), the SPD’s traditional coalition partner, Die Grünen (the Green Party), has won around 13.5%.

According to projections, that means the CDU will hold 54 seats in the Landtag, Lower Saxony’s regional unicameral parliament (a 14-seat drop from the current representation) and the FDP will gain a seat for a total of 14.

The SPD will gain just one seat to hold 49, while the Greens have gained eight seats to hold 20.

Together, therefore, the center-left is likely to hold 69 seats to just 68 seats for the center-right, giving Weil the narrowest of margins in the Landtag. 

The key factor is the loss of all 11 seats currently held by the more radical Die Linke (The Left Party), which is projected to have won just 3.1% of the vote, lower than the 5% required to win seats under Lower Saxony’s electoral system.  That means that all of the center-left seats won in Sunday’s election will have gone to the SPD-Green coalition, rather than split with the Left Party, which has historically rejected the possibility of joining a coalition with the SPD.

The Piratenpartei Deutschland (Pirate Party) also fell far below the 5% threshold.

So the result is quite a setback for McAllister, who was contesting his first election as minister-president, and has been mentioned as a potential successor to Merkel as a federal chancellor.  There’s a fair chance that Merkel could bring McAllister into her federal government as a top aide and minister (she once attempted to appoint him as the head of the CDU federally).

Although McAllister isn’t incredibly unpopular in Lower Saxony, he became minister-president in 2010 after Christian Wulff, premier since 2003, resigned to assume Germany’s largely ceremonial presidency — Wulff resigned in February 2012, however, amid allegations that he concealed a private loan from a wealthy friend with business interests in Lower Saxony.

Given the scandal around Wulff, the fact that the CDU has held power for a decade and was seeking its third consecutive mandate for forming a government, and the fact that Germany is slipping into recession, McAllister was always going to have a tougher run in this year’s elections than Wulff had in 2008.

But, as I noted above, there’s a lot of good news for Merkel in advance of this autumn’s elections: Continue reading Merkel shouldn’t despair over center-right’s Lower Saxony loss →

Germany, Lower Saxony

Lower Saxony state elections also a mild barometer for Merkel’s federal CDU

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State elections in Lower Saxony later this month are to Germany’s center-right what elections last year in North-Rhine Westphalia were to Germany’s center-left. Germany Flag Iconlower_saxony

Last year, state elections in North-Rhine Westphalia were somewhat of a barometer of German federal politics, and the incumbent minister-president Hannelore Kraft’s win in May 2012, extending the strength of her Sozialdemokratische Partei Deutschlands (SPD, the Social Democratic Party) as well as of her coalition partner, Die Grünen (the Green Party).  Her commanding position as a pro-growth, pro-Keynesian premier in Germany’s most populous state instantly made her a possibility for a future jump to federal politics — and until she ruled herself out, a likely more savvy challenger against chancellor Angela Merkel in federal elections expected later this autumn (certainly more charismatic, in any event, than the SPD’s chancellor candidate Peer Steinbrück).

Although Lower Saxony is only just Germany’s fourth-most populous state, it lies just to the north of North-Rhine Westphalia, and like North-Rhine Westphalia, it’s a bit of a political weathervane.  It launched the career of former chancellor SPD Gerhard Schröder, who was minister-president of Lower Saxony from 1990 to 1998 before sweeping to federal power in the 1998 federal elections.  Since 2003, the Christlich Demokratische Union (Christian Democratic Union) has, however, controlled Lower Saxony’s Langtag, its 152-member unicameral state parliament.

And its current minister-president since 2010, David McAllister (pictured above with Merkel), like Kraft, is a rising star who could one day make a leap to federal politics.  Born in West Berlin at the height of the Cold War to a German mother and a Scottish soldier who came to Germany during World War II, at 41, he’s one of the youngest rising CDU leaders, and political observers both within and outside Germany pit him as a credible successor to Merkel as the head of the CDU federally — Merkel even offered him a position as general secretary of the federal party in 2005, though McAllister declined at the time.

