Friday, 29 August 2008

Romania tries to prevent emigration of doctors

According to an opinion poll conducted by a European medical foundation, 45 per cent of Romanian doctors and medical assistants want to emigrate. According to the doctors’ professional body in France, the number of Romanian doctors practising in France has risen by 320 per cent in the last ten months. Since January 2008, more than 7,000 health professionals have sought from the Romanian authorities a certificate which they can use to have their qualifications recognised abroad. The Romanian authorities, though, are playing down the risk of losing their doctors on the same scale as Poland has lost hers. But there is already a shortage of anaesthetists, cardiologists, urologists and neurosurgeons in Romanian hospitals. The danger is of course that medical students will go abroad before completing their studies, completing them instead in a foreign country and therefore disappearing from the official statistics (because they will have not been qualified at the time they emigrate). The Romanian government is, though, trying to persuade people to stay by promising to build some thirty new hospitals and to increase the monthly salary from 220 euros to 400. At any rate, it is estimated that some 3 million Romanians have already left their country to work abroad, which means that there is already massive emigration, and not only from among the most highly educated section of society. [Mirel Bran, Le Monde, 9 August 2008]

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Sarkozy’s idea for the Commission

As reported in the last Digest, the number of commissars in the European Commission after Lisbon has been ratified can be modified by a decision in the European Council. The plan was originally to reduce the number of commissars to two thirds of the number of member states. This would mean reducing the number from 27 as at present to 18. However, European leaders are considering whether to modify this in the light of the Irish rejection of Lisbon. President Sarkozy has suggested that countries “from similar language and cultural circles” share a commissar. So Austria and Germany could have the same commissar, and the UK and Ireland or the Benelux states. Of course if the Lisbon treaty is not ratified, all this will never come to pass. [Der Standard, 6 August 2008]

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Klaus attacks Lisbon treaty again

The Czech president, Václav Klaus, has again attacked the Lisbon treaty. Asked if he would sign the Lisbon treaty if the Polish president decided to sign it, Klaus replied, “The Czech national interests tell me that I should never sign the Lisbon Treaty.” Asked to explain his expression of delight when the treaty was rejected in Ireland, Klaus said, “Such a document [i.e. like Lisbon] is unnecessary for the standard functioning of the EU (including further enlargements) and is detrimental to freedom and democracy in Europe in the future.” Asked what he would put in a new treaty, Klaus replied, “The most important issue would be the return to intergovernmentalism and unanimity of decision-making. The return from “Union” to “Community”.” [Rzeczpospolita, 26 July 2008; see also the web site of the President of the Czech Republic,]

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Irish would vote No a second time

When President Sarkozy had the temerity to suggest that the Irish should hold a second vote on the Lisbon treaty, he of course assumed that they would vote ‘Yes’, as they did when they voted for a second time on the Nice treaty in 2001. However, opinion polls suggest that a new poll would produce the same result as the first one. According to one poll, 62 per cent would reject the treaty in a new vote and only 38 per cent would vote in favour of it. Seventy one per cent said they were opposed to a new referendum. [Frankfurter Allgemeine Zeitung, 27 July 2008]

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Sarkozy having a bad war

All government buildings in Paris are currently decorated with the EU flag, as is even the Arc de Triomphe itself. (When a group of four Eurosceptics spontaneously protested against the hoisting of this flag at the tomb of the Unknown Soldier – the focal point of the Bastille Day celebrations on 14 July – they were arrested.) The presence of the flags is supposed to emphasise France’s role as president of the EU, a role Nicolas Sarkozy also emphasised when he appointed himself mediator in the Russian-Georgian conflict. But his foreign policy initiatives have not brought him any political benefit. On the contrary, the death of ten French soldiers in Afghanistan, killed in a Taliban ambush, has brought heavy criticism on Sarkozy’s foreign policy by his political opponents. They have attacked Sarkozy for his “Atlantic obsessions”. For instance, the leader of the Socialist Party, François Hollande, reminded the President that he had always warned against France sending troops to Afghanistan because of the danger that the war would escalate there. Hollande called for a parliamentary debate on the purposes and goals of France’s participation in the NATO force in Afghanistan. He said, “Our soldiers should not let themselves be killed for Uncle Sam.” The government has tried to deflect the criticism, saying that it is fighting the war on terror. Le Figaro, which often acts like a government mouthpiece, proclaimed on its front page that France was “defending the freedom of the world”. Less favourable papers (Le Parisien for example) have asked if Sarkozy was not naïve when he got the Russians’ agreement to the ceasefire before their troops had left South Ossetia. [Le Figaro, 21 August 2008; Le Parisien, 20 August 2008]

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Ukraine goes wobbly too

Just as Georgia’s accession to NATO now seems very seriously in doubt, the tectonic plates of Ukrainian politics have also shifted. The former pro-Western allies there have fallen out, a development which threatens that country’s NATO accession too. At the time of the Orange Revolution in 2004, the pro-Western alliance consisted of the man who became president, Viktor Yushchenko, and the billionaire businesswoman, Julia Timoshenko. Now these two have quarrelled, the former accusing the latter (who is the current Prime Minister) of “high treason”. Yushchenko has also accused Timoshenko of “political corruption”. Yushchenko said that Timoshenko was “working for the interests of Russia. Timoshenko had sought the support of Moscow for her candidacy in the presidential elections of 2009 or 2010. The Ukrainian government which she controls has not criticised Russia’s intervention in Georgia, for instance, presumably in order to curry favour in Moscow. Yushchenko said that he would instruct his security services to investigate his Prime Minister’s dealings with the Russians. [Süddeutsche Zeitung, 18 August 2008]

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Georgia: Schröder wades in

Just as all the serving heads of state and government in Europe were issuing various forms of instructions to Russia to withdraw her troops from Georgia – Nicolas Sarkozy, for instance, published a long article in Le Figaro on 18 August, the same day that Angela Merkel was photographed visiting Mikheil Saakashvili in Tbilisi – the former German Chancellor, Gerhard Schröder, has expressed support for the Russian position in the conflict. In an interview with Der Spiegel, Schröder said that Georgia had started the conflict by invading South Ossetia (something Sarkozy also conceded in his otherwise pro-Georgian article). Schröder also warned against early NATO membership for Georgia and said that the chances of it happening had now become extremely remote. Schröder referred to Mikheil Saakashvili as a “chance-taker” and said that he was sure that Russia was not trying to annex any territory. He said, “I think nothing of this demonisation of Russia. I think of Russia as part of Europe.” [Der Spiegel,16 August 2008]

Schröder’s interview has caused outrage in the German political class. One CSU politician said that Schröder has become totally unreliable on matters Russian and that his interview was an insult to Frank-Walter Steinmeier, the serving (Social Democrat) Foreign Minister. The same politicians said that the whole idea of a strategic partnership between Germany and Russia now had to be revisited. Many of Schröder’s enemies attack him for being the voice of Moscow in Germany, especially since he now works for the consortium building the trans-Baltic pipeline which will bring gas directly to Germany.

His intervention comes just as the current Chancellor, Angela Merkel, travelled to Tbilisi where she gave strong support to the accession of both Georgia and Ukraine to NATO. Previously she had been opposed to both: indeed, it was largely as a result of German opposition that neither country was invited to join at the Bucharest summit this spring. Merkel called on Russia to withdraw its troops immediately from South Ossetia and reaffirmed her government’s support for Georgia’s territorial integrity. [Handelsblatt, 17 August 2008]

As it happens, NATO is bitterly divided over the conflict in the Caucasus. According to diplomatic sources, the alliance cannot agree on who is responsible for starting the war. The Alliance members also cannot agree whether or not to support Georgia. The United States, Britain and Canada and the East European countries want a very firm anti-Russian policy; by contrast, Germany and France, while also basically anti-Russian, want to put the emphasis more on dialogue and diplomacy. One commentator wrote, “The Caucasus conflict has shown that NATO is a paper tiger.” [Cerstin Gammelin, Süddeutsche Zeitung, 19 August 2008; Richard Herzinger, Die Welt, 19 August 2008]

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Russian analyst says Cuban base should be reopened

The head of the Department for Disarmament and Conflict Resolution in the Institute for World Economics and International Relations at the Russian Academy of Sciences, Alexander Pikayev, has said that Russia should re-open a listening and surveillance base in Cuba, which used to cover the whole USA, in retaliation for the American decision to install anti-missile radars and launchers in the Czech Republic and Poland or Lithuania. The electronic surveillance facility, which used to be near Havana, was shut down in October 2001 in a friendly gesture by Moscow towards the West in the wake of the 9-11 attacks. That gesture has never been reciprocated and the West has only become ever more anti-Russian since. Pikayev said, “Cuba is a unique place to gather intelligence on the United States. I believe that the reopening of this station is both possible and necessary amid the threat that the Americans are creating for Russia. Russia has every right to respond.” The facility covered 28 square miles and employed over one thousand Russian technicians and engineers; it enabled Russia to monitor communications in the US and between the US and Europe. [RIA Novosti, 23 July 2008]

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Poland signs anti-missile shield agreement

As if the new Cold War over South Ossetia were not enough, Poland and the United States signed their agreement on the stationing of the new anti-missile shield missiles in Poland – and you read about it here first. Issue No. 249 of the Digest in December 2007 stated, “Radek Sikorski’s elevation to head of the Polish Foreign Office [in the new government of Donald Tusk] means that Warsaw’s foreign policy will be every bit as pro-American as it was under the previous Kaczynski government, in which Sikorski was Minister of Defence.” On 20 August, Sikorski hosted Condoleezza Rice in Warsaw for the signing ceremony.

One German paper comments, “The crisis in the Caucasus strengthened those who supported the shield.” This is an admission that the shield is directed against Russia after all, whereas the official American position is that it is designed to prevent missile attacks from Iran. Certainly, Russia has interpreted the decision as an unfriendly act.

On 20 August, the presidents of Russia and Belarus met to discuss the creation of a common air defence system as a response. [Itar-Tass, 20 August 2008] President Medvedev of Russia and President Lukashenko of Belarus agreed that a treaty on the matter should be signed by the autumn.

Other Russian reactions have been more colourful if less substantial. The Russian ambassador to NATO, Dmitri Rogozin, said, “The Europeans have received a ‘dead cat’ from the Americans.” (A more accurate English translation of what he said might be “The Europeans have bought a pig in a poke” or “They have been sold a pup”.) Rogozin said that signing the agreement with the United States, Poland had confirmed that the missile shield is directed against Russia. “The Poles should be thanked for helping reveal the strategic goal of the U.S. missile defence plan," he said. [RIA Novosti 20 August 2008]

The Polish Prime Minister confirmed that the decision was a momentous one. Donald Tusk said, “We have crossed the Rubicon.” Patriot missiles will now also be stationed in Poland, one of Warsaw’s main demands; there is also an agreement that America will defend Poland from any external attack. [Die Welt, 14 August 2008]

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EU and EU hopefuls show support for Georgia

The short war in South Ossetia seems to have radically changed the balance of power in the world. The failure of NATO states to reach any proper conclusions about how to react to the crisis has confirmed the split within the Alliance; the war and the near-impossibility of Georgia now ever re-establishing its territorial integrity means that NATO accession must be now little more than fantasy.

While the West could not agree on action, it did agree on words. Even as evidence was emerging of atrocities committed by Georgian forces as they invaded South Ossetia, the leaders of various EU, NATO and EU-NATO candidate states travelled to the Georgian capital to show their support for the man who started the conflict, President Mikheil Saakashvili. These included politicians from Germany (Angela Merkel herself went to Tbilisi), Poland, Ukraine and the Baltic States. The president of the European Council, Nicolas Sarkozy, meanwhile acted as a broker between Georgia and Russia.

The President of Estonia (who grew up in the United States, like the President of Lithuania, and just as the president of Latvia grew up in Canada), Toomas Hendrik Ilves, has been especially virulent. He attacked Russia, together with his two Baltic counterparts, for having “crossed a red line”. In an interview with the FAZ, Elves said that the Russian intervention in Georgia was “an illegal act of aggression.” He said it was possible to imagine how the EU could have a strategic partnership with a country “which bombs cities in a neighbouring state, which breaks international law and which demands regime change of legitimate and democratically elected governments.” (Saakashvili was originally elected in 2004 with a score of over 95 per cent.) “This is an illegal act of aggression which violates the UN charter and the fundamental principles of cooperation and security in Europe.” He called for the EU to revise the whole of its policies towards Russia as a result. Ilves said it was highly regrettable that NATO had not admitted Georgia and Ukraine in the spring, for Russia had interpreted this as a sign that those countries were to remain in her sphere of influence. [Interview, Frankfurter Allgemeine Zeitung, 13 August 2008]

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What Spain’s José Luis Zapatero does not know


Sara Moore explores current European Central Bank policy through the historical lens of how Germany used deflation in the Great Depression for political ends. Moore argues that Spain has lost patience with the ECB since it has had to endure high interest rates for the last year. It is therefore legitimate for Spain’s premier, Jose Luis Zapatero, today to ask: Is Germany using deflation today again for the same reason? Perhaps when Zapatero realises just how far Germany bore the responsibiliy for the Great Depression, he will be even more vociferous.

Spain’s premier Jose Luis Zapatero is an ardent European but he has lost patience with the ECB. Spain has had to endure high interest rates for the last year – with pain for her homebuyers because strong Germany said that she needed them to stop her workers making extravagant demands. Now Axel Weber of the Bundesbank seems to have successfully pushed for another rise in ECB interest rates, despite German consumer spending and industrial production easing, to curb the demands of its workers.

While British commentators, beset with their own inflation, might sympathise with Axel Weber’s efforts to damp down wage demands, they worry about something that Jose Luis does not know, that Germany has used ‘deflation’ before for political ends. In fact, Germany’s record in the Great Depression was appalling.

It is agreed that Germany had a more powerful economy by 1928 than in 1913 and in 1928/29 she had the additional financial advantage of not having to pay for howitzers and artillery and the 758,000 men Germany had in battle-readiness before the First World War. She waged a propaganda war over paying war reparations in the 1920s but the French financial controls over her economy from 1924 till 1929 ensured that the actual sums demanded were paid without a hitch. Indeed Germany was deemed so virtuous a payer in 1929, that it was decided that the French controls were superfluous.

Americans lent vast sums to Germany in the 1920s because they believed she was able to repay them. Less known are the large unidentified sums that Germans put on the American stock market between 1928 and 1929 because of worries about the arrival of a socialist government at home. The American stock market rose to dizzy heights as negotiators decided that they could trust Germany to pay her reparations and they gave her a generous new deal which meant she would be paying less in debt from the First World War than Britain.

Expectations were Olympian in 1929 and the stock market was fizzing. The agreement was signed in June but not finally agreed till the end of August. Still Wall Street went crazy but subterranean economic currents should have raised alarms. All the major nations were on the Gold Standard in 1929 and strong Germany was buying gold. Even in June her large purchases were disturbing; by the end of July an alarmed France decided to buy gold too. France and Germany’s gold purchases were so large that eventually Britain felt that she would have to raise her bank rate. Then German citizens began withdrawing their money from Wall Street. A petition was floated by Germany’s largest newspaper owner and leader of Germany’s second largest political party, Alfred Hugenberg, to have the whole German cabinet and even the President tried for treason, on the grounds that Germany had not started the First World War and was not therefore liable to pay any war reparations. The projected success of the petition caused a disastrous drop in the American stock market as insiders realised that not only German war reparations but also related allied war debts and even American loans to Germany might be at risk, indeed all the international community’s trust in Germany since the war could have been misplaced. The 1929 Wall Street crash was huge. Millions of life savings were swept away but insiders remained mute, hoping against hope that their fears about Germany were wrong. The evils of capitalism were blamed for the national disaster and Germany continued to pay war reparations, although now instead of industry it was mainly the man in the street asked to pay. In 1930, an ex-army officer, Heinrich Brüning, became chancellor of Germany.

He told his friends in the unions that his chief aim was to liberate Germany from paying war reparations and foreign debt – without telling them that he also hoped eventually to re-arm and return Germany to a patrician dictatorship! He argued that if he pursued a policy of deflation and diverted all Germany’s efforts into exports it would weaken the ability of America and the Allies to force Germany to pay her IOUs if she chose not to. The German unions therefore agreed to Brüning reducing wages raising taxes and imposing a poll tax on the German people, while diverting all the benefits into exports so as to bring pressure on the Western powers. German unemployment increased dramatically. A coalition government between left and right was formed before Brüning heaped on more taxes. The declaration of a customs union between German and Austria prompted France to withdraw her Austrian loans in protest, a banking crash ensued and Germany pleaded poverty. The abject misery of the German people helped soften the blow when Germany was given a reparations moratorium, even though she was the greatest exporter in the world, with a mountain of cash in the bank.