There’s some irony that ‘Mac,’ whose English is Scottish-accented due to his half-British roots, found his political base in Hanover, the capital of Lower Saxony, given that the British monarchy traces its 18th century roots to Hanover.  He has retained a British passport and has built ties to UK prime minister David Cameron.  He proposed to his wife at Loch Ness in Scotland, and he married her in 2003 wearing a kilt.  Suffice it to say his elevation in the future as Germany’s chancellor would bring about an interesting chapter in Anglo-German relations, just 68 years after World War II ended.

Nonetheless, a Kraft-McAllister showdown in, say, 2018, isn’t an incredibly unlikely scenario — but first, he’ll have to win the Jan. 20 elections in Lower Saxony.

The CDU currently holds 68 seats and it governs Lower Saxony in alliance with the economically liberal Freie Demokratische Partei (FDP, Free Democrats), who hold 13 seats.  The SPD holds just 48 seats, their traditional allies, the Greens, hold 13 seats, and the more radical Die Linke (The Left Party) hold 11 seats.

The CDU won 42.5% in the prior January 2008 elections to just 30.3% for the SPD and, while polls show the CDU with a steady, but narrower lead, the election results will invariably be seen through the prism of the parties’ respective strengths — given that the CDU is expected to win the election, it will be seen as a troubling sign for Merkel’s federal party if the race is incredibly tight, or if the SPD pull off an upset win.

Polls generally mirror national polls — with the CDU outpolling the SPD, with the Greens polling in the low double-digits, and the FDP, The Left and the new protest party Pirate Party each poll below 5%, the threshold for parties to win seats to the Landtag.  That’s not a small likelihood — in 1998, the FDP won just 4.9% and was consequently shut out completely, and The Left only won their first seats in Lower Saxony’s parliament in 2008.

Despite the CDU’s steady lead, however, the fear for McAllister is that the FDP could lose all of its seats in the Landtag, thereby forcing him to govern with the Greens or the SPD — or worse for the CDU, allow the SPD to form a governing coalition with the Greens.

Stephan Weil, who is leading the SPD in the regional elections, is the popular mayor of Hanover (since 2006) — his wife, Rosemarie Kerkow-Weil, is the president of the University of Hanover.  A vote that results with Weil as minister-president could boost the SPD’s hopes — and spur doubts about Merkel’s CDU — in advance of federal elections this autumn. Continue reading Lower Saxony state elections also a mild barometer for Merkel’s federal CDU →

United States

Time names Barack Obama Person of the Year. Is that too US-centric?

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So Time Magazine’s decision to anoint a Person of the Year since 1927, for reasons unknown, holds a rapt audience among folks in the United States, myself included.

This year (oh the suspense!), Time chose U.S. president Barack Obama. USflag

In those 85 years, of course, Time has chosen every U.S. president (except Calvin Coolidge, Herbert Hoover and poor Gerald R. Ford), and in recent years, it’s made some pretty silly decisions (‘You’), but even as recently as 2007, chose Vladimir Putin as its Person of the Year.

Indeed, over its long history, it’s identified many world leaders as Person of the Year — Indian independence leader Mahatma Gandhi in 1930, Ethiopian emperor Haile Sellasie in 1935, (controversially) Nazi German leader Adolf Hitler in 1939 and  Soviet leader Joseph Stalin in 1940, (less controversially) U.K. prime minister Winston Churchill in 1941 (and again in 1949), Iranian president Mohammad Mossadegh in 1951, West German chancellors Konrad Adenauer in 1953 and Willy Brandt in 1970, Soviet premier Nikita Khrushchev in 1957, French president Charles de Gaulle in 1958, Saudi King Faisal in 1974, Egyptian president Anwar Sadat in 1977, Chinese leader Deng Xiaoping in 1978 (and in 1985),  Iranian Ayatollah Ruhollah Khomeini in 1979, anti-Communist Polish Solidarity leader Lech Wałęsa in 1981 and even the anti-Marcos Filipino president that toppled the Marcos family, Corazon Aquino, in 1985.