We must give modern Germany credit for bringing wages under under control and improving industrial efficiency after the unification of Germany. Indeed, this process continued into the 21st Century. After the arrival of the euro (accounting currency 1999, actual currency 2002) German workers suffered years of stagnant or declining wages, enabling the country to claw back 40 per cent in labour competitiveness against Italy 30 per cent against Spain and 20 per cent against France by 2007. Unfortunately, the sometimes disparagingly called ‘PIGS’ (Portugal, Italy, Greece and Spain) had reacted to the ECB’s initial low interest rate policy by stimulating their economies, paying their workers more and – especially in Spain - pumping up their property sectors in the tourist areas. However, they should have paid more attention to the economic policies of the European Union’s strongest state, Germany.

In November 2005, while the ECB gradually raised European interest rates, a German coalition government between left and right was formed to tackle the German budget deficit by raising taxes and cutting public spending. In 2007, the German government decided, in an admittedly pale comparison with 1930, to cut corporation tax and give other advantages to industry, and to raise VAT in order to pay for it. Naturally, the German unions asked for more money to compensate them for the hike in VAT but after wage increases of 4.1 per cent were agreed with Germany’s most powerful union, I G Metall, the head of the German Bundesbank, Axel Weber, declared that wage inflation was getting out of control, that there was a growth in the money supply, and that the ECB needed to raise interest rates again to curb it. In May, France’s bank chief, Christian Noyer, contradicted Weber’s comments on inflation; yet euroland interest rates were still raised to 4 per cent causing hardship for many Southern European countries and an escalation of the American subprime crisis.

Now Germany is pushing for still higher interest rates to control wage inflation, although she was able to control it effortlessly for years and was herself responsible for the inflation that persuaded I G Metall to ask for more money. There is genuine inflation in euroland because Indians, Chinese, Brazilians and other nations want to eat more and buy new motorcars. So the price of oil and food is going up everywhere. But will causing mortgage defaults and unemployment in Europe help solve the problem or just make people in Europe poorer? Germany used deflation in the Great Depression for political ends. It is legitimate for Jose Luis Zapetro today to ask: Is Germany using deflation today again for the same reason? When he knows just how far Germany bore the responsibiliy for the Great Depression he will be even more vociferous.

Germany – an emerging superpower? Comparisons with the 1930s


Having previously written two major books, Peace without Victory for the Allies 1918-1932 and How Hitler came to Power, Sara Moore offers some valuable insights into Germany as an emerging superpower through drawing comparisons with German power in the 1930s.

A reassessment of how Germany’s deflationary policies contributed to the Great Depression in the 1930s and to her rise to power is overdue. When in 1930 Heinrich Brüning became Chancellor of Germany he told his friends in the unions that his chief aim was to liberate Germany from paying war reparations and foreign debt. He felt that if he diverted all Germany’s efforts into exports it would weaken the ability of America and the Allies to force Germany to pay her IOUs if she chose not to. The German unions therefore agreed to Brüning reducing wages, raising taxes and diverting all industrial activity into exports so as to bring pressure on the Western powers, not realising to what extent this would mean misery unemployment and a diminution of power for the workers. Brüning’s initiative was successful. Millions of people abroad were fooled into believing that Germany herself was really poor not just her hapless citizens, even though Germany was the greatest exporter in the world, with a mountain of cash in the bank.

Seventy years after the Treaty of Versailles consensus has at last been reached that the legend of the ‘vindictive’ Treaty was a fable. Yet historians have hesitated to draw new conclusions about the Great Depression, namely if German politicians escape censure for their actions in the twentieth Century will they be tempted to use deflation for political purposes in the twenty-first Century? It is true that modern Germany is a very different nation from the 1930s. She is a model of democracy and a pillar of the international community. Yet this must not stop us from voicing our alarm if we see parallels with the Great Depression. The world economy is huge compared to the 1930s but if Germay imposes a deflationary policy on Europe it can have an effect worldwide because the European Union comprises nearly 500 million people with money to save or spend.

The European Central Bank (ECB) is located in Frankfurt and modelled on the German Bundesbank. When the euro was first introduced interest rates were kept at 2 per cent, causing a slump in the value of the euro and a mass exodus of surplus funds. However since 2005 European interest rates have risen 8 times, causing the euro to rise over 50 per cent against the dollar by 2007, both because of the dollar’s weakness and to the rise in Europe’s interest rates.

Foreigners’ faith in the euro rests primarily with Germany. Other euroland countries economies are not so strong. Indeed Germany’s European neighbours have suddenly discovered that Germany effectively imposed a ‘wage freeze’ on its workers after the adoption of the euro in 1999, clawing back 40 per cent in labour competitiveness against Italy, 30 per cent against Spain and 20 per cent against France by 2007. Britain’s bankers shed few tears over France and Italy when they complained of the ECB interest rate rises making their businesses uncompetitive, or even Spain, hit by ‘an ECB-created property bubble.’ Britain’s pound was strong in the spring of 2007. It had moved ‘tightly with the euro’ for the last three years but as it always paid a little more in interest than the euro many European countries held their balances in pounds. However, in July 2007 the Bank of England decided, in view of Britain’s rising inflation, that it would raise British interest rates too, one month after the ECB. Unfortunately the combination of the American sub-prime crisis, an over-leveraged home market and the final European interest rate rise, was too much to bear – the mortgage lender Northern Rock cracked and Britain itself suddenly seemed fragile too.

In a way one could say that the present credit crisis is the delayed result of the euro’s arrival. Germany was the strongest country in euroland at its inception but outsiders worried that she was still nursing a hangover from her reunification party in 1990. She was allowed to breach EU rules that stipulated that annual government deficits must not exceed 3 per cent of GDP and the ECB also promised to keep European interest rates at 2 per cent to help the German economy. This encouraged the world’s spare cash to avoid the euro and seek higher returns in the US. The Asian economies accumulated vast sums from exports and piled them into dollars. So the bankers had the bright idea of lending money to the underprivileged so they too could share in the American dream. Instead of living in dirty dope-addicted neighbourhoods they moved into detached houses, with gardens and driveways. The trouble was that the sub-prime mortgages started with low interest rates, which soon became higher. Money began to ebb away from the US attracted by rising interest rates in Europe. In 2008 the sub-prime mortgage crisis threatens to be one of the largest losses of American wealth ever seen, wiping out a generation of home wealth building.

Despite Germany’s impressive export performance in 1930/31 most people believed her protestations of poverty in the Great Depression because of the misery and unemployment of the German people. When the euro was introduced in 1999 the German economy’s health was also in question. Yet in 2003 Katinka Barysch of the Centre for European Reform wrote an article called ‘Germany – the sick man of Europe?’ which asserted that Germany with its flourishing high-tech sector was not as infirm as many made out. Once more the world’s largest exporter she was also the principal trading partner for most Eastern European countries joining the EU.

Katinka Barysch declared that what distinguished Germany – ‘from most of its peers’ – was the weakness of domestic demand. Indeed after the arrival of the euro German workers suffered years of stagnant or declining wages. Then the German government, in an admittedly pale comparison with 1930, decided to cut corporation tax and give other advantages to industry, and to raise VAT, bringing pain to the workers, in order to pay for it. Naturally, in January 2007, the German unions asked for more money to compensate them for the increase in taxes. Yet after wage increases of 4.1 per cent were agreed with Germany’s most powerful union I G Metall, the head of the German Bundesbank Axel Weber declared that wage inflation was getting out of control, there was a growth in the money supply, and the ECB needed to raise interest rates to curb it. On 18 May 2007, France’s bank chief, Christian Noyer, flatly contradicted Weber’s comments on inflation. Yet euroland interest rates were still raised to 4 per cent – with the expectation of more – causing money to pour out of the dollar into the euro and an escalation of the American sub-prime crisis. The ECB has since flooded markets with short-term money but despite the rules being bent when the euro was first introduced to aid the German economy, Bundesbank chief Axel Weber and ECB chief economist Jurgen Stark have remained deaf to pleas, which would really help the world in 2008, to bend the rules and allow ECB interest rates to fall.

If one is looking at pre-war parallels one could chart the ebb and flow of money across the Atlantic Ocean. In the late 1920s because of her strident propaganda Germany was viewed as poor and less guilty of the war in 1914, but modern historians and economists now believe her to have been primarily responsible for the Great War and by 1928 more powerful than in 1914. European money, including an unspecified amount of German cash, flowed into Wall Street in 1928/29. At the end of April 1929, with a new deal beckoning over the payment of war reparations, Germany put her interest rates up by a full 1 per cent to 7 per cent, prompting interest rate rises in Austria, Poland and Hungary. From June 1929 Germany was reported purchasing substantial quantities of gold, an alarmed France following one month later. Germany and France’s gold purchases were so large that they eventually prompted expectations of a rise in the British bank rate as all the major countries were on the Gold Standard. Money became tight and in that environment financial scandals happen. Clarence Hatry’s fraudulent empire collapsed. Soon afterwards Wall Street crashed. In essence the Wall Street crash was a political event, caused by worries whether German war reparations and debt would ever get repaid, but tight money market conditions also helped. In 2007 money in Britain and the US also suddenly became scarce. One hopes that the final parallel with the Great Depression – a stock market crash – is averted.

In 1930 Brüning had a vision of what he wished to achieve through deflation, initially to rid Germany of reparations and debt, but also to achieve a measure of re-armament and Germany’s return to what he termed a Presidential regime. No doubt he visualised the country being led by a former army officer like himself or maybe a member of the former royal family. But misery embitters people. Hitler became dictator instead.

Germany’s deflation so far is only a faint shadow of her deflation in the 1930s but we can surmise that she has aspirations. In 1994 President Clinton prophesied that Germany would be Europe’s future leader. In the Middle Ages she had been leader of the Holy Roman Empire, which encompassed much of Europe. Later, before the First World War, the Pan German League aimed at creating an empire of all the Germanic peoples under Prussian leadership, which would include all the nations in the Austro-Hungarian Empire, also Switzerland, Holland and Belgium and Romania because of her strategic position at the mouth of the Danube. The empire would be bound together first by a customs union, which would prepare the way for the creation of community-wide legal and political institutions. Eventually a Nationalstaat would come into being ‘impelled by the logic of ethnic solidarity, economic pressure, and should it prove necessary, military force’.

In the First and Second World Wars Germany became Europe’s master by driving tanks into Europe’s cities. However after the Second World War she turned into a very different country, a bastion of democracy. Later the European Union evolved but it was not viewed as Germany’s empire, either within Germany or in the rest of Europe. Although France and Germany were original members, the EU is formally run by the Council of Ministers, the European Parliament and by bureaucrats in Brussels, rather than by a single state. Democracy is enshrined in the EU and the voice of each tiny country carries weight. Yet it is becoming increasingly clear that it has a dominant Franco-German axis and that Germany is the principal paymaster. So the old adage – he who pays the piper calls the tune – may eventually be appropriate even in the European Union.

So far Germany has behaved with admirable restraint but she is beginning to flex her muscles. Her huge export surpluses reputedly pay for the deficits of Ireland Greece, Italy, Spain and even France, while her own people scrimp and save. At Nice, in 2001, her call for greater weighting in the Council in view of her greater population, was opposed by France, who insisted that the symbolic parity between the two nations be maintained; then Germany hoped to secure more power and influence through the Constitution – but French and Dutch voters turned it down. However when Germany took over the Presidency of the European Union her Chancellor, Angela Merkel, declared that the time of reflection about a new form of government was over. By March 2007 the Berlin Declaration was adopted which declared the intention of all member states to have ratified a new Treaty for the government of the enlarged European Union by the 2009 elections. Beyond the Treaty, Germany, who stayed firmly in the driving seat during the discussions leading up to the Lisbon Treaty, is now alleged to have ambitions to create a superpower in Europe, with military power and control over taxation. One worries that if things do not go her way she could revert to her old idea of a Germanic empire, which would divide Europe and fragment nations.

One also frets about the future economic outlook of the European Union. A German historian recently alleged that in an economic sense the ‘Second World War amounted to a gigantic struggle between two diametrically opposed views on how to organise the future world market: Closed Blocs vs: the Open Door’. Lately talk of ‘community preference’ has mostly been blamed on the French. Yet few people know that Germany’s predatory economic policy beggared the world in the early 1930s and led to military blocs and war.

We live in changing times with the rise of India, China, Japan and the Far East and the relative decline of the world’s greatest super power, America. Germany has been a pillar of the international community since the war. With the help of the European Union and its most powerful provider of funds, Germany, the countries of the former Soviet Union in Eastern Europe are becoming richer, democratic and self-confident. Germany has a right to have an important say in the ECB to ensure that her money is well spent. Yet we live in a global economy. Power must be used with care. We must not underestimate Germany’s strength because of her citizens’ poverty or unemployment. Her deflation, and push for the ECB to adopt a high interest rate policy, besides affecting Britain and America, will slow growth for the whole of the European Union and create problems for the weakest states, whilst strengthening her relative position. How Germany will use this position is of fundamental interest and the parallels up to the present time with the 1930s experience raises cause for concern.

Lisbon Treaty will lead to fundamental change of Czech Republic as a sovereign country


This is the finest individual opinion I have heard on the Lisbon Treaty as it passed through Europe - Ed. This is the final conclusion. For the whole report, see the August 2008 edition of the European Journal.

Following an invitation from the Czech Constitutional Court, the President of the Czech Republic, Václav Klaus, delivered an opinion that the Lisbon Treaty will bring about a fundamental change to the legal character of the European Union and the Czech Republic, not only as its Member State, but also as a sovereign country. Therefore, the Constitutional Court is facing an immense responsibility not only with respect to the present, but also the future of the Czech Republic, the 90th anniversary of whose establishment will be commemorated this year.

"As a legal participant in the proceedings before the Constitutional Court regarding the Petition of the Senate of the Parliament of the Czech Republic for an assessment of [compliance of] the Lisbon Treaty with the constitutional system, I consider a fundamental and comprehensive assessment of its content and implications by the Constitutional Court an absolutely essential prerequisite for its ratification.

The explanation of the Senate’s petition and the content of my above statement give rise to absolutely evident indications that the Lisbon Treaty constitutes a fundamental change to the Czech constitutional system and the international position of the Czech Republic. I do not consider it possible that such fundamental changes to the international position and internal functioning of the Czech Republic, which the adoption of the Lisbon Treaty will undoubtedly bring about, are made unaware, without being clearly defined and understood and without a political and social consensus on them. The Constitutional Court, as the highest legal authority of our country, is required to provide to the political representation and general public a clear and comprehensive assessment of the Lisbon Treaty in all its respects in such a way that it is possible to adopt a responsible decision on its ratification clearly and with full awareness of its implications.

The Lisbon Treaty brings about a fundamental change to the character of the European Union and the legal status of the Czech Republic not only as its Member State, but also as a sovereign country as such, something that it was until now and still is. Therefore, the Constitutional Court is facing an immense responsibility not only with respect to the present, but also the future of our country, the 90th anniversary of whose establishment we commemorate this year ..."

Mr Barroso’s illogical €2.4bn European technology idea


Technology analyst, Armand Van Dormael, writes that Commission President José Manuel Barroso’s idea to create a €2.4bn European Institute of Technology (EIT) is out of touch with the industry’s cutting-edge issues and in the end, will not yield any noteworthy results. The best we can hope for, he argues, is that the European Commission gets out of the way and lets the scientific community and the industry attempt to re-normalize the strategies and procedures of scientific research.

In February 2005, Commission President José Manuel Barroso put forward a project intended to smooth the interaction between public research organisations and industry. He proposed to create a new institution, The European Institute of Technology (EIT). The EIT would be a flagship for excellence in innovation, enabling Europe to compete with the most prestigious institutes of technology. It would give access to world-class research facilities and host top scientists. “Such a body” Barroso stated, “would act as a pole of attraction for the very best minds, ideas and wcompanies from around the world.” He envisioned that it might eventually match MIT as a platform for research partnerships between academe, industry and government. The operation would be funded from public and private sources. The project was to be launched within a year and would cost €2.4bn. The Commission pledged €308 million from its own budget, hoping to persuade the private sector to put up the remainder.

A consultation on the EIT’s mission, objectives, added value and possible structure took place in autumn 2005. Industry was kept informed, but not consulted. The proposal immediately ran into trouble and gave rise to endless debate. The League of European Research Universities took the position that the EIT was useless, unimaginative and of doubtful sustainability. The European Research Advisory Board gave notice that plans to create a US-style high-tech institute were too ambitious and warned the Commission that a “world-class research institute cannot be created top down.” Even those who were in favour had very different views on how the eventual EIT should look. In the face of such criticism, Barroso decided to change tack. Instead of one large campus, he proposed a virtual model of six Knowledge and Innovation Communities (KICs) to be established across Europe. These innovation hubs would be joint ventures organised around strategic objectives.