Many of those decisions were thoughtful and, perhaps, even courageous.  As a platform for highlighting key issues and illuminating the mechanics of how cultures, politics and economics shape our world, the ‘Person of the Year’ concept isn’t a bad one.  

But before Putin in 2007, you have to go back to 1987 and 1989, when reform-minded Soviet premier Mikhail Gorbachev was chosen twice.

Is it really true that Time can’t find anyone in the world (outside the United States, of course) in the past 25 years worthy to be ‘Person of the Year’ other than Russian autocrats?

Certainly, Obama’s reelection was an important moment with wide implications for world affairs, but is Time really being too US-centric?

Consider all of the other options:

  • German chancellor Angela Merkel, who has nudged and cajoled the eurozone to bailouts of Greece, Portugal and Ireland that have kept those countries in the eurozone, while centralizing more fiscal policy and banking policy decision-making powers in the hands of the European Union.  In doing all of this, she’s maintained or even gained in popularity in Germany.
  • European Central Bank president Mario Draghi, whose commitment to stabilizing the eurozone in no uncertain language last summer may well have turned the page on the eurozone’s ongoing crisis.
  • International Monetary Fund managing director Christine Lagarde, for assistance in cleaning up most of Europe’s economic mess and the rest of the world’s besides, all the while trying to initiate a discussion about balancing austerity with the need for higher growth.
  • Egyptian president Mohammed Morsi, whose Muslim Brotherhood now controls the government of the world’s most populous Arab country in the wake of the revolution that toppled Hosni Mubarak last year, and whose rule, above all over this week’s constitutional referendum, remains subject to increasing uncertainty and doubt among secular liberals?
  • Fatah leader Mahmoud Abbas achieved recognition of Palestine as a state in the United Nations last month.
  • The incoming leader of the world’s most populous country, Xi Jinping, as the new general secretary of the Chinese Communist Party.  Hell, Time could have chosen the entire new seven-member Politburo Standing Committee.
  • Time could have been timely — and creative — and chosen the four new leaders of four East Asian countries — Xi, North Korea’s Kim Jong-un, Japan’s incoming prime minister Shinzo Abe and South Korea’s incoming president Park Guen-hye, the latter two being elected just this week.
  • México, poised to overtake Brazil as the largest economy in Latin America in the 2020s, has returned the longstanding PRI to power under the leadership of new president Enrique Peña Nieto, who promises tax reforms, privatization and development of México’s oil industry and a new approach to drug violence and security.
  • Maybe even Colombian president Juan Manuel Santos, who’s staked his presidency on peace talks with the longtime rebel guerilla group FARC?
  • How about Aung San Suu Kyi, who after years of house arrest is now serving in the parliament of Burma/Myanmar, with the once nearly-autarkic regime engaged in reforms to not only its economy, but human rights and democracy as well, garnering the re-establishment of relations with the United States?

U.S. power isn’t infinite, especially in the increasingly multipolar 21st century — and at some point, it’s a little ridiculous for Time to focus on Americans to the exclusion of those outside the United States.  Maybe it’s time to call it what it’s become — the Person of the Year Most Relevant to the United States.

Photo credit to Nadav Kander for Time.

Germany

Thoughts on what a Steinbrück government would mean for U.S.-German relations

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I’ve written a short piece today for Deutsche Welle looking at how U.S.-German relations might (slightly) vary if Peer Steinbrück, chancellor candidate for the center-left  Sozialdemokratische Partei Deutschlands (SPD, Social Democratic Party), defeats current German chancellor Angela Merkel, of the center-right Christlich Demokratische Union Deutschlands (CDU, Christian Democratic Party) in elections expected to be held in September 2013.

By and large, the main priority for U.S. policymakers, no matter who wins the Nov. 6 presidential election in the United States, will be that Germany keeps the eurozone from spiraling into crisis.

The key point is that U.S. policymakers should expect continuity, mostly, on the German position vis-a-vis the eurozone and on German economic policy:

Steinbrück, who served as Germany’s finance minister under Merkel in the SPD-CDU grand coalition government from 2005 to 2009, would also mark continuity in German economic policy – in contrast to center-left leaders such as former UK prime minister Gordon Brown and current French president Francois Hollande, Steinbrück derided Keynsian economics in 2008 and, alongside Merkel, refused to consider large amounts of stimulus funding in 2008 and 2009.

Nonetheless, on European policy, as well as on the more narrow focus of German economic policy, Steinbrück would not exactly mark a rupture; that will be especially true if the next German election leads to another grand coalition between the CDU and SPD.

Steinbrück emerged as the SPD candidate last month.

Ultimately, I note, the biggest area for potential disagreement is on foreign policy especially in light of the rift over Iraq between then-U.S. president George W. Bush and then-German chancellor Gerhard Schröder a decade ago:

[N]owhere will the US election matter more than in the area of foreign policy – a Romney administration would be much more likely than the Obama administration to consider military action to prevent Iran from achieving nuclear weapon capability.  While Merkel’s government has supported the Obama administration’s approach for increasingly tougher economic sanctions on Iran, it seems unlikely that Germany, especially under a SPD chancellor, would have much appetite for military action in Iran.

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 →

European Union

Some thoughts on the Nobel Peace Prize

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The Nobel Peace Prize this morning was awarded to the European Union ‘for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe’:

Thorbjorn Jagland, the chairman of the panel awarding the prize, said it was a signal focusing on the union’s historical role binding France and Germany together after World War II and its perceived impact in spreading reconciliation and democracy beyond the Iron Curtain that once divided Europe and on to the Balkans. “The stabilizing part played by the E. U. has helped to transform most of Europe from a continent of war to a continent of peace,” he said.

I’ve got a busy morning, but I wanted to share three initial observations:

First, this is obviously a not-so-subtle attempt by the Nobel Committee to provide some encouragement at a time when the EU is in a bit of a crisis — not just in the sense of lurching to save the eurozone, but a more existential political crisis.  In many ways, the EU is right now a sort of halfway house that resembles something like the pre-constitutional United States, when it was governed by the ineffective Articles of Confederation.

The EU today has a monetary union, but no fiscal or political union to match, despite the failure of the much-derided “EU constitution” effort in 2004 and 2005 that ended with a resounding failure in referenda in France and the Netherlands.  With German chancellor Angela Merkel this week on a trip in Greece to discuss that country’s finances after four years of recession and biting austerity designed to keep Greece in the eurozone, the Nobel Prize will be a reminder that the stakes of the eurozone’s success really are more than just determining the  outcome of an experiment in monetary policy, but the future of the entire ‘European project’ — and I think that’s a point upon which both the pro-federalist ‘neo-functionalism’ and the more skeptical ‘intergovernmentalism’ schools of EU integration would agree.

Secondly, it feels like a posthumous Nobel award to Jean Monnet (pictured above) and Robert Schuman, a former prime minister and foreign minister of France.  The two were as responsible as anyone for the establishment of the EU’s predecessor, the European Coal and Steel Community in 1951 among France, Germany, Italy, the Netherlands, Belgium and Luxembourg.  Monnet’s plan for coal and steel cooperation and the 1950 Schuman Declaration largely became the blueprints for the creation of the ECSC.