The EIT gave rise to endless debate. For months, EU education ministers and MEPs kept struggling behind the scenes to settle fundamentals about funding, powers, governance and legal status. The European Parliament saw EIT as a source of overlap with the activities of the newly created European Research Council and decided to withhold its backing until the Commission announced where its money would come from. Despite the lack of support, Barroso kept pushing his plan forward. In October 2006, the Heads of State and Government, meeting in Lahti, Finland, adopted the proposal on establishing the European Institute of Technology.

The EIT will consist of two levels: an administrative council responsible for the strategic priorities and several “knowledge and innovation communities” (KICs). The communities will be overseen by a permanent governing board made up of high-profile business and scientific personnel, plus a limited support staff. Each KIC will have at least three partner organisations, based in two or more Member States. At least one of these partners must be a university and at least one a private company.

When it came to decide which country would host the headquaters, a fierce argument erupted between several governments. In June 2008, EU ministers agreed that the seat of the EIT would be located in Budapest because the city did not yet have a European institution.

The governing board has until the end of 2009 to identify, select and launch the first innovation hubs. The project faces unresolved financing problems. The projected budget for 2008-2013 is 2.36 billion, but there is no provision for this in the budget of the Commission. The EU will contribute 308 million. Business has shown no incentive to participate and has not pledged any of the private sector investment on which the project depends. Europe has no tradition of private donations to public research institutions. If all goes well, operations are expected to start within two years. Once the EIT is established, the first projects will cover climate change, renewable energy and next-generation information and communication technologies. The first KICs could see the light of day by 2010. By then, Europe should be “the most competitive and dynamic knowledge-based economic area in the world.”

European Technology PolicyThe EIT is the latest in a series of mega-projects intended to give Europe a prominent place in the global IT industry. In the early 1950s, American mainframe computers made their appearance in Europe and immediately took control of the market. Within two decades, about 20,000 machines were installed. This raised the spectre of a technology gap and economic backwardness not only in Europe’s nascent computer industry; it would also affect the telecommunications, automotive and service industries. Each government protected its computer industry with preferential contracts, tariff walls and substantial subsidies. When the “buy national” policy proved ineffective, a consensus developed that European countries should pool their scientific capabilities.

This presented the Commission with the opportunity to propose a “European” technology policy in the new prestige field of electronics. It would serve as an antidote to the image of fraud associated with the common agricultural policy, and provide Europe’s IT industry with the basic technologies needed to resist and beat American and Japanese competition. Technology policy became the Commission’s big project. Big projects, of course, meant big money. Company lobbyists, universities, research institutes, consultants and experts of all kinds quickly learned how to play the game. Most of the funds went to the largest computer companies. The Commission’s technology planners were unaware of the fact that Silicon Valley’s startups had invented the microcomputer which had revolutionized and reshaped the industry, and created an entirely new business model of open standards, forcing IBM to join the PC market, using software provided by a startup called Microsoft.

ESPRIT was established in 1984 to promote cooperation between companies and to involve Europe in drawing up worldwide technical standards. National R&D programs would be coordinated to develop basic, non-proprietary technologies. Following EC antitrust laws, research had to be pre-competitive. Individual contractors were free to use the results and develop their own projects. The programme allowed companies and researchers to tackle R&D projects that they would not otherwise have attempted. For several years, about 3,000 engineers and scientists from 420 independent organisations worked on about 200 projects. In its first two rounds, ESPRIT ploughed 4.7 billion ecus into pre-competitive research.

The Framework Programmes (FP) are by far the most important schemes for the implementation of the joint policy on research and technology. Under Jacques Delors, technology policy became the major project of the Commission. Delors was no friend of big business, but he expected the industrial leaders to “think European” by providing them with ample subsidies. Grandiose mega-projects were drawn up in consultation with abundantly staffed working groups and panels of researchers and evaluators. But a permanent power struggle between the European Parliament, the Commission and the governments obstructed the decision-making process. Despite their obvious ineffectiveness, the scope of the Framework Programmes increased exponentially. The budget of the First FP (1984-87) was 3.7 billion ecus. The Seventh FP (2007-13) has a budget of €53 billion.

EUREKA was the third joint European development programme. Research focused on six broad scientific areas: optronics, high-speed microelectronics, large computers, artificial intelligence, high-power laser and particle beams. Financing was shared between governments and industry. EUREKA brought together about 13,400 partners. Most of them were small and medium-sized enterprises. More than 1,840 individual projects and 180 cluster projects were completed, with a budget of €9.9 billion and €10.9 billion. Currently, there are around 700 ongoing individual projects and 120 cluster projects with a budget of €1.7 billion and €2.3 billion respectively. Launched in early 2007, the European Research Council (ERC) is a funding agency for frontier research. The ERC has a budget of €7.5bn. It focuses on fundamental research in all physical, engineering, social, biological and environmental science. Investigators will be able to compete for grants. Research is run on a peer-reviewed basis. A Scientific Council directs the operations. There is no specification of research areas or themes. To assess the level of validity of each project, the Council will count the number of scientific papers published by the researchers and the number of citations they receive.

On the wrong track and against the tideThe European Union is handicapped by the unique system and the unique economic philosophies it has created. A political construct, it lacks businesslike common sense and economic logic. The amalgam of socialist statism and the invisible hand of the market has led to a dichotomy called the third way. Politicians and bureaucrats mastermind scientific research and economic development policy-making, but lack the sophisticated understanding of the ways in which science and technology interact. From the beginning, the Commission considered research as a collaborative endeavour, whereas it is inherently competitive and top secret. R&D is one of the most important and least understood elements of the Commission’s budget. The focus of the political class is on spending a percentage of GDP equal to that of the United States and Japan, with slight concern for follow-through and juste retour, and without any idea of what makes R&D’s success in these countries.

The acid test of any industrial policy is the measure of progress in creating new or better products and new sources of wealth. The outcome of three decades of European high-tech policy makes a mockery of the promise. The mind-boggling subsidies intended to make the European electronics industry globally competitive were wasted on backward research laboratories and badly managed companies. In 1984, when the Commission opened the throttle of public money, 12 European companies – large and small – were producing computers. They became accustomed to public-cash infusions and developed a dependency culture. Ten years later, they had disappeared or closed their computer division.

In a globalised economy, to be of any value, research must be world-class. The prestigious American universities are private institutions having close links with industry. China’s universities graduate 500,000 students a year with degrees in science and engineering. Japan’s universities turn out more engineering graduates than the American colleges. Compared to the US and Asia, very few European students take science subjects and maths. As a result, industry has severe difficulties to hire trained personnel, which hampers the ability grow and innovate. Near-gratuity yields a democratic access to education, but reduces it to mediocrity. European universities are packed with students who hope to settle down into a comfortable job, which is not the best incentive to develop new ideas and new products. Bright and ambitious scientists and engineers who don’t see opportunities for reward take their talent to the United States. Any new idea requires a visionary appreciation of its potential applications, followed by arduous work to achieve commercial success. In Europe, the entrepreneur who embraces new ideas is a rare breed. Technically trained people prefer a comfortable job in a solid company, rather than the risk and bother of starting a new company.

Competitiveness in industry depends on the spirit of enterprise and educational provision. The prerequisites are creative minds, capital for start-ups and for expansion, world-class research and business-friendly fiscal policies. The high-tech industry is brutally competitive. Its products tend to become obsolete within a few years. Burdened by overregulation, an anti-entrepreneurial climate and exorbitant wage and tax levels, Europe is an inhospitable place for entrepreneurs.

Scientific research, as concocted by Europe’s politicians and bureaucrats, perverts the image of science. The Commission throws money around far and wide. The real issue in scientific research is not quantity, but quality. Switzerland hosts the top university on the European continent. The University of Singapore, a country of 3.3 million inhabitants, ranks among the world’s best. The cardinal mission of the universities resides in providing scientific education and training, and - secondarily - carrying out research activities. Academic research as it is performed in Europe is out of touch with the industry’s cutting-edge issues and will not yield any noteworthy results. The best we can hope for is that the Commission gets out of the way and lets the scientific community and the industry attempt to re-normalize the strategies and procedures of scientific research. We shall then have to wait for research in Europe to become about as tractable and productive as it is in other parts of the world.

Sovereignty: Russia in Georgia and Europe in Ireland

The Editor’s letter to the Belfast Telegraph, Friday 15 August 2008:

The Georgia-Russian conflict mirrors the EU’s overriding of the Irish ‘No’ vote on the Lisbon Treaty — both tensions are reducible to an attack on state sovereignty.

Ireland (with its ignored referendum result) is in the process of becoming to the European Union what Georgia will become to expansionist Russia — a ‘pseudo-sovereign’ subsidiary province absorbed within a larger state.

The crux of diplomatic discussions in the Caucasus conflict will focus on Putin’s advantage — that Europeans have no high horse from which to lecture Russia in respect of sovereign power or its sacrifice. On that point Putin and President Medvedev will be absolutely correct and will have significant negotiating force.
Jim McConalogue, The European Foundation

Lisbon Treaty should have gone the way of the dodo

The Editor’s letter to the Irish Independent, Friday 8 August 2008:

I believe that under the terms of both EU law and the Irish Constitution, the Lisbon Treaty should have gone the way of the dodo. However, I also know that the EU of recent decades has become wholly undemocratic and that, in Ireland, the treaty will be forced through the Dail by Brian Cowen, without a referendum – but with a dubious ‘special deal’, promising:

(i) the heads of state and government could later decide, through subsequent European Council proceedings, to keep one Commissioner per country. This is already provided for in the treaty;

(ii) the EU will not legislate on abortion, an undertaking given already in 1991 at the time of the Maastricht Treaty;

(iii) that Ireland’s neutrality will not be undermined, which was already given in 2001 at the time of the Nice Treaty;

(iv) that decisions on tax will continue to be governed by unanimity. However, I consider the actions of the European Union to be absolutely undemocratic and believe this treaty should have been dead the moment the Irish people voted ‘No’.

Jim McConalogue, The European Foundation

A letter to the Political Editor of the Irish Times


Following the campaign of the Irish Times under its political editor, Stephen Collins to call on the Government to ratify the Lisbon Treaty regardless of the ‘No’ vote referendum result, Professor Anthony Coughlan wrote this letter to Mr. Collins, asking why he demand such a profoundly unconstitutional and undemocratic course from our political leaders.

Dear Stephen,

In your Irish Times article you call on the Government to ratify the Lisbon Treaty regardless of the 12 June referendum result.

It is strange that a political correspondent of a major national newspaper should seek to become a partisan player in the political game in this way.

Stranger still that you should be urging such a profoundly unconstitutional and undemocratic course on our political leaders.

You are mistaken if you think that Ireland can ratify the Lisbon Treaty by Oireachtas vote without a referendum.

The Lisbon Treaty, which is the EU Constitution revamped, establishes a constitutionally new European Union, with its own legal personality for the first time, which is legally different from the present European Union that was established by the Treaty of Maastricht and which is referred to in Article 29.4 of the Irish Constitution.

The first sentence of the Constitutional Amendment which the people rejected on 12 June proposed to replace the present Maastricht-based EU by a future Federal-style Lisbon-based EU, of which we would all be made real rather than symbolical citizens for the first time.

The same name, “European Union”, would be used post-Lisbon as pre-Lisbon, but the constitutional and political character of the Union, its Member States and of us as Irish citizens would be transformed fundamentally by the ratification of the Lisbon Treaty.

No Oireachtas vote is constitutionally capable of doing this. With all due respect to you, it is irresponsible to be speading illusions otherwise.

The Lisbon Treaty would also abolish the European Communities other than the Atomic Energy Community which we joined in 1973, and would replace the Treaties on which they are based and which are explicitly referred to in the Irish Constitution. These references would have to be deleted also to enable the State to ratify Lisbon. No Oireachtas vote can do that either.

And there are several other reasons why the Constitution would have to be amended to enable the Lisbon Treaty to be ratified.

Your article proposes an attempt to get around the constitutional requirement, laid down in the 1986-7 Crotty judgement of the Supreme Court, that surrenders of sovereignty to Brussels in European Treaties can only be done by the Irish people in a referendum, for they are the repositories of sovereignty.

I was myself intimately involved in the Crotty case and attended every day of the three hearings of the case: the original Injunction action before Judge Donal Barrington, the High Court stage which Raymond Crotty lost, and the Supreme Court stage which he won. You may be interested to know that it was quite a close-run thing that Crotty did not win his court challenge to the constitutionality of the ratification procedure of the Single European Act on the ground that that Treaty’s central provisions entailed a transfer of sovereignty to Brussels, but on the narrower ground that the requirement to coordinate foreign policy under “European Political Cooperation” entailed such a transfer.

The late Judge Henchy was the swing judge on this point in the five-man court.

Crotty’s lawyers were reliably informed at the time by sources close to the judges that Judge Henchy was anxious to find for Crotty, but that if he did so in relation to the core elements of the Single European Act which had previously been approved by Oireachtas vote, he would effectively have been finding the country’s President at the time, the late Patrick Hillery, as having failed to refer a constitutionally dubious Bill purporting to ratify the SEA to the Supreme Court for assessment of its constitutionality.

Judge Henchy wanted to avoid embarrassing the President, so he approved the main provisions of the SEA as having been covered by the original “license” for Ireland to join a developing European Community, but he joined with the majority of the court in striking down the foreign policy provisions, which did not require Oireachtas approval, as being unconstitutional. So the Crotty judgement was a highly political one amongst the five Supreme Court judges themselves! These facts are not widely known, but I assure you they are correct.

It follows therefore that one cannot assume that the transfers of sovereignty entailed by the Lisbon Treaty would be similarly indulged by the present Supreme Court if the matter should come before it, as you implicitly propose in your article.

Judge Henchy moreover made quite clear in his own judgement in the Crotty case that if the then European Community were to move towards becoming a Political Union, a constitutional referendum would be required here to permit that. The European Union that would be established by the Lisbon Treaty – which is the 2004 EU Constitution revamped – is undoubtedly such a Political Union.

In your article you insult the No-side campaigners by saying that they were “unhampered by any allegiance to the truth”. Truly this is the pot calling the kettle black! I do not recollect you or your fellow Yes-side commentators alerting people during the referendum to the hugely important fact that the post-Lisbon EU would be constitutionally and politically profoundly different from the pre-Lisbon EU. . .

Or to the fact that we would be made real citizens for the first time of this post-Lisbon EU, owing obedience to its laws and loyalty to its authority over and above our citizens’ duty to the Irish Constitution and laws. . .

Or to the fact that in the post-Lisbon EU the Irish Government would lose the right it has at present to decide who its national Commissioner would be when we have a member on the Commission, and that this would be replaced by a right to make “suggestions” only for the incoming Commission President to decide – so replacing the present bottom-up process for appointing the Brussels Commission by a top-down one post-Lisbon . . .

Or to the fact that Lisbon proposes to restore the death penalty in Europe for the EU as a corporate entity in time of war or imminent threat of war, by providing that the post-Lisbon EU would accede to Protocol 6 of the European Convention on Human Rights, which permits the use of the death penalty in such circumstances, rather than to Protocol 13, which abolishes the death penalty at all times and which the individual Member States have separately acceded to. This matter has caused national outrage in Austria and some controversy in Germany, but scarcely anyone has heard about it here in Ireland.

But maybe you would dismiss that too as just another No-side “untruth”?

Yours, Anthony Coughlan

Wednesday, 6 August 2008

Parliament restricts European political groups

News @ European Parliament. The so called house of democracy has delivered another blow to democracy. From 2009 it will be much more difficult to create a political group at the European Parliament. From then on, it will be necessary to have 25 members representing a minimum of seven countries. Several members would be denied the democratic right to integrate a group of their choice being forced to sit as non-attached members or to take part in a group which might not fully share the same convictions and views.

Richard Corbett MEP recently proposed a draft report on amendment of Rule 29 of the European Parliament’s Rules of Procedure concerning the formation of political groups. The Labour MEP proposed to increase the number of MEPs necessary to form a political group which is presently set at twenty (representing 2.5 per cent of the total number of MEPs) to thirty (representing 4 per cent of the total number of MEPs in a Parliament of 750 MEPs). The European Parliament’s Constitutional Affairs Committee voted on the report on 27 May and by a majority of just one, Corbett’s proposal was rejected. All groups had voted against the idea of increasing the threshold with the exception of the EPP-ED and the PES.