If it seems shocking that the EU has been awarded the Nobel Peace Prize, it’s only because it has been so successful.  From cooperation over coal in the Saar, the European project expanded into a means for creating a common market to tear down tariffs among European nations, a vehicle for unity against the Soviet Union, a mechanism for boosting fledgling democracy in Greece, Portugal and Spain in the 1980s, a salve to soothe Europeans worried about the reunification of Germany in the early 1990s, and the easiest way for “western Europe” to reach out to the newly liberated eastern European states following the collapse of the Soviet Union.  Today, the EU remains a stabilizing force in the Balkans — with Serbia, the last bastion of ethnic-based warfare on the European continent in the 1990s, now a fledgling democracy that itself is in EU accession talks.

Finally, if you think of the Prize as both a boost to EU at a time of institutional stress and an acknowledgement of Monnet’s efforts, I also see it as an acknowledgement of the leadership of Jacques Delors — the eighth president of the European Commission, he more or less railroaded the Maastricht treaty through what was then the European Economic Community in 1992 (despite some fireworks with UK prime minister Margaret Thatcher).  Although I think it’s still too early to tell whether the euro as a single currency is a success or a failure, if the EU pulls through this crisis by developing a fiscal union and a political union commensurate with its monetary union, Delors will rightly be seen as just as important as Monnet and Schuman for his role in bringing about a real supranational union of European states.

Germany

Steinbrück set to challenge Merkel as SPD candidate for chancellor

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In a month when most eyes have been on Germany’s current finance minister, all eyes are now on Germany’s former finance minister, Peer Steinbrück, who is now set to become the main challenger to German chancellor Angela Merkel in federal elections expected later in 2013.

In a bit of a surprise, Steinbrück was named as the candidate of the main opposition party, the center-left Sozialdemokratische Partei Deutschlands (SPD, Social Democratic Party) on Friday after the other main contender, Frank-Walter Steinmeier, indicated that he didn’t want to run.

Among the trio of Steinmeier, Steinbrück and party leader Sigmar Gabriel, Steinbrück has always been the clear favorite.

But perhaps the most jarring element of Friday’s announcement was that SPD party leaders simply announced the news — in Germany, there are no primaries and no leadership contest as such to determine who will be the candidate for chancellor (essentially, think of the German chancellor much like a very strong prime minister rather than a president). Gabriel is highly unpopular among voters and Steinmeier previously led the SPD against Merkel and her governing Christlich Demokratische Union Deutschlands (CDU, Christian Democratic Party) — to disastrous result.

In the previous September 2009 general election, Steinmeier won just 23% for the SDP and lost 76 seats (for a total of just 146).  The party thereupon fell out of the CDU-SDP “grand coalition” that had governed Germany since 2005.  The CDU, which won 34% and 239 seats, was able to form a more rightist coalition with its preferred partner, the Freie Demokratische Partei (FDP, Free Democratic Party), which won 15% and 93 seats. Steinmeier had previously served in the “grand coalition” as foreign minister.

The next federal election in Germany is expected to be held in September or October 2013.

Steinbrück, however, remains a less than ideal candidate — he served as Merkel’s finance minister from 2005 to 2009, so it’s going to be difficult for Steinbrück to draw as clear a contrast on economic policy as might otherwise be the case, even with signs that Germany, the last beacon of economic strength throughout the eurozone, is now also likely headed into recession.  As finance minister, Steinbrück famously (demonstrating his, ahem, willful side) derided Keynesian economics and criticized the stimulative approach of the UK’s government under Labour prime minister Gordon Brown, but he is well regarded, alongside Merkel, for steering Germany reasonably well through the 2008-09 financial panic. (Note: Paul Krugman will be happy).

On Europe, too, the German electorate seems receptive to a populist challenge to Merkel’s performance on European affairs — Germans are incredibly weary of four years of what they see as German bailouts of profligate governments from Portugal to Greece.  Nonetheless, the SPD is actually more pro-Europe than the CDU — and especially more pro-Europe than the CDU’s sister party in Bavaria, the Christlich-Soziale Union (CSU, Christian Social Union).  In Bavaria, the CSU-led government’s finance minister Markus Söder has all but called for Greece to be booted out of the eurozone.