Notwithstanding this rejection, Jo Leinen, the President of the Committee decided that the committee members should vote on the remaining amendments. An amendment was approved allowing a political group to continue to exist if it follows below the required threshold until the next constitutive sitting. The amended report was adopted but without the Corbett proposal to increase the threshold. In a show of protest against the vote on the threshold of political groups, ALDE, UEN, Greens, GUE and IND-DEM coordinators wrote a letter to the President of the European Parliament. They believed that the vote on the amendments was an “abuse of procedure” as it took place whilst the MEPs had already rejected the bulk of the report. Consequently, they have asked Pöttering for the report to be sent back to the committee. However, the text was brought to the plenary in the July session. Amendments to the European Parliament Rules of Procedure must be adopted by a majority of the component Members of Parliament.

A compromise was reached between most of the political groups which sets the threshold at 25 MEPs from seven countries. On 9 July the European Parliament voted to increase the threshold to create a political group. Presently, to form a political group, 20 members representing at least one fifth of the Member States (6 countries) is needed. The European Parliament has agreed to change its rules of procedure to increase the threshold to 25 MEPs (3.3 per cent of total membership), representing at least one quarter of the Member States (7 Member States). Such a move was adopted with 481 votes in favour, 203 against and 26 abstentions. Obviously, the EPP and the PES, the Parliament’s largest political groups, fully supported the increase of the threshold. The Greens, GUE and UEN groups have decided to vote in favour of the compromise as it was not as detrimental as Corbett’s proposal. The ALDE group voted against the compromise as well as the Ind-Dem which has 22 members.

An amendment was also approved in which if a group falls below the required threshold, the President of the European Parliament may allow the group to continue to exist until the end of the term if it still represents a fifth of Member States and it has been established for more than a year. The new rules will come into force when the European Parliament starts its next term after the June 2009 European elections. It seems that such amendments to the European Parliament’s rules of procedure were almost designed to target eurosceptic groups. The survival of the Independence/Democracy Group is at threat at the next European elections as it presently has 22 members. Moreover, the Europe of the Nations (UEN) group has 44 members but they represent 6 Member States therefore it might fail to meet the member state threshold in the next election. The Movement for European Reform which is presently supported by the Czech Civic Democratic Party (ODS), the British Conservative Party and the Bulgarian Union of Democratic Forces (UDF) must definitely find more support as presently a political group is composed of MEPs elected from at least six Member States and from 2009, it would be required, under the threshold, to have a quarter – which means seven Member States.

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Global airlines dispute EU emissions scheme

News @ European Parliament. On 26 June, following several negotiations, the Slovenian Presidency and the European Parliament reached an agreement on a Commission proposal from 2006 for a directive aimed at bringing greenhouse emissions from air transport into the EU Emissions Trading Scheme. This directive will have terrible consequences for the aviation industry especially at a time where airlines are already struggling to survive with high fuel prices. Moreover, the aviation industry is likely to pass their costs on to the consumer – therefore the price of ticket flights will probably need to rise.

The Commission has proposed to cover emissions from flights within the EU from 2011 and all flights to and from EU airports from 2012. Whereas the European Parliament and the Council agreed that the ETS should include at the same time intra-Community and intercontinental flights, the Council wanted to include airlines in the ETS in 2012 and the European Parliament has proposed the deadline of 2011. The Council wanted to allow airlines to keep emission levels at the 2004-2006 average levels after 2012 and until 2020 whereas the European Parliament has proposed a 10 per cent cut by 2011. The Council has also insisted that 90 per cent of emission permits would be distributed to airlines for free. Therefore, according to the Member States only 10 per cent of emission permits should be auctioned. However, according to the European Parliament 25 per cent of the emission permits should be auctioned. The European Parliament took the view that revenues from auctions should not be allocated by Member States to their general budget. The European Parliament has proposed that revenues from emission allowance should be used to fund research and to develop sustainable modes of transport. But according to EU Member States, environment ministers’ earmarks should not be binding as Member States should be free to decide how to use such money. As the Council has rejected the European Parliament amendments, the draft proposal has returned to European Parliament for a second reading.

On 26 June, following several negotiations, the Slovenian Presidency and the European Parliament reached an agreement on the inclusion of aviation in the European Emission Trading Scheme. The agreement was formally adopted by the European Parliament on 8 July. The European Parliament voted at second reading adopting a directive which includes aviation in the EU Emissions Trading System from 2012. Under the compromise reached all flights departing or landing in the EU, including intercontinental flights will be integrated in the ETS from 2012. The directive will apply to all airlines flying in and out of the EU, including airlines from third countries. The reduction of emissions from aviation is to be calculated on the basis of airlines’ average annual emissions between 2004-2006. In 2012 airline emissions will be cut by 3 percent therefore there will be a cap on emissions from aviation of 97 per cent of average emissions for 2004- 2006 which will be decreased to 95 per cent from 2013 hence airline emissions will be cut by 5 percent from 2013. Airlines can exceed their CO2 allowances but they will have to buy extra permits from other companies. The cap will be reviewed in light of the general review of the ETS.

Moreover, 85 per cent of the emissions permits will be allocated for free however 15 per cent of the airlines emission permits will be auctioned. Under the agreement reach is for the Member States to decide how to use the revenues generated from the auctioning of emissions allowances however such revenues should be used “to tackle climate change in the EU and third countries … to adapt to the impacts of climate change in the EU and third countries, especially developing countries, to fund research and development for mitigation and adaptation, including in particular in the fields of aeronautics and air transport, to reduce emissions through low-emissions transport, and to cover the cost of administering the scheme.” Moreover, such revenues should be also used “to fund contributions to the Global Energy Efficiency and Renewable Energy Fund, and measures to avoid deforestation.” Airlines whose annual emissions are less than 10,000 tonnes of CO2, humanitarian flights under a UN mandate, emergency flights, police, military flights and research flights are exempted.

The aviation industry is not pleased with such an agreement as they believe that their future business was not taken into account by the EU institutions. It is estimated that the directive could add between €3.5 billion and €7 billion to the costs of the aviation industry. According to Sylviane Lust, Director-General of the International Air Carrier Association, “Fifteen per cent auctioning in 2012 is unaffordable and unacceptable for our airlines given today’s high fuel prices and weakening demand.” The European Low Fares Airline Association (ELFAA) Secretary General, John Hanlon, has said “There is a huge risk that the legislation will impose unnecessary costs that do nothing to achieve its environmental objectives.” According to ELFAA it would be harder for airlines to invest in clean technologies as they will not have the financial means. Moreover, the US as well as Australia, Canada, China, Japan, South Korea (including their airlines) have already shown their opposition to the EU’s ETS and stressed that such move would violate EU Member State international obligations under the Convention on International Civil Aviation. The US is already considering taking legal action against the EU in the WTO. The draft directive still has to be formally approved by the Council which is very likely to accept it.

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Commission creates asylum pact with blessing from the French

News @ European Commission. The European Commission has adopted a communication entitled “Policy Plan on asylum, an integrated approach to protection across the EU.” It should be recalled that the 1999 Tampere European Council decided that a common asylum policy should be implemented and a common European asylum system be set up using a two-phases approach. The aim of the first phase of a Common European Asylum System (CEAS) which ran from 1999 to 2005 was to harmonise Member States’ legal frameworks on the basis of common minimum standards. The elements of the first phase are already in place: the Reception Conditions Directive (minimum standards for the reception of asylum seekers), a Directive on minimum standards in asylum procedures for granting and withdrawing refugee status, a Directive on qualification and content of refugee status and on subsidiary forms of protection and a Regulation on criteria and mechanisms for determining the State responsible for examining asylum requests. The crucial objective of the Common European Asylum System is the establishment of a common asylum procedure and a uniform status for persons in need of international protection valid throughout the EU.

In the present communication, the Commission is proposing a policy plan which defines a road map towards the creation of the CEAS. The Commission has stressed that a Common European Asylum System must provide for a single common procedure, establish uniform statuses for asylum and for subsidiary protection, increase cooperation among the Member States, provide for rules on the determination of the Member State responsible for examining an asylum application as well as solidarity mechanisms. The Commission has pointed out that several shortcomings were identified in the legislative instruments of the CEAS’s first phase – therefore according to the Commission the existing common standards are not enough and consequently it will propose amendments to the current legislation as well as new instruments to complete the second phase of the CEAS. According to the Commission the Reception Conditions Directive allows a considerable amount of discretion for Member States in several key areas. Therefore the Commission wants to amend this instrument to achieve further harmonization. The Commission has stressed that there are different asylum procedural arrangements among the Member States and that the Hague Programme as well as the TFEU call for the establishment of a common asylum procedure. The Lisbon Treaty removes the reference to minimum standards hence there will be common procedures for the granting and withdrawing of uniform asylum or subsidiary protection status.