In any event, German voters seem fairly well disposed to giving credit to Merkel for walking a tight line between letting the eurozone crumble, on the one hand, and holding governments in Spain, Ireland, Portugal, Italy and Greece to very tight austerity plans in exchange for European monetary and fiscal support, on the other hand.

The latest polls show the CDU-CSU with a very healthy lead of around 38% to just barely 30% for the SDP — since 2010 and 2011, the gap has only grown wider in favor of the CDU-CSU.  The FDP, however, looks set to collapse, picking up just 4%, though the SDP’s preferred coalition partners, Bündnis 90/Die Grünen (the Greens) poll a very strong 13%.  The newly-formed Piratenpartei Deutschland (Pirate Party) and the more leftist Die Linke (The Left Party) poll 6% each.  Given Steinbrück’s centrist characteristics, I would not be surprised to see the current soft support for the Pirate Party migrate to the Left Party or to the Greens — there will be a lot of room on the left in a Merkel-Steinbrück race to win support, both on Europe and on economic policy, especially if Germany’s economy continues in a downward trajectory.  Given the Left Party’s strong base of support in the former East Germany, there’s a real opportunity for the Left to break out.

The ideal candidate for the SPD may well have been the premier of Germany’s most populous state, North Rhine-Westphalia, Hannelore Kraft, who led the SPD to a huge victory in elections in May of this year.  A premier with charisma, who has championed a more activist state response to boost economic growth, and who could well have been Germany’s second woman as chancellor, Kraft indicated earlier this year that she was not interested in running for chancellor.

 

Germany

Wolfgang Schäuble, the ‘big beast’ of German politics and a vital European policymaker at age 70

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I am also a week late to this — but it should be noted that Wolfgang Schäuble turned 70 last week, and it’s been an opportunity for the German media to reflect on a man who’s been a “big beast” (to steal a term from the UK’s Kenneth Clarke) of German politics.

The Guardian called him “the politician who has done more to shape contemporary Germany and Europe than anyone else currently in office in the EU.”

Schäuble, a lion of the Christlich Demokratische Union Deutschlands (CDU, Christian Democratic Union), has been a member of the Bundestag, the lower house of Germany’s parliament, since 1972.  He served as a key ally of chancellor Helmut Kohl during Kohl’s reign from 1982 to 1998, including as minister of the interior and chair of the CDU in the Bundestag in the 1990s, leading negotiations on behalf of the Federal Republic of Germany (i.e., West Germany) for reunification with the German Democratic Republic (i.e., East Germany). He, alone among the current German government, was present in 1992 when the Maastricht Treaty brought the single currency into existence.

Kohl, however, refused to cede the limelight to Schäuble — the CDU lost the 1998 election and Schäuble himself was implicated in a party funding scandal in 2000.  By the time that the CDU regained power, it was under Angela Merkel and not Schäuble.  The falling-out between Kohl and Schäuble was so acrimonious that even today, Kohl refuses to take part in the many celebrations of Schäuble’s 70th birthday.

In 2004, Merkel refused to nominate him for the largely ceremonial role of the German presidency, another rebuke to a man who was all but assumed to be, at one time, a future chancellor.  But Merkel’s relationship to Schäuble has taken a different turn than his relationship with Kohl.  Schäuble, who served again as interior minister during Merkel’s “grand coalition” government from 2005 to 2009, has now served as finance minister since 2009.

As such, Schäuble, who has been paralyzed and uses a wheelchair since a 1990 assassination, at age 70, is arguably at one of the most engaged — and vital — points of his lengthy career in public service.

In the past week alone, he’s been talking up a plan to leverage the European Stability Mechanism, boosting the value of the euro when he said the currency’s salvation was “worth any effort,” and throwing cold water on the idea of a European bailout for Spain (picking a subtle fight with France while doing so).  The week before, he got into a row with Jens Weidmann, the president of Germany’s Bundesbank (Germany’s central bank) — Weidmann has opposed the move for the European Central Bank to buy the debt of eurozone countries directly.

It’s safe to say that he is second only to Merkel herself and European Central Bank president Mario Draghi in his centrality to determining the future of the euro.  Big beast, indeed.

When I think of Schäuble, I can’t help but also think of Clarke — if Clarke is a One Nation Tory, I think of Schäuble as a kind of One Nation Christian Democrat.

  • They both entered politics in the early 1970s, and rapidly became rising stars.
  • They both served as finance minister (in the UK, Clarke served as chancellor of the exchequer, which is the equivalent) in times of currency crisis — Clarke in the wake of the 1992 sterling crisis and Schäuble today, during the eurozone crisis.
  • They both watched their leadership prospects crumble away as their parties passed them over for a new generation (Merkel, in the case of Schäuble, and David Cameron and others, in the case of Clarke).
  • And they have both been, despite right-wing pressures from their respective parties, champions of the European project throughout their careers.

For better or worse, whatever the solution to the eurozone crisis, it seems nearly certain that Schäuble will be among its authors.

Germany, Greece

Samaras ‘negotiations’ with Berlin not going so swell

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It didn’t go so well for Greek prime minister Antonis Samaras on his visits with European Union leaders in Berlin.  His plea for more time to come up with cuts to the Greek budget is being met with stony nonchalance from both German chancellor Angela Merkel (pictured above right, with Samaras) and French president François Hollande, to say nothing of German civil society.

Samaras has requested an additional two years to come up with an additional €11.5 billion in cuts to the Greek budget.  While Merkel — and especially Hollande — were sympathetic to Samaras’s plea and reiterated their support for Greece to remain in the eurozone, Samaras will return to Athens having won no concessions from Berlin or Paris.

Business daily Handelsblatt writes:

“Greek Prime Minister Antonis Samaras does not tire of making new demands. Now he wants more time, for the health of his economy. Not more money, only more time — at least according to his requests to Berlin and Brussels. And, in Berlin and Brussels, there will be much discussion about whether Greece should be granted more time.”

“Our instinctive reaction regarding Samaras’ request is, well, that could be something. Given the near 40 degree Celsius (104 degrees Fahrenheit) temperatures that Germany experienced last weekend, we can empathize with Greek lethargy.”

“But is the Greek prime minister right? Is time instead of money really better? I say no.”

“We have known for a long time that time is money. Perhaps Angela Merkel will also say that to the Greeks. Despite the hot and sweaty 40-degree temperatures, there will be no more days off.”

Athens News reports that Merkel’s comments at a joint press conference with Samaras Friday were particularly tense:

“We expect Greece to deliver all that has been promised,” Merkel declared. In remarks that were unusually sharp for a joint news conference, she stressed that Berlin has heard words in the past but now expects deeds.

The tough talk contrasted sharply with the head of state honours and diplomatic smiles with which Samaras was received on his first official visit, complete with red carpet and band.

Merkel said that Samaras’ visit is a sign of the “very close ties” between the two countries, only to add later that each side had lost credibility in the eyes of the other and that trust must be regained.

And these are demands from someone who ‘Europe’ was desperate to win June’s Greek parliamentary elections.

Can you imagine how horrific the reaction would have been if the request had come from Alexis Tsipras, the leader of SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς)?

Merkel spent Sunday trying to calm the waters against anti-Greek feeling in Germany, after German Bundesbank president Jens Weidmann attacked the European Central Bank’s buying of state debt, and Alexander Dobrindt, general secretary of the governing Christlich-Soziale Union (Christian Social Union), the Bavarian conservative party and sister party of Merkel’s own Christlich Demokratische Union (Christian Democratic Union), speculated that Greece would leave the single currency by next year.