The Commission is therefore planning to propose in 2009 amendments to the Asylum Procedures Directive which will include the establishment of a single, common asylum procedure and in this way Member States would no longer be entitled to have their own procedural arrangements. The Commission has also pointed out that the Qualification Directive has provided for minimum harmonization on the criteria for granting international protection yet it has stressed there are still differences among the Member States on the recognition of protection needs of applicants from the same countries of origin.

The Commission wants to promote solidarity in this field: it has pointed out that “Solidarity and fair sharing of responsibility” is a TFEU principle which governs the implementation of the CEAS. The Lisbon Treaty introduced a new requirement for “solidarity between Member States.” Hence, those Member States exposed to an influx of asylum seekers and illegal immigrants will be able to be assisted by the Union. The Commission has stressed that one of the CEAS’s aims is to assist Member States that due to their geographic position have to face pressures on their national asylum systems. According to the Commission, the EU has the responsibility, based on the principle of the solidarity, to find a common response to tackle the challenges faced by those Member States. The Dublin Regulation provides the criteria to establish which Member State is responsible for examining an asylum claim. Presently, asylum seekers must apply for asylum in the first EU Member State where they arrive.

The Commission wants to create a Community mechanism which would provide for temporary suspension of the Dublin rules. The Commission believes that the suspension of the Dublin system in emergency situations will lead to a more uniform burden sharing of asylum applications among the EU Member States. The Commission will propose for cases of exceptional asylum pressure, the internal re-allocation, on a voluntary basis, of beneficiaries of international protection from one Member State to another. It should be mentioned that a provision introduced by the Lisbon Treaty states “In the event of one or more Member States being confronted by an emergency situation characterised by a sudden inflow of nationals of third countries, the Council, on a proposal from the Commission, may adopt provisional measures for the benefit of the Member State(s) concerned.”

As there is no veto power and measures are adopted through the co-decision procedure, the UK has a reduced influence over the development of a common asylum policy.

Jacques Barrot, Commissioner Responsible of Justice, Freedom and Security, is not concerned with the Lisbon Treaty entering into force. According to Europolitics, he said “Lisbon did include an article on asylum, but we can act even in the framework of the present treaties.” However, the Commission has made clear, in its communication that it will propose measures to achieve the objectives set out in the TFEU. In fact, the Commission is already counting on the new legal basis provided by the TFEU.

It is no coincidence that the European Council conclusions adopted on 20 June in the area of Freedom, Security and Justice match the French priorities in this area, so French presidency success is almost guaranteed. The European Council has welcomed the abovementioned Commission communications and has underlined the need to continue with progress on the future Common European Asylum System with a view to its realisation by 2010. The European Council has endorsed the European Commission border management package and has invited the Commission to put forward proposals by the beginning of 2010 for an entry/exit and registered traveller system and legislative proposals on an electronic system for travel authorisation and on the creation of a European Border Surveillance System.

The European Council has also stated that it “[...] looks forward to the forthcoming proposal of a pact on immigration and asylum by the incoming French Presidency.” It is well known that France is drafting a European Pact on asylum and immigration. It should be pointed out that the European Commission proposals also match with the French priorities and its idea for the ‘European pact on migration and asylum.” France, at the informal meeting of justice and home affairs ministers on 7 July has revealed its ambitious six-month programme in the area of freedom, security and justice, including its European Pact on Immigration and Asylum. The main aim of the pact is to ensure better co-operation amid Member States on asylum and immigration policy meaning more harmonization on immigration and asylum matters. France has drafted the pact around five main pillars. Under the Pact, Member States should make five commitments. France has suggested that EU should organise legal immigration taking into account the capacity of each Member State to accept migrants according to their labour market needs and in the spirit of solidarity. The Blue card proposal will be the main focus under this heading. Member States would be also committed to set up effective integration policies. The second pillar concerns the control of illegal immigration mainly by returning illegal immigrants to their country of origin. The return of illegal immigrants is already covered by the recently adopted Return Directive. Nevertheless, the pact calls for the EU to conclude readmission agreements with third countries and to put in place common mechanisms for the return of illegally staying third country nationals such as joint flights. Member States would be urged not to use “general regularization for humanitarian or economic reasons, within national legislation.” The third pillar is focused on making the control of the EU external borders more effective in the spirit of solidarity. This includes measures such as strengthening Frontex powers and issuing biometric visas from 2012.

The pact reiterates the need to establish a common European asylum system. It also calls for the creation of a single EU asylum procedure. The pact’s fifth pillar intends to promote the development of the countries of immigration. Member States would be required to implement the decisions resulting from the pact. France has faced opposition from some Member States mainly from Spain which has not agreed to certain aspects; hence, French Immigration Minister Brice Hortefeux has watered down his original proposal. The original plan of a compulsory “integration contract” for immigrants was abandoned. Moreover, Sarkozy was hoping to end the mass “regularizations” of illegal migrants yet, due to Spanish opposition, the strong wording calling for the ban of mass regularizations was softened. According to Brice Hortefeux, “The interior ministers gave their unanimous accord on the principles, the objectives, the presentation and the structure of the pact.” Sarkozy is expecting the immigration and asylum pact to be endorsed and officially adopted at the EU summit in October.

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Commission prepares one-size-fits-all EU immigration rules

News @ European Commission. The European Commission, the French Presidency and the European Council are united on Freedom, Security and Justice policies. Under new measures proposed by the Commission, the British Government will have even less power to decide on asylum and immigration matters. On 17 June, the European Commission adopted two communications which will plan to take forward the EU common immigration and asylum policy. The Commission is expecting to obtain the endorsement of the European Council in October to both communications which will contribute to the 2009 debate on the definition of a new 5-year Programme in the Justice, Freedom and Security area. The communication “A Common immigration policy for Europe: principles, actions and tools” is planning to contribute to the development of a common immigration policy over the next few years. A common immigration policy is one of the EU’s existing priorities. The Commission has proposed common principles on which the common immigration policy should be based. However, the Commission has not limited itself to indicating principles – it has already proposed concrete action for their implementation.

According to the Commission, “immigration for economic purposes should respond to a common needs-based assessment of EU labour markets addressing all skills levels and sectors in order to enhance the knowledge-based economy of Europe, to advance economic growth and to meet labour market requirements.” In order to achieve this, Member States would be required to develop “national immigration profiles” in order to provide data on immigrant numbers as well as immigrant participation in the national labour market. The Commission also urges the Member States to increase the “effectiveness of labour-matching policies and tools”, meaning more investment in the education and training for third-country workers in order to match their skills with the needs of national labour markets. Member States would be required to invest more in measures endeavouring to bring unemployed third country nationals who are legally residing in the EU Member States into employment. The Commission also stressed that host Member States must strengthen their efforts to integrate legal immigrants and has called on the Member States to effectively apply EU law which provides third country nationals with the same treatment as EU nationals in coordinating social security schemes across the EU. The Commission has pointed out that a common immigration policy must be based on solidarity among the Member States.

According to the Commission “… no Member State can effectively control or deal with all aspects of immigration on their own and therefore decisions likely to have an impact on other Member States need to be coordinated.” Member States would no longer be entitled to determine their national immigration policies. Last February, the European Commission adopted a package on the management of the EU’s external borders aiming to set up an integrated EU policy on border management and to ensure a uniform and high level of control and surveillance (see The European Journal, April 2007 issue). In this present communication, the Commission has reiterated its wishes to extend FRONTEX powers. The Commission has suggested that the Member States should increase the use of biometrics with the aim of fighting illegal immigration. The Commission has pointed out that “Effective return measures are an indispensable component of the EU’s policy on illegal immigration.” Therefore, the Commission has asked the Member States to provide the return policy with a “genuine European dimension.” The European Commission has called for a common approach on regularization. Member States would be required to report to the Commission each year on the implementation of the common objectives and on their national immigration profiles. Based on Member States’ reports, the Commission will draft an annual report for the European Council to make a political assessment of the situation and to issue recommendations.

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